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Benefits Column

A New Look at Pet Insurance

People love their pets, and some organizations are adding pet insurance to their benefits packages. But is it something that belongs in your benefits toolkit? I've long been doubtful, but I'm now rethinking my skepticism.

Monday, March 12, 2012
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People are talking about pets everywhere I turn lately. It started with the furor created by Uggie -- the Parson Russell Terrier who stole scenes in the Oscar-winning film, The Artist.

Then, in February, the zoning commission for a town near my home approved a pet funeral home. Services like these are growing in number in the United States.

And, finally, an increasing number of my friends are rescuing animals -- mainly dogs. According to the ASPCA, while most of us find our pets through family and acquaintances, 20 percent to 30 percent of people rescue their pets.

The costs associated with rescuing an animal are not small. My friend Laura recently adopted Lucky. The initial costs for bringing this sweet dog home involved $250 to the rescue agency for shots and neutering, another $250 for her first veterinarian visit and $300 for tick and heart-worm medications.

Being a rescue, Lucky had a few other problems, so Laura is paying $150 an hour for a trainer in addition to prescriptions for Prozac and Xanax. Lucky is also scheduled for quarterly, well-care visits to the vet.

In general, people love their pets. The ASPCA reports that more than 60 percent of U.S. households include a pet, which means that a good number of employees care for animals. By comparison, 33.5 percent of family households include children under 18 years old, according to a USA Today analysis of 2010 U.S. Census Bureau data.

This recent attention involving pets made me revisit the concept of HR executives adding pet insurance to their employees' benefits package.

In the past, I haven't been the biggest fan of pet insurance. My skepticism stemmed from two concerns -- employees choosing pet insurance over important financial coverage such as disability insurance, and the plan design and premiums associated with pet insurance.

I thought it was time for me to update my knowledge.

Pet insurance has been around in varying forms since 1890, when Claes Virgin created the first health-insurance policy to protect his livestock. Sweden was home to the first dog insurance policy in 1924, and Great Britain established the first pet-insurance policy in 1947.

Pet insurance didn't appear in the United States until 1980, when Veterinary Pet Insurance was established. VPI sold its first policy in 1982 to cover television's Lassie.

Dennis Drent, the president and CEO of VPI, says pet insurance sales grew dramatically after the late 1990s, spiked by the establishment of a well-care rider, Internet sales and employers offering pet insurance via the workplace.

In 2003, the restaurant chain, Chipotle Mexican Grill Inc., first offered pet insurance as a voluntary benefit to its salaried employees. From the start, the employer contributed $10 per month for one pet.

Today the employer contributes toward the premium for up to three pets per month per employee, costing it about $4,000 each year as between 3 percent and 4 percent of employees enroll.

"Chipotle is adamant that it will offer employees unique, edgy benefits," says Melissa Yoakam, Chipotle's Denver-based benefits manager.

Yoakam says that, while a few workers complained about the $10 contribution for pets, the overwhelming response from employees was positive.

HR leaders should consider a few facts before adding pet insurance to their benefits offerings.

Pet insurance is not a variation of human health insurance. It's a form of property insurance and, therefore, reimburses the pet owner after the pet has received care and the owner submits a claim.

Contracts vary widely in design and associated costs. Drent says "injury only" policies may cost as little as $10 per month, while premiums for rich plans -- which may cover congenital and hereditary conditions and well-care visits -- cost about $200 per month.

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The average group pet-insurance policy runs about $30 a month.

There are more than 20 companies that offer pet insurance in the United States. Some carriers may issue policies on either a lifetime or annual basis. There are the usual issues that are associated with human healthcare policies such as pre-existing exclusions, deductibles, maximum limits and caps, and reimbursement calculations.

Michelle Yates, VPI's group accounts sales manager, says the company has seen tremendous growth in worksite-available pet insurance, which can be offered outside the open-enrollment period. Group discounts can range from 5 percent to 15 percent, she says.

Yoakam put my mind at ease regarding employees opting for pet insurance over other benefits.

The employees who buy pet insurance, she says, also participate in long-term care insurance and supplemental life plans at higher rates.

"Employees who choose pet insurance are more plan-full and recognize the benefit of having their pet insured," Yoakam says.

Yoakam also offers this advice to HR leaders considering such a benefit:

* If you are going to contribute funds to offset pet insurance premiums, contemplate making a similar contribution to the dependent healthcare offering.

* Limit pet-insurance benefits as an option to salaried employees.

* Recognize that some employees will appreciate the pet-insurance benefits while others will not. However, when employers offer a robust suite of benefits, she finds that workers recognize that their company is trying to make their lives as easy as possible.

When thinking about offering such a benefit -- or any supplemental-insurance benefit -- to both hourly and salaried employees, HR executives may want to consider whether employees should have to show evidence of health insurance before they're given access to ancillary benefits.

That would eliminate one of the reasons I am sometimes a skeptic about such benefits.

My newly enhanced knowledge of pet insurance makes me less of a skeptic. And, with the right plan design, I may even recommend it as a benefit offering.

Carol Harnett is a widely respected consultant, speaker, writer and trendspotter in the fields of employee benefits, health and productivity management, health and performance innovation, and value-based health. Follow her on Twitter via @carolharnett and on her video blog, The Work.Love.Play.Daily.

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