Pet insurers threaten to oppose model law if regs block lengthy waiting periods; consumer reps blast industry trade group NAPHIA

During a contentious ninety-minute Pet Insurance Working Group meeting on July 22, insurance regulators and consumer representatives clashed with pet insurance industry stakeholders over language that would restrict the ability of pet insurance companies to impose lengthy waiting periods on consumers in what would be America’s first significant piece of pet insurance legislation.

“We have given, and given, and given, and given, and compromised, and compromised, and compromised,” pet insurance industry attorney Cari Lee of NAPHIA told state insurance regulators during the Pet Insurance Working Group meeting. “The waiting period language really is a line in the sand. It will be something we will oppose and will result in us, very likely, opposing the model.”

Consumer representatives blasted Lee’s statements in comments submitted to the Working Group on Wednesday: “We are troubled by NAPHIA’s threat to regulators during the last call if regulators don’t comply with industry wishes,”  Birny Birnbaum (Center for Economic Justice) and Brendan Bridgeland (Center for Insurance Research) wrote to the Working Group. “NAPHIA’s comments make clear that NAPHIA seeks regulation to protect and memorialize current pet insurance sales practices and not to protect consumers. NAPHIA’s comments also reveal their belief that they have veto power over regulator actions….”

Speaking for the member insurance companies at the July 22 public meeting held by the task force charged with drafting the Pet Insurance Model Law, Lee threatened to use the industry’s considerable lobbying clout to oppose any model law that banned insurers from including the “waiting period” allowances proposed by NAPHIA (the proposal was submitted ahead of the July 22 meeting): 14 days for accidents, 30 days for illnesses, and 120 days for “orthopedic” conditions not resulting from an accident.

“NAPHIA does not support what was adopted,” Lee told task force Chairman Donald C. Beatty of Virginia toward the end of last week’s meeting. She added, “And if this language is in the final version that you vote out of the working group, we will be opposing the model.”

“I understand, I understand,” Beatty said, responding calmly. He added:

“My own observation is that the waiting period concept generally is kind of a tough sell. And when you get into some of the specifics, it just seems like the time frames seem to be pretty long….And as Mick Jagger said, ‘You can’t always get what you want.’”

Mr. Beatty and his fellow regulators have been under pressure to complete their work. In December 2020, the group told TCR they expected to complete their work by April, ahead of the spring meeting. As we head into August, the clock is ticking. The legislation remains stuck in the working group, locked into what appears to be a new major impasse: those waiting periods.

The NAIC Hybrid Meeting is in Columbus from August 12 to 17. If the group can somehow finish the model before August 12, it will be presented to the “C Committee” (Property and Casualty), and then, finally, it will go before individual states.

But Beatty, the Virginia-based chair of the group of state regulators from across the country, is apparently worried that they won’t meet the parent committee’s deadline: “Are you loading up your rifle to shoot me in Columbus?” Beatty asked Vicki Schmidt of Kansas who is also the commissioner of the parent committee of the task force, the Property and Casualty Committee.

August 12 Deadline

Waiting periods — the amount of time a consumer must spend once a pet insurance policy is activated for claims to become eligible and for conditions to be considered non-preexisting — come in numerous shapes and sizes, but all limit the value of the underlying insurance. Simply put, regulators — who have been meeting under the banner of the Pet Insurance Working Group –want to reign in the insurance industry’s use of waiting periods, while consumer representatives have made clear from their comments that they reject any waiting periods of any kind.

The pet insurance working group has been holding public virtual meetings every other week for one hour; as of last week, the meetings are now 90 minutes and weekly. Toward the end of last week’s meeting, it became clear that there would not be any movement on the waiting period issue in the near future:

“We have given, and given, and given, and given, and compromised, and compromised, and compromised,” insurance industry lawyer Cari Lee told  Beatty last week. “The waiting period language really is a line in the sand. It will be something we will oppose and will result in us, very likely, opposing the model.” She added, “I wish it didn’t have to be that way. Really, we’re hoping for a better outcome.”

Responding to Lee and her “line in the sand” threat, consumer representatives decried the comments in a document submitted yesterday to the Pet Insurance Working Group:

“We are troubled by NAPHIA’s [ North American Pet Health Insurance Association] threat to regulators during the last call if regulators don’t comply with industry wishes and memorialize (or worsen)… NAPHIA’s comments make clear that NAPHIA seeks regulation to protect and memorialize current pet insurance sales practices and not to protect consumers. NAPHIA’s comments also reveal their belief that they have veto power over regulator actions….”

[Click here to read the full-text of comments from consumer representatives to NAIC Pet Insurance Working Group, July 28, 2021]

When Chairman Beatty asked Ms. Lee if there was one particular element such as the orthopedic waiting period or the 14-day limit for accidents that was a deal-breaker.  Lee told Mr. Beatty that all of the elements were important. “They’re just critical pieces of how we write these policies.”

“As a regulator, I get very concerned about [a 120- or 180-day waiting period],” Matthew Gendron of Rhode Island said during the July 8 NAIC meeting, “because it’s a one-year contract, and because consumers don’t fully understand the disclosures that are being made to them, and because right now there are no rules about disclosure and things like that.”

“I think we all understand, completely, your point of view,” Dr. Jules Benson of Nationwide said, responding to Gendron’s comments. “I think it’s just from the insurer’s point of view,” he added, “as we look at that risk, ultimately some insurers may decide to not offer coverage.”

Nationwide, like many pet insurance providers, currently requires members to wait six months for insurance coverage of certain orthopedic issues.

Nationwide is on Nationwide’s Side

Many pet insurance providers currently impose 6-12 month waiting periods for certain conditions, but only Nationwide is apparently comfortable enough with those waiting periods to advocate for them publicly and unabashed in regulatory meetings: “They are costly…they can have a gradual onset, and can be hard to diagnose,” Benson, Nationwide’s chief veterinary officer said during the July 8 meeting in ardent defense of Nationwide Pet’s 180-day waiting period for certain orthopedic conditions such as ACL tears or cruciate ruptures.

Dr. Benson is right. Orthopedic injuries are expensive and can be difficult to diagnose. I have first-hand experience with high-cost veterinary orthopedic invoices, which also often involve other specialties like neurology and sports medicine. My Labrador, Nellie, has (among other issues) a complicated injury involving her knee and lower back. Knowing nothing about pet insurance when Nellie entered my life, having just moved home from a three-year stint in northeast Asia, Nellie has zero coverage for the tens of thousands of dollars we’ve spent and will spend on her injury; in fact, it’s what sparked my interest in pet insurance as a business reporter. I wanted to understand the business models of pet insurance companies and how the heck they paid claims on the kind of invoices I was dealing with for Nellie, or whether they paid at all. How could they stay in business without networks and managed care? Well, apparently, waiting periods are a “critical piece” of that puzzle.

The question is, as the regulators and consumer advocates point out, if a consumer buys insurance for a dog on January 1 and the dog starts limping on March 1, what’s the difference between that scenario and a car getting rear-ended 60-days into an auto insurance policy?

“I don’t think we’re suggesting that everybody’s trying to cheat insurers, but I think there is unconscious, as well as conscious,” Dr. Benson of Nationwide said. He added: “This dog limping, not seen by a vet, but they buy pet insurance. So, there’s no diagnosis at this point. But by day 115 or so, this has turned into a $5,000 surgery. So, again, we’re trying to make sure that we’re controlling consumer costs for everybody. I’m trying to make sure that insurers have the ability to – and again, not all insurers having these waiting periods, this is really not the industry asking me–to do that.”

Healthy Paws has a 12-month waiting period for hip dysplasia coverage for pets under six years of age. Figo has a 6-month waiting period for cruciate ligament conditions, which they will waive if the pet undergoes an exam. Nationwide also will waive its orthopedic waiting period pending an exam. Petplan also requires a 6-month waiting period for cruciate ligament issues.

Trupanion is mum

Not every pet insurer has a dog in this fight.  Trupanion has no waiting period for orthopedic conditions, although there is a 5-day waiting period for injuries, which would presumably include orthopedic injuries, as well as a 30-day waiting period for illnesses. Even Trupanion’s recently launched entry-level price point insurance product PHI Direct only has a 60-day waiting period for cruciate tears, significantly less wait for coverage than Nationwide, Petplan, Embrace, etc. So this would seem like an obvious opportunity for Trupanion to underscore such a positive distinction.  Yet, despite its regulator-friendly waiting periods and unique emphasis on customer service, Trupanion also continues to be a full member of NAPHIA, which means NAPHIA speaks for the company on policy matters by default, particularly because Trupanion’s own lawyer rarely makes public comments in writing or orally, and because their veterinary officer doesn’t get involved with the company’s policy positions, not to suggest that he doesn’t have a presence on social media platforms or in the company’s marketing. Trupanion CEO Darryl Rawlings referred TCR to general counsel Gavin Friedman, who has not responded to requests for comment as of press time.

The company is scheduled to release its Quarter 3 earnings one week from today, on August 5, and as a result, spokesman Michael Nank says the company is in what’s called a “quiet period” and that he’s still, for example, not even at liberty to tell us what happened to Rawlings’ canned tuna video; more about the video’s disappearance in our story about PHI.

Taskforce chair says “not been made aware of any movement or progress” since last week

When asked on Wednesday if there had been any progress since last week’s meeting, Lee referred us to NAPHIA spokeswoman Kristen Lynch. In an emailed statement, Lynch told TCR yesterday:

“NAPHIA continues to work in good faith with the NAIC’s Pet Insurance Model Law Working Group to establish a model law… As there are still several critical topics to be resolved before the Model Law can move on to its next stage of consideration by the C-Committee, NAPHIA is working directly with regulators to resolve those matters.”

Lynch declined to respond directly to TCR’s questions, including whether NAPHIA maintains its positions taken last week–that it will not support the model law if it restricts waiting period implementation beyond what NAPHIA proposed, which was 14 days for accidents, 30 days for illnesses and 120 days for orthopedic conditions.

Asked the same question yesterday, Mr. Beatty told TCR, “I have not been made aware of any movement or progress.”

The most damning rhetoric for NAPHIA and Nationwide, however, has come from NAIC designated consumer representatives Birny Birnbaum and Brendan Bridgeland. During the July 8 meeting of the Working Group, Birnbaum even cut off Chairman Beatty as he was about to transition from waiting periods to free-look periods. In an interview, Mr. Birnbaum explained his thinking to TCR, saying that he felt compelled to interject because he wanted to be on record as not having been complacent.

“I wanted to make a couple of comments because we are really strongly opposed to having any waiting period at all. We don’t want to seem to have endorsed the discussion between industry and other interested parties that come up with a waiting period. So, if I could just take a minute or two to explain why we’re strongly opposed to waiting, periods. If you look at other types of insurance like disability insurance, the waiting period is there to make sure that the disability continues for a minimum length of time. It’s not to replicate the pre-existing condition exclusion. The rationale offered by NAPHIA is essentially the purpose of identifying pre-existing conditions…We don’t like this waiting period stuff at all, and you don’t agree with the rationale.”

The Vets Weigh in – And seem to be Wavering

Meantime, the American Veterinary Medical Association (AVMA) has been less forthright in its support for consumers in recent months, even offering to back Nationwide’s and NAPHIA’s compromise at 120-days, which neither the regulators nor consumer advocates accept. In last week’s Pet Insurance Working Group meeting, AVMA general counsel Isham Jones stated that the AVMA “worked closely with [now condemned] NAPHIA” on the proposal submitted to the group, noting, however, that AVMA continues to have “some concerns about the 120-day waiting period,” adding, “We think that’s a little bit long for orthopedic conditions, but other than that, we can support the proposal as submitted,” he said.

Asked yesterday if the AVMA’s position with respect to waiting periods had changed since last week’s meeting, AVMA spokesman Michael San Filippo responded by email:

“The AVMA’s position on the model act will depend on what additional information is provided as per the Working Group’s request and what the final language of the act looks like. We will continue to work on a path forward that ensures pet owners can obtain the care their veterinarian recommends and their pet needs while delivering a reasonable operating environment for the pet insurance industry.”

Update:  Following publication, the Pet Insurance Model Law Working Group met again, and although the meeting had been scheduled for ninety minutes, the meeting ended early. Seconds before the meeting formally adjourned, NAPHIA’s Cari Lee made a last-ditch attempt to salvage the waiting period discussions. “I was wondering if the committee is at all interested in revisiting the language related to the waiting period limitations around accidents and orthopedic conditions?”

“I’m not,” Beatty said. “We could be here forever!” he added. “I mean, to answer your actual question, NO, I AM NOT.”

The group is scheduled to meet for what may be the final meeting next Wednesday, August 4.