The headline of the Nov. 18 company press release reads, “Two Thousand Companies Now Offering VPI [Veterinary] Pet Insurance as a Voluntary Employee Benefit.”
About now you’re probably wondering what in the world pet health insurance has to do with tax and fiscal policy. Say with us here.
Pet health insurance has been around for a number of years. Initially, the coverage was primarily intended for larger animals, such as reimbursing the owners for horse surgery and the like.
But as more expensive veterinary options have become available, and since there are a lot of people willing to pay thousands of dollars to do, say, joint replacement on a house pet, pet insurance has expanded.
No problem there. In a normal insurance market, if utilization and costs go up—which they generally always do when individuals become insulated from the marginal cost of their decisions—people bear the cost of the higher premium. And that process puts downward pressure on utilization.
But increasingly pet insurance has been targeting the employer market, promoting a voluntary sign-up, including payroll deduction for large companies, as a way to attract better employees—just as employers use human health insurance benefits to attract and keep good workers.
Now, according to the press release: “Although pet health insurance does not currently qualify as a pretax medical benefit, there is some movement in that direction. The Journal of the American Veterinary Medical Association (JAVMA) reported this month that the American Veterinary Medical Association (AVMA) will ask Congress to pass legislation amending Section 125 of the Internal Revenue Service Code to include pet health insurance as a pretax option when enrolling through a company’s benefits program.”
Uh-oh!
One of the primary reasons the country is having a health insurance reform debate is that employer contributions to health insurance can be excluded from employee income, which created a huge tax break—currently worth roughly $250 billion a year. But perhaps more importantly, the provision fused health insurance to employment.
Granted, pet health insurance is a long way away from following the route traditional health insurance has. But the last thing we want is to do to pet health insurance is what we’ve done to traditional health insurance.