Hedging Health Risks, Hedgehog Style

by Elaine Schwartz    •    Apr 11, 2012    •    845 Views

By Mira Korber, guest blogger.

Oppressive fluorescent lights, the antiseptic squeak of rubber soles on linoleum, and the omnipresent pulse of machines envelop you at the hospital. You’re anxiously awaiting the results of surgery on your beloved family member.

Her name is Harriet, she’s a hedgehog, and this actually happened.

This (just slightly) unusual medical story is the result of pet medical insurance. (NB: The purpose of any health insurance is not to pay for medical procedures, but rather to hedge against risk of medical disaster [see this Econlife post.])

Without the coverage, would Harriet would have undergone treatment? Maybe, maybe not. 

Why? The proliferation of pet health insurance demonstrates a changing series of behavioral incentives. Logically, the more coverage you have for your pet, the greater the incentive to supply costly care and medications. Then, will you see an incentive to own more pets because insurance covers advanced treatments? Disregarding the cost of vet school, will more students see a lucrative future in veterinary fields?

A segment from NPR “This American Life” episode 392  exemplifies how incentives change for pet owners with insurance. Quoting a report from the National Commission on Veterinary Economic Affairs, NPR reports, “‘with pet insurance, clients likely will use your services even more often and opt for more advanced medical procedures.'”…insurance can reduce  ‘price resistance on the part of the client…with cost concerns removed, clients become more engaged and more responsive.'”

Additionally, these statistics express the nature of a growing pet insurance market (cited from an informative USA Today article):

  • Pet insurance costs from $15-$75/month, and covers 80-90% of claims
  • Dogs are insured 4x more than cats
  • 1% of American pets are insured, compared to Europe’s 20%
  • In 2011, Americans spent $50.8 billion on pets; $14.1 billion was health related expenditure


The Bottom Line? By providing health insurance to four-legged family members, owners are more willing to leap for the big-ticket bills. By the same token, vets are more likely to prescribe expensive procedures.

Find some interesting reads and blog source material below:

Details on Harriet the hedgehog. Information on dogs and the American economy, here.
VPI Pet insurance. And finally, The cost of advanced procedures, without insurance.

3 Responses to Hedging Health Risks, Hedgehog Style

  1. bob says:

    im so glad i have pet insurance. i meant what would i do without it with all the health problems. im so glad i have Shih Tzu health insurance

  2. Thanks god i had already got pet insurance before this blog put some more light in need of pet insurance

  3. Kyle says:

    Agreed! This is why I have pet insurance (Trupanion)… The problem is that I have a $500 deductible per year, and some years I don’t even rack up any more than that in vet bills – so I end up paying out vet bills PLUS insurance premiums. I actually also use a service called Pet Assure, they give me a discount at the vet (without exclusions for preexisting conditions actually), so coupled with insurance, owning my two dogs is actually not that expensive!

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