THE insurance industry is starting to interfere directly with the veterinary referral process for patients.
The Royal Sun Alliance (RSA), which underwrites policies issued by More Than, Tesco, M&S, Homebase, John Lewis and Argos, has written to vets in a pilot region covering the Midlands and north-west to tell them that if you (the first opinion vet) need to refer a pet then the client can contact it [RSA] and “we will then agree which of our preferred specialists or referral practices our client should go to”.
This is a hugely significant moment for the veterinary referral industry.
I contacted the RCVS for a comment and it has subsequently released a statement on it website, part of which is quoted here:
“In our view, it remains for the veterinary surgeon to decide, following discussion and agreement with their client, if referral is necessary and where the most appropriate referral practice would be. This decision typically would also take into account the likely referral costs, and whether the client’s existing insurance policy might wholly or partially cover those costs.
“Whilst pet insurers may maintain a list of preferred veterinary service providers, depending on the terms of their policies, they should not take on the professional responsibility of the veterinary surgeon who has the animal under his/her care. Veterinary surgeons remain the most qualified people to decide what is in the best health and welfare interests of their patients.
“The additional press statement issued by RSA today about their policy decision has done little to assuage our concerns. Whilst RSA were unable to answer our attempt to contact them today, we will continue to seek an opportunity to discuss this matter with them at the earliest opportunity.”
Well, your correspondent at the Cross-words hotdesk of news here managed to outdo the RCVS (at the time of writing) and yesterday I had a half-hour telephone interview with Keith Maxwell, the head of pet claims at RSA – details to follow.
Back in 2006 I wrote an article in Veterinary Review looking at this as a possibility. It was during the time insurance companies first started recommending that their clients use internet pharmacies.
Let’s look back at the context and review some of that article. Depending on your perspective, I was either way ahead of my time, or just wrong at the time!
“There have recently been some of the first signs that the relationship between the veterinary profession and the pet insurers is changing, at least from the perspective of practitioners … There has also been concern raised by some that the insurers are starting to think seriously about making the veterinary treatment market more like the car ‘treatment’ market, by introducing such things as fixed fees per job, approved practices or networks of practices, capped fees, etc.
“An approved practice system could work at the pre-approval stage of a claim. The client would contact the insurers who would then give the go ahead for the procedure and direct them to their nearest approved practice for the work to be carried out.
“In some respects this may be understandable as fees vary widely between practices (especially around the country) and if the insurer is paying out why shouldn’t they shop around? However, few vets in practice are likely to appreciate the interference.
“To help understand why things are changing, it is useful to look briefly at the early days of pet insurance and how insurers and vets have since developed. The very first pet insurers started in the 1950s, with a few more in the 70s, totalling about six or seven in the 70s to early 90s.
“These existed to cover vets’ fees and set premiums to match what vets were already charging. They relied on vets to promote them and most vets reading this will remember filling out pads of policy documents at first vaccinations. It was a cosy relationship that worked pretty well for all concerned although uptake was limited.
“This period also saw the rapid growth of referral vets and specialist centres. For many of these, the majority (approximately 80%) of the animals they treated were insured (as is still the case).
“This allowed them to set their fees pretty much without a ceiling, unlike general practices which have far fewer insured clients (and many cases that do not reach the excess level) and so have always had their fees constrained by the pockets of their clients.
“Increased technology, better equipment, longer training and huge leaps forward in treatment options have also, like in the NHS, caused costs to increase markedly in the referral sector…
“And so here we are today with high veterinary fees and low insurance premiums. Insurers can’t increase premiums or they will lose business to cheaper competitors. The underwriters especially are starting to feel the pinch.
“One source quoted that, ‘For every £100 paid in in premiums received, the pet insurance industry pays out £70, for human health insurance the payout is £2 for every £100 in.’ If you were paying attention earlier on you will have noticed the clause “…premiums to match what vets were already charging”: we are now approaching the position where vets’ fees will have to match what the insurers are charging. We are not there yet but it could be on the horizon.
“This is a worry. Can they do it? Can insurers dictate to vets what to charge, or send their clients to designated practices? How much power do they have over us and our clients, or are ‘our clients’ becoming their clients?
“It is clear from speaking to different people that insurers and underwriters are looking at ways of reducing claims payouts…
“In conclusion, there are several ways in which the insurers could have direct influence over what practitioners charge. Implementing such systems is probably a way off yet, partly due to the fact that the market is fairly unsaturated, and partly due to bureaucracy and costs associated with such systems.
“Also, the FSA and our dear friends at the Competition Commission may not allow such concerted action from a group of different companies aimed at reducing what vets can charge … We are more likely to see increasingly carefully scrutinised claims and more policies with a simple numeric cap on payouts.
“However, when the insurers feel they don’t have so many potential clients to chase, they may start looking more closely at reducing their claims payouts and examining who and where charges what and then taking steps to direct their clients to the most costeffective practices, or in some way try to cap claims for set procedures across the board.
“It isn’t likely to happen just yet, but like most legendary bottomless pits, insurance company coffers do have limits and we may be starting to see them.”
Customers’ interests at heart…
Wind forward to 2015 and I am on the phone to the head of pet claims at RSA. From the outset it was made clear to me that RSA has its customers’ interests at the heart of this, by which I mean keeping its current premiums low, attracting new customers and, importantly for all of us, keeping pet insurance premiums affordable to ensure new customers take up policies.
The other point he made clear to me was that RSA will not refuse payment of insurance claims for treatment undertaken at referral centres not on their approved list.
So the fear of the insurer saying “You can go to practice A and we will cover it, but if you go up the road to practice B we will pay nothing” is unfounded, he reassured me. Whether that will ever come, who knows?
What the insurer will spell out is how the excess and co-payment costs will compare between its approved practice and the one not on its list, and go on to tell the client that the vet at practice A is just as well qualified and equipped to deal with the problem at a much cheaper price.
This has not just been dreamt up in a financial director’s office. RSA has contacted a lot of referral practices in the pilot areas and undertaken benchmarking of equipment, training and costs in those practices which were willing to deal with them. Some vets and practices said no, they didn’t want to be involved; some were very keen.
RSA employed its own vets to carry out the benchmarking. I asked how you get on the list and was told that they wrote to nearly all vet practices in the pilot areas and asked them to get in touch if they were interested in being considered.
I did repeatedly push him on the question of whether the RSA would ever refuse to pay for treatment at a non-approved practice. He was adamant that they would still pay but the client would end up paying more in co-payments and be told this when he or she called.
RSA would make efforts to persuade the client to go to a similar but cheaper veterinary practice which is on its list. Co-payments on insurance policies can be hefty and I have had clients refuse referral due to the cost of the co-payment.
A cheaper option would be better than no referral in these cases, but directing the client on cost basis between two practices is different.
Thin end of wedge?
So, is this just the thin end of the wedge? It definitely is direct interference in the clinical management of a veterinary case by people who are not vets. If what I was told on the phone holds true, it will be merely a bit of financial advice to the client, but that will certainly influence what happens to the patient.
There is much to discuss and debate here for the profession and the RCVS. Referral centres will need to look at their prices as insurance companies have much more power over them than first opinion practices as they hold the revenue of some 80% of their patients compared to about 15% of first opinion vets.
I am also sure that vets in referral centres will resent having their worth weighed and measured by a conversation between the client and the insurer, neither of whom are veterinary trained.
I will leave you to draw your own conclusions and have tried to present the situation above in a fairly unbiased manner.
I will add my own opinion now, for what it’s worth, and to be honest I can see valid points on all sides. Referral centre fees can be very high and very variable; insurance company funds are not endless and insurance costs are already high enough to put many people off and cause insurers to insert ever more slippery get-out clauses to keep premiums low.
As a first opinion vet I will resent it if I want to send a certain patient with a certain problem to a specific referral vet and I am told by the client(s) that they have decided they want to go somewhere else.
I do not like the fact that this decision will be made by the client and insurer without much input from the first opinion vet. I am also concerned that vets like me who do a small amount of referral work will just get missed off the list.
Another worry is that the insurers will be basing all this on an urban model and clients in rural areas who may have to drive one hour to get to referral practice A may be told to drive four hours to practice B – both equally good – but the insurer’s preferred one being a huge distance away.
Or there may be instances where a first opinion vet has had very bad results at a specific referral centre and stopped using it, but finds he or she now has to because that centre is cheaper.
I am also not sure how the benchmarking has been done and we all know that the quality of outcome over years of referral to a practice is not something that can be assessed by ticking boxes on a form.
Having said all that, the simple fact is that referral prices are going up and premiums are constrained by the market. Something is going to have to change. And, as I wrote in 2006 and will repeat now: “Like most legendary bottomless pits, insurance company coffers do have limits and we may be starting to see them.”
