Download Genetic Testing - Richard MacMinn

Genetic Testing and Adverse
Selection
Richard D. MacMinn
Illinois State University
and
Patrick L. Brockett
University of Texas
Asia-Pacific Risk and Insurance Association
Bangkok
July 2003
American Risk and Insurance Association
Denver
August 2003
European Group of Risk and Insurance Economists
Zurich
September 2003
Timeline
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
The initial planning process
culminated in 1990 with the
publication of a joint research plan,
"Understanding Our Genetic
Inheritance: The U.S. Human
Genome Project. The First Five
Years FY 1991-1995“ and the 15
year Human Genome Project Began
26 June 2000 - International Human
Genome Sequencing Consortium
Announces the Working Draft of the
Human Genome
15 February 2001 - Complete
human genome sequence
announced in the two leading
scientific journals - Nature
(NIH/DOE) and Science (Celera)
number
Genome Database
900
800
700
600
500
400
300
200
100
0
genes associated with genetic
disorders
mapped genes
1
3
5
7
9 11
13
chromosome number
15
17
19
21
Y
Quotes

“Genetic testing has the potential to revolutionize
medicine. But revolutions can have casualties.”


Francis Collins, Director of the Human Genome Project, Newsweek, 1996
“All progress is precarious, and the solution of one
problem brings us face to face with another
problem.”

Martin Luther King
Concerns:
Should regulators care?


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Should insurers be able to underwrite using the
results of genetic tests? Under what conditions?
Concern about discrimination creating a class of
uninsured risks
Will there be a repeat of the industry exit such as
occurred in Washington DC?
Why should insurers care?
Why should regulators care?

A Texas woman who was turned down for life and
disability insurance because her doctor had noted on
records that her mother might have died of
Huntington's disease. Her mother, however, had
never been diagnosed.
Fear of losing insurance

In April 1996 two US Marines were court-marshaled
and ultimately discharged from the Marines for
refusing to provide a DNA sample. The Marines
feared that information might leak from the
government storehouse and others might eventually
be able get access to their genetic sample. They
feared that they could experience genetic based
discrimination in employment or health insurance
after they left the Marines.
Example: "discriminating" based on genetic
information

A California man was denied health insurance when
he changed jobs because he had the gene for
neurofibromatosis, even though he no signs of the
disease.
Fear of losing employment

Burlington Northern & Santa Fe Railway

In a case that sends a strong signal discouraging employers'
use of genetic testing, Burlington Northern & Santa Fe
Railway Co. agreed to pay $2.2 million to 36 employees to
settle a landmark Equal Employment Opportunity
Commission lawsuit over the controversial screening.
Regulation
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United Kingdom
Europe
United States
Asia
United Kingdom

Previously industry was regulated by the ABI code of
conduct
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According to the code, insurers could not require genetic tests.
Now there is a five year moratorium


“…from 1 November 2001 insurers will not take genetic data into
consideration when evaluating premiums unless the government's
Genetics and Insurance Committee has approved the test and the
policy is a life policy exceeding £500,000 or another policy, for
example long-term care cover, exceeding £300,000.”
“So far, the only test the committee has approved is for
Huntington's disease, but it is also in the process of reviewing
whether tests for a hereditary form of Alzheimer's disease, as
well as breast and ovarian cancer, can be included.”
Europe
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Council of Europe
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
Convention on Human Rights and Biomedicine (1997)
Chapter IV – Human genome
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Article 11 – Non-discrimination - Any form of discrimination
against a person on grounds of his or her genetic heritage is
prohibited.
Article 12 – Predictive genetic tests - Tests which are predictive
of genetic diseases or which serve either to identify the subject
as a carrier of a gene responsible for a disease or to detect a
genetic predisposition or susceptibility to a disease may be
performed only for health purposes or for scientific research
linked to health purposes, and subject to appropriate genetic
counselling.
Europe
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Legislation prohibiting access
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Austria (The Gene Technology Act, 1994)
Belgium (Law on Terrestrial Insurance Contracts, 1992)
Norway (Act Relating to the Application of Biotechnology in
Medicine, Law n. 56 of 5 August 1994)
Sweden (Law 114 of March 1991 on the Use of Certain Gene
Technologies within the Context of General Medical
Examinations (1993))
Europe
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Moratorium prohibiting access
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France (French Federation of Insurance Companies, 1994,
1999)
Germany (German Insurers’ Association, 1999)
The Netherlands (Verzekeraars verlengen moratorium
erfelijkheidsonderzoek, December 1990 (1995))
Switzerland
Europe

Voluntary code
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Finland, Greece, Ireland
Other
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Italy, Portugal
Asia
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China
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Almost unanimously - by 91% - the scientists said that
couples who carried the same disease-causing genetic
mutation should not be allowed to have children.
United States - Health
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Early regulation in 1975, 1978, 1982
prohibited denial of health coverage or
charging higher premiums for those with
the sickle cell trait.
40 of the 50 states have regulations
covering genetic testing.
The regulations generally prohibit
cancelling, limiting, denying or
establishing differentials in premium rates
based on genetic test results
California, New Hampshire and New
Jersey prohibit the use of family history
in setting rates
Concerns


Can self-insuring employers limit
coverage? Yes
Can employer see results of genetic
tests? Yes
Legislation by year
25
20
15
10
5
0
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
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United States - Life

Existing state law on life insurance can be
categorized as follows:
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(1) those that require that life insurers obtain the applicants’
informed consent for genetic testing or use of genetic
information, e.g., AZ, CA, MA, MN;
(2) those that require that life insurers use genetic
information only in an actuarially justified manner, e.g., MT,
NJ, NM; and
(3) proposals to prohibit the use of genetic information
altogether or for policies below a certain dollar amount, e.g.,
AZ, CA, NY, Oregon.
Adverse Selection
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Literature
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MacDonald, NAAJ, 1999
Subramanian, et. al., JRI, 1999
Lemaire, et. al., NAAJ, 2000
Boyer
To insure or not insure
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Pooling
Separating
Adverse Selection
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Market Equilibria
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Life
Health
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Demand
Supply
Equilibria
Demand
Equilibrium
Concluding Remarks
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Is there concern of adverse selection in the insurance
industry? -- yes -- “death spiral” concerns -- Are they
exaggerated -- possibly
Is there a need for regulatory oversight? -- possibly,
with restraint and rational approaches that respect
market economics
Precautionary Quote
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"Our society went into the age of nuclear energy
blindly, and we went into the age of DDT and other
pesticides blindly. But we cannot afford to go into
the age of genetic engineering blindly. Instead we
must move into this exciting new era with an
awareness that gene therapy can be used for evil as
well as for good. As we reap the benefits of this
technology, we must remember its pitfalls and remain
vigilant."

W. French Anderson, Scientific American, 1995