“Genetic testing threatens the insurance industry” proclaimed a recent Economist headline, highlighting an issue that is causing sleepless nights for health insurance underwriters.
The catalyst for these fears came in April, when predictive genetic test company 23andMe won a years-long battle to get regulatory approval to screen people for risk factors for ten diseases and conditions, including Parkinson’s and Alzheimer’s.
The premise of the Economist piece was that the growth of such predictive genetic tests could lead to increasing levels of what underwriters refer to as “adverse selection,” defined as “ where market participation is affected by asymmetric information.” Put simply, it’s when one party to a deal knows something that the other party does not.
In healthcare this refers to people who, thanks to genetic testing, know they might be susceptible to a life-changing illness and then go out and buy health insurance in case they ever need to pay for treatment that might otherwise bankrupt them or leave them without care.
Insurers fear that if this happens it will skew the risk pool, making policies more expensive for everyone, especially the younger, healthier customers they hope to attract to offset the care costs of older, less healthy policy holders.
The insurance industry argues that if consumers have this information then so should they, but current regulations only require that insurance applicants disclose diagnostic test results, and not those from predictive tests. Patient advocacy groups counter that the insurers might use predictive test data to discriminate regarding policies and premiums, possibly even barring access to insurance for some.
For now, patient data rights hold the upper hand but how long the status quo can persist remains to be seen. For an insurance-based health system to be maintained the house (to borrow a casino metaphor) must always win. Predictive genetic tests tilt the balance in favor of at least some of the house’s customers, threatening its business model.
The concept of adverse selection was a pivotal factor in the recent debate about the future of healthcare in America. The introduction of predictive genetic tests guarantees it will remain so.
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