Points have been raised against a major argument used by life and health insurers
One expert in economics is disputing a commonly used argument against Canada’s contentious bill meant to prohibit genetic discrimination by insurers.
The Canadian Life and Health Insurance Association (CLHIA) has been a vocal critic of Bill S-201, which prevents insurers from using results of genetic tests to decide on coverage or premiums. Preventing this use, the group argues, could lead to high-risk individuals being lumped in the same pool as average low-risk people. The resulting increases in overall claims costs would then cause premiums to increase for everyone and a smaller market for the insurance industry.
The argument describes a situation known as adverse selection. But according to Mike Hoy, professor of economics at the University of Guelph, there is little evidence to suggest it will actually happen.
“Adverse selection occurs if more insurance is purchased by people deemed to be[at] a higher risk — say, those with Huntington disease — than the average person with low risks,” he said in a recent think piece published on The Conversation. “As an economics professor who’s done extensive research on genetic discrimination, I argue this scenario is highly unlikely.”
He explained that there are two conditions under which a ban on insurers’ use of genetic test results could jeopardize the insurance markets.
First, a significant proportion of those applying for life insurance would need to be confirmed carriers of genes for fatal disease, or future health costs for long-term care and other types of life insurance would have to be much higher.
Second, the knowledge that they carry genes for fatal disease or that health costs will increase in the future would have to drive people to take in more insurance than an uninformed consumer would.
“Actuarial evidence suggests that these conditions aren’t at play, so there won’t be a major impact on the average price of insurance,” Hoy said.
He conceded that lowered costs of genetic tests in the future could lead to an explosion of information on genetic diseases across the population. In that case, there may be a need to revisit the law.
“[But] it’s probable that most people will find that they have as many good genes as bad ones,” Hoy said. “And that means there likely won’t be substantial differences among the risk levels for mortality or morbidity — a necessity if adverse selection becomes a problem for insurance market.”
Related stories:
Australian insurers’ use of genetic information cause concern
Genetic testing law will lead to higher premiums, says industry body
The Canadian Life and Health Insurance Association (CLHIA) has been a vocal critic of Bill S-201, which prevents insurers from using results of genetic tests to decide on coverage or premiums. Preventing this use, the group argues, could lead to high-risk individuals being lumped in the same pool as average low-risk people. The resulting increases in overall claims costs would then cause premiums to increase for everyone and a smaller market for the insurance industry.
The argument describes a situation known as adverse selection. But according to Mike Hoy, professor of economics at the University of Guelph, there is little evidence to suggest it will actually happen.
“Adverse selection occurs if more insurance is purchased by people deemed to be[at] a higher risk — say, those with Huntington disease — than the average person with low risks,” he said in a recent think piece published on The Conversation. “As an economics professor who’s done extensive research on genetic discrimination, I argue this scenario is highly unlikely.”
He explained that there are two conditions under which a ban on insurers’ use of genetic test results could jeopardize the insurance markets.
First, a significant proportion of those applying for life insurance would need to be confirmed carriers of genes for fatal disease, or future health costs for long-term care and other types of life insurance would have to be much higher.
Second, the knowledge that they carry genes for fatal disease or that health costs will increase in the future would have to drive people to take in more insurance than an uninformed consumer would.
“Actuarial evidence suggests that these conditions aren’t at play, so there won’t be a major impact on the average price of insurance,” Hoy said.
He conceded that lowered costs of genetic tests in the future could lead to an explosion of information on genetic diseases across the population. In that case, there may be a need to revisit the law.
“[But] it’s probable that most people will find that they have as many good genes as bad ones,” Hoy said. “And that means there likely won’t be substantial differences among the risk levels for mortality or morbidity — a necessity if adverse selection becomes a problem for insurance market.”
Related stories:
Australian insurers’ use of genetic information cause concern
Genetic testing law will lead to higher premiums, says industry body
