JOURNAL OF INSURANCE MEDICINE Copyright © 1997 By Journal€¦ · Antiselection The purpose of risk classification is to group risks with similar characteristics in order to establish

JOURNAL OF INSURANCE MEDICINECopyright © 1997 By Journal of Insurance Medicine

SELECTED TRANSACTIONS OF THE INTERNATIONAL UNDERWRITINGCONGRESS 1997Medical Underwriting in the Genetics EraRobert J. Pokorski

Received: March 15, 1997

Accepted: May 1, 1997

Journal of Insurance Medicine1997, 29:106,108

It is a great honor to meet with you during theopening session of the world’s firstInternational Underwriting Congress. I wasasked by the program committee to discuss"Medical Underwriting in the Genetic Era."This topic is a fitting introduction to thisweek’s discussion of issues of global impor-tance to underwriting professionals. I believeconcerns engendered by genetic testing repre-sent the most serious threat to risk classifica-tion that we will experience in our workingcareers. In brief, the issue is as follows. Thefield of genetics is experiencing exponentialgrowth, with a corresponding recognitionthat most medical information, screening anddiagnostic tests, and disease processes have agenetic component. These scientific advanceshave been accompanied by fears that insurerswill misuse genetic information to the detri-ment of the general public. Accordingly, anumber of countries have proposed and/orenacted legislation to restrict insurers’ accessto and/or use of genetic tests and geneticdata, legislation that would, in some cases,prevent access to information that is essentialfor classifying medical risks.

My remarks will focus on the most criticalinsurance issues: redefining medical informa-tion in genetic terms, antiselection, discrimi-nation, definition of genetic tests, genetic test-

ing legislation, likely resolution of thisdebate, and steps we can take to protect riskclassification. A more comprehensive analysisof this subject has been distributed to theaudience in the form of a reprint from theJanuary 1997 issue of the American Journal ofHuman Genetics?

Redefining Medical Information in GeneticTermsMedical practice is entering an era in which itwill be difficult if not impossible to drawmeaningful distinctions between genetic andnongenetic information. In their comprehen-sive analysis of disorders with a genetic com-ponent, the authors of The Genetic Basis ofCommon Diseases listed virtually all of the con-ditions encountered in an average medicalpractice.2 The United States Institute ofMedicine Committee on Assessing GeneticRisks stated that information regarding fami-ly history, physical examinations, and pasttreatment may be genetic? Overlap betweengenetic and nongenetic information has beenacknowledged by the National Center forHuman Genome Research which observedthat "For policy purposes, it will becomeincreasingly difficult to distinguish geneticfrom nongenetic diseases, and genetic infor-mation from nongenetic information."4 Thelack of a clear boundary between genetic andnongenetic conditions and tests was also rec-ognized by the American Society of Human

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Genetics Ad Hoc Committee On InsuranceIssues in Genetic Testing,~ and in an editorialin the British journal Lancet which opinedthat "it will soon be impossible to talk of med-ical and genetic tests as separate creatures.,’6

Genetic experts even envision the time whenthe public will be offered genetic screeningvia "walk-in testing (e.g., at shopping malls),mail-order kits, and home test kits ...,,3 Theselatter predictions seem futuristic, but inBritain it is now possible to purchase cysticfibrosis test kits by mail without consulting aphysician.7 An oral fluid sample containingcells from the mouth is collected by the indi-vidual, sent to the testing laboratory, andresults are received via the mail.

These official pronouncements that geneticand nongenetic information will often beindistinguishable make it clear that much ofthe data now used in day-to-day underwrit-ing is being redefined in genetic terms. Thescope of this "geneticization" of medicalinformation includes routine underwritingparameters such as family history, serum cho-lesterol and blood glucose, physical examina-tions, and virtually all common medicalimpairments. Insurers are facing the scientificreality that most medical tests, diseases, anddata will have a genetic component, while atthe same time being confronted with legisla-tion that seeks to prohibit use of all geneticinformation during risk classification.Against this backdrop of unparalleledchanges in medical practice and onerous leg-islation lies a fundamental business principle:in order to sell individually underwritteninsurance, where premiums are based on anapplicant’s claim risk relative to other peopleof the same age and gender, insurers needaccess to the same information - genetic ornongenetic - that is known to their applicants.

AntiselectionThe purpose of risk classification is to grouprisks with similar characteristics in order toestablish an equitable price for each riskgroup. This goal cannot be achieved unless

both the applicant and the insurance compa-ny have the same level of knowledge aboutthe magnitude of the risk. Any system which,by design or Government intervention, per-mits the applicant to have superior knowl-edge will inevitably lead to antiselection.8

Historically, antiselection via use of geneticinformation has not been a serious problem,with both insurers and applicants operatingon what might be characterized as "mutualgenetic ignorance." This situation haschanged. During the next decade, hundredsof thousands of genetic tests will be per-formed, primarily on people at high risk ofdisease. Individuals will have access to infor-mation indicating they are at significant riskof a serious disorder or are already in thepresymptomatic phase of a disease process.Many of these people will alter previous buy-ing practices, i.e., choose to buy insurancewhen they would not have done so absent anunfavorable test and, most importantly, fail toinform the company of the results at the timeof application. The medical literature hasalready reported instances where high riskindividuals have "attempted to buy life insur-ance or increase the amount of their coveragewhen they first learned of their at-risk statusor when symptoms of the disease appeared. ,,9The impact of antiselection will be greaterthan predicted by the number of peopleinvolved since it is likely these individualswill (1) buy more insurance than average pol-icyholders, (2) submit claims much earlierthan expected, and (3) selectively purchasecoverage, e.g., buy life insurance if earlydeath is likely, disability income or long termcare insurance if the disorder is disabling butnot life-threatening, and critical illness insur-ance if a lump sum cash benefit is desired atthe time of diagnosis. Antiselection is espe-cially worrisome with products where thebenefit is paid directly to the policyholderrather than a beneficiary. For example, ifapplicants at risk of hereditary cancer (orother conditions covered by the contract)have the right to conceal test results, insurers

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who sell critical illness coverage are contrac-tually obligated to pay a lump sum (poten-tially in amounts of $500,000 or more) at thetime cancer is diagnosed even though themalignancy may be detected at an early stageand cured.

Those opposed to sharing genetic informa-tion with insurers argue that antiselectionwill be a rare event, that its impact will bediluted when spread among all insurers, orthat it must be tolerated regardless of its mag-nitude in order to guarantee coverage foreveryone. These comments display a lack ofappreciation of the staggering financialadvantage that can be attained when oneparty in a contractual agreement knows morethan the other. Some people will attempt touse genetic test results to create an estatewhen none would have existed prior to test-ing. Suppose a 30-year-old man decides tobuy life insurance after learning via a genetictest that he is likely to die within 5, 10, or even20 years, a life expectancy similar to that of aman aged 89 years, 79 years, or 62 years,respectively.1° Realizing that higher premiumswere likely, the applicant might (1) purchaselife insurance at standard rates if he couldconceal the test result, or (2) invest the moneyhe would have spent on premiums. A$100,000 10-year level term life policy can bepurchased for as little as $125 per year, and a20-year level term policy for $151 per year,~1

and the insurer is obligated to pay $100,000 inthe event of death. In comparison, the sameannual premiums invested at 10% per yearwould yield a return of $2191 after 10 years($125 invested annually for 10 years), or$9513 after 20 years ($151 invested annuallyfor 20 years). For many people, the tempta-tion to buy insurance under these circum-stances will be irresistible. Simply stated, iflife expectancy is much shorter than antici-pated, purchasing life insurance at standardrates is the world’s best financial investment.Unexpected claims are paid by policyholdersthrough higher insurance premiums and/orlower dividends.

DiscriminationA recurring criticism is that unfavorablegenetic information will be used by insurersto rate (charge higher premiums) or declinenew applicants, as well as deny claims on inforce business on the grounds that unfavor-able genetic characteristics constitute a preex-isting condition. Critics charge this eventual-ity would result in genetic discrimination andcreation of a "genetic underclass" who wouldbe unable to afford or obtain insurance, andonly persons with favorable genetic charac-teristics would be able to buy coverage ataffordable rates.

The premise that use of significant medicalinformation to classify risks constitutes a dis-criminatory practice strikes at the very heartof the private insurance business.Discrimination based on race, ethnicity, andreligion is vilified as an affront to the mores ofall societies that subscribe to egalitarian prin-ciples, and use of these factors by insurers isgenerally prohibited. Yet most countries havecodified into law statutes that explicitly allowdiscrimination via other risk parameters(exempting race, ethnicity, and religion) with-in the context of private insurance, with theproviso that such discrimination is based onfactors that exhibit a strong correlation withthe risk accepted by the insurer.Underpinning this apparent paradox isacknowledgment by legal and regulatoryauthorities worldwide that, in a private, vol-untary insurance market where applicantsdecide if they want to buy insurance and thenchoose the type, timing (when it’s pur-chased), and amount of coverage, insurancecaru~ot be sold without basing premiums onthe risk - genetic or nongenetic - presented tothe insurer.

In the United States, the question of what con-stitutes acceptable ("fair") vs. unacceptable("unfair") discrimination in the context ofinsurance is governed by unfair trade prac-tices acts which prohibit unfair discrimina-tion.s The first Model Unfair Trade Practices Act

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for insurance was adopted by the NationalAssociation of Insurance Commissioners(NAIC) in 1947. An unfair trade practice isdefined in Section 4G(1) of the Model act as:"Making or permitting any unfair discrimina-tion between individuals of the same classand equal expectation of life in the ratescharged for any life insurance policy or annu-ity or in the dividends or other benefitspayable thereon, or in any other of the termsand conditions of the policy." There is noquestion that laws based on this Model actpermit fair discrimination, as well as prohibitunfair discrimination. All States and theDistrict of Columbia have now enacted theModel act or substantially similar legislation.

There is a more compelling reason why insur-ers must use genetic information: consumersbuying individually underwritten insurancewill continue to demand that we base under-writing decisions on an applicant’s risk rela-tive to others of the same age and gender. Inmy experience, some of the strongest propo-nents of risk classification based on geneticfactors have been people with milder forms ofgenetic disorders such as Gaucher’s disease,cystic fibrosis, and alpha1 antitrypsin defi-ciency. They have refused to be classified withapplicants having more severe manifestationsof the same diseases and insisted that insur-ance premiums reflect their more favorablerisk status. In the future, these applicants willassuredly be joined by (1) individuals whosegenetic mutations are less serious, (2) thosewith negative genetic tests, (3) people withgenetic characteristics that confer healthand/or survival advantages, and (4) appli-cants whose risk of genetic disease is marked-ly reduced by proper medical care, e.g.,patients with the HNPCC genotype (heredi-tary nonpolyposis colorectal cancer) whohave regular surveillance for prevention orearly detection of cancer will demand cheap-er insurance premiums. Suggesting thatinsurers selectively use genetic information,i.e., credit favorable genetic factors and disre-gard all unfavorable data, is unrealistic and

represents a serious impediment to resolutionof this issue. No private enterprise would bewilling to operate in a business environmentwhere downside risks were ignored andprices were quoted based on a best case sce-nario.

The principle of insurance discrimination wasconceded more than 100 years ago; it operatescountless times each day when insurerscharge premiums that reflect the likelihood ofa claim. Ultimately, objections to use ofgenetic information will be subsumed by eco-nomic and scientific realities: individuallyunderwritten insurance cannot be sold with-out risk classification and much of the med-ical information needed to classify risks willbe genetic. This eventuality has been recog-nized in an editorial column in the journalNature which opined that "in the end, bothinsurer and policyholder will have to share[genetic] information equitably - there is nolong-term alternative to consensual discrimi-nation.//12

Definition of Genetic TestsOf paramount importance to insurers is themeaning of "genetic test." If a broad defini-tion is used in laws or regulations that restrictinsurers’ access to genetic data, companieswould be severely limited in their ability toclassify risks. For example, the definitionprovided by the Task Force on GeneticTesting of the NIH-DOE (National Institutesof Health-Department of Energy) WorkingGroup on Ethical, Legal and SocialImplications of Human Genome Researchreads as follows: "Genetic tests- The analysisof human DNA, RNA, chromosomes, pro-teins or other gene products to determine thepresence of disease-related genotypes, muta-tions, phenotypes or karyotypes for clinicalpurposes. Such purposes include predictionof disease risks, identification of carriers,monitoring, diagnosis or prognosis, but donot include tests conducted purely forresearch.’’13 This definition illustrates prob-lems that broad language can create for insur-

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ers: (1) it covers the full spectrum of diseaseranging from asymptomatic carrier status tosymptomatic illness, (2) tests for proteins orother gene products are included, and (3) useof genetic tests is limited to clinical purposes,a

Legislation based on this definition wouldeffectively prevent insurers from classifyingrisks even if symptoms had already devel-oped, and use of routine tests such as serumcholesterol and blood glucose would be pro-hibited because these tests could be consid-ered gene products.

In response to efforts by state legislatures toregulate use of genetic data by companiesselling medical expense coverage, the follow-ing definition has been used in various formsby United States insurers in an attempt tolimit the impact of this legislation: "Genetictest means a laboratory test of human DNA orchromosomes from an individual which is (i)used to identify the presence or absence ofinherited alterations in genetic materialwhich are associated with disease or illness,including carrier status; and (ii) a direct mea-sure of the presence or absence of such alter-ations. The term genetic test does not includea test of indirect manifestations of any suchalterations.’’~4 This definition is quite specificon several points: it is limited to laboratorytests of human DNA or chromosomes; it cov-ers tests that identify the presence or absenceof inherited alterations in genetic material,but does not include non-inherited diseasesin which the genetic alteration is caused by

external factors such as cigarette smoke,ultraviolet light, or environmental toxins; andthe definition refers only to direct measures ofthe alterations and expressly excludes tests ofindirect manifestations of genetic alterations(gene products) such as serum cholesteroland blood glucose.

Several caveats are noteworthy regardingdefinitions that may be incorporated intolaws or regulations. First, the context inwhich the definition is used is as important asthe definition itself. The foregoing industry

definition would be acceptable for certainpurposes, such as reasonable informed con-sent or confidentiality requirements. On theother hand, the same definition would not beacceptable if it were used to prohibit use ofgenetic test results during the underwritingprocess, the reason being that the definitionincludes the types of genetic tests that willbecome routine medical practice in the future,and insurance companies would be at amarked disadvantage if they were unable toaccess important risk information known totheir applicants. Second, experience hasshown it is almost impossible to predict howthe definition of "genetic test" will evolveduring the legislative process. For example, ifinsurers were willing to agree to restrictionson use of genetic information based on a cer-tain definition, the definition might bechanged later in the legislative process inresponse to pressure from special interestgroups, thereby making the proposed lawtotally unacceptable. Finally, the issue of anacceptable definition is a fluid situation thatrequires constant reassessment. Seeminglyharmless laws passed in 1997 might have cat-astrophic effects on insurers as researchersdiscover that genetic factors are a near-uni-versal component of screening and diagnostictests, and most or all nontraumatic impair-ments.

The concern of insurers extends beyond thedefinition of a genetic test. Equally problem-atic are references to "genetic information,""genetic disease," and "genetic characteris-tics." For instance, legislation filed (but notenacted) in 1996 in Connecticut would haveprohibited underwriting for health or disabil-ity income insurance on the basis of "infor-mation about genes, gene products or inherit-ed characteristics that may derive from anindividual or family member. ’’~ This languagecould be interpreted to include height,weight, serum cholesterol, or even diseaseprocesses that were already symptomatic.

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Genetic Testing LegislationUse of genetic information in the context ofprivate insurance is being discussed at somelevel in all countries with mature insurancemarkets. In some cases, discussions havebeen confined to medical societies and scien-tific publications. Other countries have ele-vated this topic to Governmental committees,and/or proposed or enacted laws restrictinginsurers’ access to and/or use of genetic data.Medical expense coverage is generally the ini-tial focus of the debate because most peoplethink this type of insurance is a right, i.e.,everyone is entitled to medical expense cov-erage by virtue of citizenship. Subsequentdiscussions invariably concern life, disabilityincome, long term care, and critical illnessinsurance even though these latter types ofcoverage are widely viewed as financial prod-ucts. To the best of my knowledge, genetictesting legislation has been enacted only inthe United States and Europe.

United StatesIn the United States, proposed legislation torestrict insurers’ use of genetic informationhas focused primarily on health insurance.The driving force behind these efforts hasbeen the unique status of this type of cover-age in the U.S. In contrast to countries withNational health insurance programs, privatehealth insurance is generally needed to accessthe health care delivery system in the UnitedStates. Supporters of genetic testing legisla-tion were concerned that it might be difficultto obtain health insurance if companies wereallowed to underwrite using genetic factors.(From a regulatory perspective, health insur-ance typically includes medical expense, dis-ability income, long term care, and critical ill-ness insurance, plus supplemental medicalexpense coverage. However, laws dealingwith health insurers’ use of genetic informa-tion generally target medical expense cover-age).

Legislative efforts to restrict use of geneticinformation closely paralleled advances in

genetics and further accelerated after publica-tion of a 1993 report15 by the NationalInstitutes of Health (NIH) which concludedthat genetic information should not be usedto deny health care coverage. Despite anexplicit statement in the NIH report that theirrecommendations "concern health care cover-age and should not be applied uncritically toother forms of insurance, such as life or dis-ability income insurance," subsequent draftlegislation concerning insurers’ use of geneticinformation often included not only healthinsurance but also life and disability incomecoverage.

In 1989 only one bill dealing with use ofgenetic information by insurers was proposedin the 50 states. By 1993 approximately 15state bills were introduced, and by 1996 thenumber grew to at least 28 bills in 15 states.However, state laws enacted to date reflectthe perception that issues involving healthinsurance are fundamentally different fromthose concerning life and disability incomecovers, as well as the industry’s successfulefforts to protect life and disability incomeunderwriting. Fifteen states have passedlaws addressing use of genetic information inthe context of health insurance, but no statehas prohibited or restricted use of geneticdata when underwriting life or disabilityincome insurance, with the exception ofColorado which prohibits underwritingbased on genetic factors for group disabilityincome insurance. Regarding Federal legisla-tion, Congress recently passed theKassebaum/Kennedy Health InsurancePortability and Accountability Act of 1996.This law provides that genetic information, inthe absence of a diagnosis of the conditionrelated to such information, shall not be a pre-existing condition under group health insur-ance. It also prohibits use of genetic informa-tion as well as health status, medical condi-tion and medical history, among other things,in considering eligibility for group healthinsurance. Eight additional bills concerninggenetic testing were pending in Congress in

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1996; five dealt almost exclusively with healthinsurance.~ It is expected that as many as sixgenetic privacy bills will be introduced at theFederal level in 1997, the most important ofwhich will probably be a redrafted version ofa bill introduced last year by Senator PeteDomenici entitled the "Genetic Confidential-ity and Nondiscrimination Act of 1996."16

This legislation would prohibit unfair use ofgenetic information by employers and healthinsurers.

EuropeThe situation in Europe with respect to lawsgoverning use of genetic information is morecomplicated because three entities must beconsidered: the European Union, the Councilof Europe, and legislation in individualEuropean countries.

European UnionOn March 16, 1989, the European Parliamentadopted a Resolution on the Ethical and LegalProblems of Genetic Engineering. ThisResolution had no legal authority in themember States of the then EuropeanCommunity but it sensitized people to prob-lems that might arise in the future. Principle19 states that "Insurance companies have noright to demand that genetic testing be car-ried out before or after the conclusion of aninsurance contract nor to demand to beinformed of the results of any such testswhich have already been carried out and thatgenetic analysis should not be made arequirement for the conclusion of an insur-ance contract." Principle 20 indicates that"The insurer has no right to be notified by thepolicyholder of all the genetic data known tothe latter." It is not clear whether thesePrinciples address private insurance as awhole or only private medical expense insur-ance.

An accompanying explanatory report statesthat "It has not been usual in the past to cate-gorize insurance risks on the basis of heredi-tary factors and this must remain the case in

future," and "Whilst, in an insurance con-tract, the contracting parties must have thesame information with regard to the probabil-ity of the event insured against, the insurercannot claim any right to protection in respectof estimates concerning possible risks, riskswhich may [manifest themselves] in the dis-tant future or the identification of predisposi-tions which will only be activated under cer-tain environmental conditions."

Council of EuropeThe Council of Europe is an inter-govern-mental organization comprised of fortyEuropean countries. Among the goals of thisorganization is development of legislativesolutions to social problems facing memberStates, e.g., minority rights, AIDS, bioethics,and protecting the environment.

In 1992, the Committee of Ministers of theCouncil of Europe adopted RecommendationNo. R (92) on Genetic Testing and Screeningfor Health Care Purposes. Principle 7 stipu-lates that "Insurers should not have the rightto require genetic testing or to inquire aboutresults of previously performed tests, as apre-condition for the conclusion or modifica-tion of an insurance contract." With theexception of the Netherlands, all members ofthe Council of Europe adopted thisRecommendation.

The Council of Europe released a draftBioethics Convention in 1994, which was latermodified and finally rewritten. A final ver-sion was published November 19, 1996 enti-tled "Convention For The Protection OfHuman Rights And Dignity Of The HumanBeing With Regard To The Application OfBiology And Medicine: Convention OfHuman Rights And Biomedicine." Article 11(Non-discrimination) states that "Any formof discrimination against a person ongrounds of his or her genetic heritage is pro-hibited." Article 12 (Predictive genetic tests)stipulates that "Tests which are predictive ofgenetic diseases or which serve either to iden-

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tify the subject as a carrier of a gene responsi-ble for a disease or to detect a genetic predis-position or susceptibility to a disease may beperformed only for health purposes or for sci-entific research linked to health purposes,and subject to appropriate genetic coun-selling." This Convention is open for signa-ture by member States of the Council ofEurope, non-member States, and theEuropean Community, and it will becomeeffective if signed by five States (four ofwhom must be members of the Council ofEurope). Thereafter, States choosing to signthe Convention would be required to trans-pose all articles into National law, exceptingspecific provisions that conflicted with exist-ing law.

Individual European CountriesBelgium- Articles 5 and 95, respectively, oflegislation enacted in 1992 stipulate thatapplicants cannot transmit genetic data toinsurance companies, and physicians cannottransmit the results of "genetic analysis tech-niques" capable of determining future state ofhealth.

France- Laws No. 94-653 and No. 94-654(1994), respectively, limit use of genetic infor-mation to medical and research purposes,and impose a penalty of one year’s imprison-ment and a fine of FRF 100,000 (Art. 226-26 ofthe Penal Code) if information about geneticcharacteristics is used outside a medical orresearch setting. Coincident with discussionof these laws, the French Federation ofInsurance Companies announced a moratori-um on use of genetic information - favorableor unfavorable during the underwritingprocess. Both the laws and the moratoriumexpire after 5 years.

Austria- A law dated July 12, 1994 states thatinsurers cannot obtain, request or use resultsof genetic analysis.

Norway- Law No. 56 (August 1994) indicatesthat genetic tests can be performed only for

medical diagnostic and/or therapeutic pur-poses (Chapter 6-2), and stipulates that thirdparties (e.g., insurers) cannot request, receive,retain, or make use of genetic test information(Chapter 6-7).

The Netherlands- There is an indefinite mora-torium on insurers ordering or using geneticinformation for policies below NLG 300,000.

Sweden and Denmark- Each country has pro-posed legislation to limit insurers’ access togenetic information but no laws have beenenacted.

United Kingdom- The House of Commonsand the Government have disagreed onwhether or not there is need for legislation tolimit use of genetic information by insurancecompanies. In July 1995, the House ofCommons Select Committee on Science andTechnology proposed creation of a HumanGenetics Commission to regulate medicaluses of genetics and provide advice on issuesincluding use of genetic information forinsurance purposes. The Committee also crit-icized the insurance industry for failing topropose a solution for dealing with geneticdata. In response to these recommendations,the Government stated that a HumanGenetics Commission was not necessary, andthere was no current or foreseeable need toenact legislation to regulate use of geneticinformation. The Government also statedthat the attitude of the insurance industry hadbeen appropriate, and they encouraged dia-logue between the Association of BritishInsurers and leading geneticists in the hopesof creating an industry-wide code of practicethat would address how genetic informationshould be used by insurers. Subsequently,the British Government announced it wouldcreate a National commission that wouldfunction in an advisory capacity (but have noregulatory powers) to review genetic devel-opments that might affect public health,employment, and insurance.

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An important development occurred onOctober 7, 1996 when the Association ofBritish Insurers announced that ProfessorSandy Raeburn of the University ofNottingham had agreed to become its part-time genetic adviser. According to the ABI,Professor Raeburn will assist the Associationin keeping up to date on genetic develop-ments and in drawing up a Code of Practicefor handling genetic information. He will alsowork closely with Consultant MedicalOfficers and other industry experts on thesubject. As a further indication of its commit-ment that insurers will handle genetic infor-mation with great sensitivity and confiden-tiality, the ABI has extended an invitation tothe British Society for Human Genetics to joinwith them to review current and futurearrangements with respect to dealing withgenetic data.

On February 18, 1997, the ABI issued anupdated Policy Statement on Life Insuranceand Genetic Testing.’7 The statement appliedto life insurance only, and not to medical orhealth insurance sold separately or with lifeinsurance. Four items were noteworthy. First,companies will not require anyone to takegenetic tests when applying for coverage.Second, unless indicated otherwise by theinsurance company, applicants should reportresults of any genetic tests completed prior tothe application. Third, special provisionsapply to applicants for life insurance whencoverage is directly linked to a new mortgagefor a private dwelling: "Any genetic testswhich are to the detriment of applicants forlife insurance up to a total of £100,000 will beignored when the insurance is linked to a newmortgage for a home. Life insurers are able toprovide this assurance [insurance] for whathas been identified as an especially sensitivearea because the risk of selection [antiselec-tion] against them is somewhat less than forpolicies issued in other circumstances."Family history and other medical informationwill still be used during the underwritingprocess. Fourth, for other (non-mortgage) life

insurance applications, individual companieswill decide whether or not they wish to con-sider the results of previous genetic tests.

Summary of Legislation in EuropeA central theme of European legislation is thedesire to find a permanent solution to thequestion of "How should genetic informationbe used by private insurance companies?"Most of the enacted legislation conveys theimpression that there is a simple solution tothis extraordinarily complicated problem,namely, simply prohibit use of all geneticinformation by insurers. Among the short-comings of legislative efforts to date are thefollowing:

1. Insufficient understanding of the privateinsurance business, particularly, (1) the differ-ence between products that are individuallyunderwritten vs. those issued in a group con-text, and (2) the fundamental difference inthese issues for medical expense coverage asopposed to life, disability income, long termcare, and critical illness insurance.

2. Failure to acknowledge that insurersworldwide practice legally-sanctioned dis-crimination countless times each day. Withrespect to genetics, medical underwritershave used genetic factors since the founda-tion of the modern insurance industry morethan one hundred years ago, e.g., family his-tory, height and weight, blood pressure,serum cholesterol and blood glucose levels,and history of disorders such as coronaryheart disease, diabetes mellitus, Huntington’sdisease, cystic fibrosis, and polycystic kidneydisease.

3. Absence of definitions for genetic test,genetic information, and genetic disease.

4. Failure to recognize two critical distinc-tions between genetic tests: (1) genetic teststhat identify a predisposition (an event whichmay occur) vs. tests used to make a diagnosis(an event which has already occurred), and

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(2) genetic tests for inherited disorders vs.tests based on genetic technology and used inthe context of nonhereditary conditions.

5. For legislation based on models devel-oped by the European .Union and the Councilof Europe, lack of appreciation of the deleteri-ous effects of legislation written by a singleentity on diverse insurance markets. In a freemarket economy such as the EuropeanUnion, legal or regulatory constraints thatincrease the cost of insurance in one countrywill induce healthy people to purchase cheap-er coverage in another market, as well asencourage individuals at higher claim risk tobuy insurance in countries with lower prices.

In my opinion, European legislation will bemodified in the future. Underlying legisla-tive reform will be the realization that indi-vidually underwritten insurance cannot besold without risk classification and much ofthe medical information needed to classifyrisks will be genetic.

Likely Resolution of this DebateGenetic issues discussed in this paper arebeing driven by the research and medicalcommunities, with private insurers followingtheir lead. It is unreasonable to expect thatunderwriting practices could be frozen in the20th century amid a sea change in medicalpractice and consumer understanding.Without information needed to estimate riskthere can be no risk classification, and with-out risk classification there can be no individ-ually underwritten insurance. This absolutedependence on predictive data is the reasoninsurers react so negatively to suggestionsthat they not use genetic information. Theissue is not "will premiums increase a little ora lot;" rather, it is that prohibiting use of pre-dictive information - genetic or nongenetic -represents a frontal assault on a fundamentalbusiness practice.

I believe an organized effort could succeed inlimiting insurers’ access to genetic data. It

might even be possible to achieve the "holygrail" of some critics: legal prohibition of useof genetic information during the underwrit-ing process. At best, this eventuality wouldresult in price increases that place insurancebeyond the reach of many people, p~irticular-ly those already least able to afford coverage;TM

at worst, it could threaten the financial sol-vency of the industry. But these issues willnot be resolved by legislative fiat or orga-nized efforts within the medical communityto restrict access to information. They will bedecided by consumers. In the end, people will"vote with their feet," i.e., they will choose asolution that most closely meets their needs.As viewed from the perspective of a physi-cian, medical director, and insurance con-sumer, the solution will almost certainlyentail total acceptance of the use of geneticfactors in risk classification. The explanationlies in the economic imperative: there is noviable alternative to the private insurancemechanism. If the populace decides toendorse a system that calls for significantlyhigher premiums in order to subsidize othersat greater risk, that is their right. For mostpeople, however, willingness to subsidizeothers will quickly fade with the realizationthat, even if they are willing to "play by therules" and purchase insurance "blinded" totheir genetic status, many others will not beso forthright, and the latter will use geneticinformation as the basis for choosing the type,amount and timing of insurance purchases.Confidence in such a system will furthererode when consumers realize that genetictests, diseases and information have becomesacrosanct, and insurance premiums are nolonger determined by one’s claim risk relativeto other policyholders of the same age, butaccording to whether or not a test result, diag-nosis, or risk factor has a genetic component(e.g., if there were an increased but virtuallyidentical likelihood of early claim in two 40-year-old applicants, and the risk was geneticin one person and nongenetic in the other,prohibiting use of genetic information wouldmean that only the individual with nongenet-

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ic risk factors would be required to pay addi-tional premiums).

A Lancet editorial asks if society might bewilling to restrict genetic information todirect medical uses and "forgo any premiumadvantage in being able to show that we aregenetically at low risk.’’6 Though laudable,this proposal has no chance of success. Forthose questioning the assertion that peopleare unwilling to subsidize others at higherrisk, imagine that an insurer would agree toaccept everyone at risk of a serious diseasewith the stipulation that (1) the premiumwould be the same for everyone regardless ofrisk, and (2) genetic test results - favorable orunfavorable - could not be used to eitherincrease or decrease the premium. Such aplan would be welcomed by those with anunfavorable test but those with a favorableresult would never accede to such an arrange-ment. This contention is supported by a con-sumer survey conducted by the AmericanCouncil of Life Insurance.19 Existing policy-holders were asked if they would be willingto pay more for life insurance so that every-one could receive coverage at the same rate,regardless of the risk they represented to thecompany. Twenty-seven percent would paymore; most people in this group wantedincreases limited to 10% or less. Overall, only2% of policyholders were willing to increasetheir premiums by as much as 11% to 25% toensure that rates were the same for everyone.

Admittedly, the immediate future will be adifficult period for insurers since testing willalmost exclusively target people at high riskof genetic disease, and any circumstancerequiring an extra premium will be trumpet-ed by the medical and lay press as proof thatinsurers practice genetic discrimination. Thisunfavorable press will fade when testingspreads to the general population. Genetictesting will be readily available in doctors’offices, free-standing commercial laborato-ries, and eventually, via home testing, andpeople will learn that risk conferred by genet-

ic characteristics spans a range from low tohigh, with most individuals having an aver-age risk. If confronted with de facto forcedsubsidization by regulations or professionalcodes of conduct that forbid sharing of infor-mation except when it confers a financialadvantage, applicants who know they haveneutral or favorable genetic profiles will insistthat :insurers use this information to grantlower premiums. Consumer purchasingdecisions are not governed by utopian pre-cepts, but by rules established in perpetuity,namely, to maximize personal financial gain.

Steps to Protect Risk ClassificationI will conclude my remarks by suggesting anumber of steps we can take to protect riskclassification.

First, I believe each insurance market shouldimmediately form a Genetic Testing TaskForce to proactively deal with these issues.Comprising this Task Force would be special-ists in legislative matters, underwriters, med-ical directors, actuaries, and other insuranceprofessionals. It is worth emphasizing thatthis debate will be won or lost in the legisla-tive arena. Insurers cannot hope to prevailsimply by arguing they have a historic rightto underwrite.

Second, establish parallel tracts for discussionof medical expense insurance, and all otherforms of insurance. This arrangement is arecognition of the fact that most peoplebelieve medical expense coverage is a rightthat should not be jeopardized by use ofgenetic information, as well as an acknowl-edgment that individually underwrittenforms of life, disability income, long termcare, and critical illness insurance cannot besold unless companies have access to thesame medical information - genetic and non-genetic - that is known to their applicants.

Third, analyze insurance needs of individualswho may have difficulty obtaining coveragewith a goal of developing new insurance

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products that provide the necessary protec-tion while safeguarding the company andother policyholders. This topic is embryonicin its development and possible solutionsabound. An initial step might be an orga-nized campaign by physicians, genetic coun-selors, and insurers to stress maximum par-ticipation in insurance coverage that is soldon a group basis, and to encourage purchaseof individually underwritten insurance sever-al decades before the likely onset of disease.From a product perspective, endowment lifeinsurance has great potential; when pur-chased at a young age, this product may sat-isfy the insurance needs of most individualsat high but predictable risk of a serious genet-ic disease. Another possibility is decreasingterm or limited term (e.g., 10- or 20-year) lifeinsurance. Other product design featuresmight follow a recommendation made byOstrer et al. who noted that "insurers mayoffer a standard risk classification to personswho engage in healthy behaviors shown tomitigate the higher risk of their genetic pre-disposition to disease, especially if compli-ance can be monitored.,’2°

Fourth, establish a dialogue with organiza-tions that will play a pivotal role in resolvingthese issues. For example, medical societiesgenerally have great influence on the opin-ions of consumers, legislators, and theirphysician members. It would be very benefi-cial to hold a series of meetings with physi-cian groups to explain our concerns regardingantiselection, individually underwritten vs.group coverage, and differences betweenmedical expense coverage as opposed to life,disability income, long term care, and criticalillness insurance.

Finally, we must remember that the businessof private insurance has thrived because ourindustry provides a mechanism to supple-ment social benefits granted by the State.Given the inability of Governments to fundall of the programs desired by the populous,there is reason to believe the role of private

insurance may increase significantly in yearsto come. However, if the insurance industrywants society to afford it a greater social role, itmust accept the increased social obligationswhich that entails.2~ With regard to genetics,this means insurers must find a way to inte-grate genetic information into risk classifica-tion while still maintaining or even increasingthe percentage of people who are able to pur-chase coverage. The alternative is to accept amore limited role in which private insurancepractices will be of less concern for social poli-cy.

ReferencesPokorski R. Insurance Underwriting in the Genetic Era. Am JHum Genet 1997;60:205-16.

2 King RA, Rotter JI, Motulsky AG (eds). The genetic basis ofcommon diseases. Oxford University Press, New York, 1992.

3 Andrews L., Fullarton J., Holtzman N., Motulsky A (eds).Assessing genetic risks: implications for health and social poli-cy. National Academy Press, 1994, Washington, D.C.

4 National Center for Human Genome Research. Genetic informa-tion and health insurance: Report of the task force on geneticinformation and insurance. 1993, NIH Publication No. 93-3686.

5 The American Society of Human Genetics Ad Hoc Committeeon Insurance Issues in Genetic Testing. Background statement:genetic testing and insurance. Am J Hum Genet 1995;56:327-3 I.

6 Editorial. Lancet 1996;347:133.7 Wertz DC. Cystic fibrosis tests available "over-the-counter" in

Britain. The Gene Letter. January 1997;1:1.8 Fisher WB. Genetic testing - a test for risk classification. Legal

Section Meeting, American Council of Life Insurance, NewOrleans, Louisiana, November 17-19, 1996.

9 Geller LN, Alper JS, Billings PR, Barash CI, Beckwith J,Natowicz MR. Individual, family, and societal dimensions ofgenetic discrimination: a case study analysis. Science andEngineering Ethics 1996;2:71-88.

l0 Society of Actuaries. 1975-80 15-year select and ultimate basicinsurance tables: 1982 reports of mortality and morbidity expe-rience. Transactions 1982:55-81.

11 Intemet QuickQuote. http://www.quickquote.com/. March 4,1996.

12 Editorial. Nature 1996;379:379.13 Task Force on Genetic Testing of the NIH-DOE Working Group

on Ethical, Legal and Social Implications of Human GenomeResearch, Interim Principles (interim document for public com-ment issued in 1996).

14 American Council of Life Insurance 1996.15 National Center for Human Genome Research. Genetic informa-

tion and health insurance: Report of the task force on geneticinformation and insurance. 1993, NIH Publication No. 93-3686.

16 Reilly PR. Senator Domenici redrafts genetic privacy bill. TheGene Letter. January 1997; 1 : 1-2.

17 Association of British Insurers. Life insurance and genetics. Apolicy statement. News release, February 18, 1997.

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18 Pokorski R. Genetic information and life insurance. Nature1995;376:13-4.

19 Dixon ME, Graber M, Perlman B. Monitoring attitudes of thepublic. American Council of Life Insurance, 1995, Washington,D.C.

20 Ostrer H, Allen W, Crandall LA, Moseley RE, Dewar MA, NyeD, et al. Insurance and genetic testing: where are we now? Am JHum Genet 1993;52:565-57.

21 Thomas G. Pooling, pricing, and professionalism. The Actuary.September 1996, p. 21-22.

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JOURNAL OF INSURANCE MEDICINE Copyright © 1997 By Journal€¦ · Antiselection The purpose of risk classification is to group risks with similar characteristics in order to establish