Genetic Nondiscrimination Act of 2008 and LTC Insurance

NPR has a story on the legal use of genetic information to discriminate (underwrite, set premiums) in the private Long Term Care (LTC) insurance market. I am the first author of the paper that Bob Green (the P.I. of the underlying study) is discussing in the NPR piece and I have blogged about its findings here and here.

The basic story of the paper in Health Affairs is that persons with at least one copy of the e4 variant of the APOE-4 genotype were found to be both more likely to move to a nursing home in a community cohort of elderly persons living in 5 N.C. counties, as well as being found in the REVEAL II study to alter their behavior upon finding out they were at increased risk of AD, including making changes such as buying Long Term Care Insurance. In short, this is adverse selection whereby consumers have information that companies do not, a story that likely keeps insurance executives up at night.

The biggest news of the segment was the report that Genworth, the largest seller of LTC Insurance in the U.S. acknowledged that the The Genetic Nondiscrimination Act (GINA) of 2008 does not ban the use of genetic markers to underwrite their product, and they stated they wished to keep this option available to do so (some states have moved to do so). I blogged at some length on this back on October 2011 (that it was allowed for LTC Insurance), but I have never heard anyone from the LTC Insurance industry acknowledge they wanted to keep this option.

I think it is a mistake to take a reflexive “see the insurance companies are bad” response to this story, and that in Long Term Care especially, we need some renewed thinking about what ‘fairness’ means.

The general idea behind GINA 2008 is that you cannot pick your genes, so to discriminate against someone on that basis is unfair. This makes general sense to me, and likely to most people. However, in a private insurance market with very low penetration (~less than 7-10% of persons in age ranges to consider such products buy them; this post highlights the many reasons) what constitutes fairness is not as clear. An average risk person who wants a LTC policy because they have no children, for example, yet who ends up paying a higher than warranted premium due to adverse selection in the market (those with higher risks signing up) could also be viewed as being harmed in an unfair manner.The chart below lays out how different scenarios of who knows genetic information in LTC could influence uptake and premiums. The table is meant as food for thought.

ScreenHunter_01 Jan. 18 09.54

The bottom line answer to planning for LTC is risk pooling, and if ever there were a risk distribution that called out for social insurance it is LTC. That seems impossible politically at this time. However, the LTC system in this country is a patch work mess that is in need of some sustained policy efforts. This post has a weeks worth of links on planning for LTC, from both an individual and population basis if you want more. Long Term Care is always the forgotten topic until someone in your family needs it.

crossposted at freeforall


  1. J. Michael Neal says

    The basic rule is: if you want everyone to be able to purchase something, insurance is a terrible product to try to do it with.

  2. marcel says

    links are not showing up on the main page, just on the page with the individual post. i notice this for wimberly’s green energy post as well

  3. Brett Bellmore says

    I’m not sure how you’d get the “no, yes” quadrant, since the genetic tests are done on individuals, who presumably are going to get the results at some point.

    Beyond that, I agree with Neal: The purpose of insurance is to convert a 1 in 100 risk of a cost of a thousand dollars into a predictable expense of ten dollars. It’s perfectly orthogonal to “everyone being able to purchase something”.

    Sucks to have a genetic illness, but if your genes are predictably make you ill, it isn’t the purpose of insurance to enable you to afford this.

    • Don Taylor says

      In NC, an insurance company can tell you they are using an allowed measure to underwrite, and can say you are denied because of a measure, but they don’t have to give you the value of said measure. I will try and track down this regulation.

    • Maynard Handley says

      Of course, what you are ULTIMATELY saying, Brett, is that healthcare!=insurance…

      Now if only the REST of America would understand this point, we might make some progress. It is insane how much public energy the US expends talking about insurance, while absolutely avoiding talking about the actual point of the insurance — how the healthcare system does, vs should, work.

      • Brett Bellmore says

        “Of course, what you are ULTIMATELY saying, Brett, is that healthcare!=insurance…”

        Yes, that’s precisely what I’m saying. A part of the problem here is that much of the recent regulation of health insurance represents an effort to shift the cost of welfare style redistribution onto private companies, by demanding that they provide their product at non-market rates to some portion of the customer base. Which is only possible if the rest of the customers aren’t permitted normal market choices.

        Not really that much different from demanding that grocery stores sell food to the poor at below cost, and then mandating that the non-poor also shop at those grocery stores, to keep them from fleeing the inflated prices necessary to pay for the first group’s below cost pricing.

        I think it would be much more honest to just let insurance companies compete in a normal free market, and if the government wants to subsidize somebody’s health care, do so directly, ON BUDGET.

    • J. Michael Neal says

      Well, yes. My ultimate point is that we need to get the insurance paradigm out of most of the health care industry and use it only on the fringes. I mean “health care” in a way broad enough to include long term care.

  4. Ebenezer Scrooge says

    Insurance markets are very fragile, which is why so few risks are insured. compared to all the risks out there. Very few risks are non-catastrophic (a measure of capital market depth), do not suffer from xs adverse selection/moral hazard, and have some decent historical information, and can be written with reasonable underwriting periods. The LTC market seems too fragile to live, even before genetic testing.