HHS, genetic information and LTCI

Opinion

Claude Thau Claude Thau

LifeHealthPro.com recently ran an article about new U.S. Department of Health and Human Services (HHS) final regulations that will let insurers continue to use genetic information in underwriting long-term care insurance (LTCI), for now.

But officials suggested that HHS will study the topic further and could eventually prohibit use of genetic information in LTCI underwriting.

HHS developed those regulations to implement the Genetic Information Nondiscrimination Act of 2008 (GINA), which prohibits health plans from using genetic information in health insurance underwriting.  However GINA does not apply to LTCI.

A belief on the part of HHS that it has the right to unilaterally expand GINA would be similar to HHS’s position on the CLASS Act, when they attempted to make unilateral changes which HHS was not authorized to do under the provisions of the law.  The separation of powers  is the genius of the U.S. Constitution and it would be scary to me to see the Executive Branch undermine the constitution in that regard, whether I agreed with the policy initiative or not.

In my limited experience of discussing the genetic testing topic with people who have espoused denying insurers access to such information, those people have seemed comfortable with the idea of creating an "assigned risk pool" to cover consumers whose genetic test results would make them uninsurable for LTCI.

Clearly, someone may be interested in genetic testing and may be in a position to gain valuable information from it, but may hesitate to get the information because of fear of the potential insurance ramifications.  As a society, we don't want to dissuade people from pursuing genetic information.

Some people think that people with conditions over which they lack control should not have to pay a higher insurance premium as a result. They might think that people who are poor drivers because they speed should pay more for auto insurance, because they have chosen to speed.  But consumers who are innocently pre-disposed genetically to develop health conditions should not have to pay more. 

Charging people who are at a high risk of developing serious health conditions a higher premium seems like "adding insult to injury".  Those people are already harmed by the high risk of developing the health problem. Charging those people more exacerbates the situation. 

However, we need to recognize the repercussions.  Is it fair for people who to use hidden information to negotiate financial transactions?  What will happen if they are allowed to do so? 

If consumers know that they have an unusual risk that can be insured, and the insurance company is precluded from getting such information, the consumers will be insured at a price that does not reflect their risk.  The result will generally be:

  • In the short run, the insurer will lose profit.
  • In the longer term, the insurer will raise prices for everyone, resulting in insurance buyers who don't have such risk exposure subsidizing those who do.
  • Eventually, the risk imbalance could drive prices for that insurance product too high for the market to bear, thereby eliminating the supply of that product.

The severity of the situation depends on factors such as:

  1. How definitive the knowledge is. The more certain the knowledge, the greater the disadvantage for the insurer and other buyers.
  2. How serious the condition is. The more expensive the claim, the greater the disadvantage for the insurer and other buyers.
  3. The penetration rate of the insurance product. If everyone has the same coverage at the same price anyway (e.g., a universal mandate), protecting genetic information is not a problem. The lower the penetration rate (ratio of actual buyers to potential buyers), the more damaging it is to allow a purchaser to withhold information which affects their risk profile.

If consumers have access to Alzheimer's genetic risk tests such as the APOE-4 and/or other significant genetic tests and the long-term care insurer is blocked from knowing about the test results, the price for LTCI could soar because:

1, Such genetic information seems to be highly predictive of Alzheimer’s.  (Note: I’ve seen some articles that suggest that the Alzheimer’s markers are not highly predictive, but from an actuarial perspective they are highly predictive, and the predictive ability of genetic testing is likely to rise in the future.)

2. Alzheimer's is a condition that is very expensive for insurers to cover,

3. LTCI has a relatively low penetration rate, very different from acute health insurance or automobile insurance. Not surprisingly, the limited research that has been done in this area indicates that people who know they have a genetic marker for Alzheimer’s are many times more likely to buy LTCI than other people.

As a result, if we allow people to do genetic testing for Alzheimer’s and to hide such information from insurers, the price for LTCI could rise substantially, such as tripling.  Many people would be unwilling to purchase LTCI at such a price, which would cause the insurance price to spiral to a level that might not be attractive/affordable even for those who knew they were unusually likely to develop Alzheimer's. That is, our effort to protect those with the risk factor (by precluding the insurer from getting access to the information) could end up doing those individuals no good because the genetic information privacy rule would simply mean that nobody could buy LTCI. 

So what is the answer?  We could permit the insurer to ask about whether an applicant has had genetic testing and whether the applicant intends to get tested in the future. If the applicant has had the test, the insurer should be able to ask, "What was the result?"

There are related issues.

  1. Incontestability: We require insurers to pay claims that occur more than two years after the policy was issued, even if someone answered a health question incorrectly, as long as the error was an innocent error. Generally, if the insurer can prove that an answer was fraudulent (knowingly and purposefully incorrect), the insurer can decline the claim. Proving fraud is difficult and expensive. So this is not an ideal solution for insurers, but in general, it has worked very well. However, one state has amazingly taken the position that its citizens have the right to answer questions fraudulently and the insurers have no recourse. I think this is entirely inappropriate regulatory action. The rule has harmed citizens of the state because the industry has cut back on the risk that it is willing to insure in that state. I would support discontinuing sales in that state entirely. This issue can be resolved by maintaining a proper legal balance.
  2. People who test positive: If we, as a society, wish to encourage people to do genetic testing and to protect them from the consequences, we should bear the cost rather than forcing other people who purchase LTCI to bear the cost.  The availability of LTCI is good for society, so we should not crush the LTCI industry.  We could, if we choose, create an assigned risk pool for people who test positive for APOE-4 and other genetic markers that would cause LTCI to be unavailable or prohibitively costly. All taxpayers could subsidize this group. Is it fair to ask all taxpayers to subsidize LTCI for those who know they are predisposed to Alzheimer’s? Some people would say "no," but others would say that it isn't fair that these people have the genetic characteristic.  I’m comfortable with subsidizing their cost, if that is what we decide.
  3. Another strategy would be to buy LTCI first, before being genetically tested. The problem with that approach is that the buyer could then drop the policy if they have a successful test (no predictor of the condition) and keep the policy if the test demonstrates their exposure. If people “anti-selected” effectively in that fashion, it could actually be more costly to insurers, because the same people would be insured and uninsured, but the insurance company would have incurred the cost of issuing additional policies that were never put into effect. That's why I suggest allowing the insurer to ask if the person intends to be tested. Alternatively, we could have a national registry of people who had taken such genetic testing, so the insurer could protect itself and the other people in the pool.
  4. Making the insurance mandatory is another "solution." That is the solution taken relative to acute health care in the Patient Protection and Affordable Care Act of 2010 (Health Care Reform).  Making LTCI mandatory would be a dramatic decision that does not seem appropriate to me because:
  • Nearly everyone wants acute health care so that their health problem can be “fixed” and they can resume their lives. However, many people do not want long-term care services.  I see the "right-to-die" as a civil right.  (Tangentially, the “right-to-die” would significantly reduce our acute health care and LTC costs.)  People who don’t want LTCI should not be forced to buy it and even more so, should not be forced to buy it for others.
  • It is very paternalistic. The vast majority of the population does not buy LTCI. Why force people to buy something they don’t want?

For the above reasons, I conclude that LTC insurers must be permitted to know as much as the applicant knows about their exposure to Alzheimer’s.  If we want to encourage people to undergo genetic testing, we can create an assigned risk pool for those who are refused LTCI as a result of their test results.

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