Genetic discrimination and the future of health insurance

The US Congress today passed legislation banning the use of genetic information by insurance companies, unions and employers. As Dominic Wilkinson noted in his post on 26 April, this legislation might have interesting implications for professional sport. The reform also raises questions about the future of insurance markets.

One argument in favour of the new legislation is that it would be unfair for employers or health insurers to discriminate on the basis of genetic information. There is at least one commonly used conception of fairness according to which this view is problematic. It is sometimes thought that one person treats another unfairly only when she arbitrarily disadvantages him – that is, when she disadvantages him without good reason. If an insurer excluded a person with high genetic risk from insurance, it would certainly be disadvantaging that person relative to lower risk people. But it’s not clear that this disadvantage would be arbitrary. Since a person with higher risk genes presents a greater financial risk to the insurer, the insurer may have good reason for excluding her.

There is, however, another conception of fairness according to which genetic discrimination certainly is unfair. It’s sometimes thought that a person is treated unfairly whenever he is disadvantaged on the basis of some factor that was not within his control. A person’s genetic predispositions are not within his control. Therefore, it is unfair it would be unfair for insurers to disadvantage persons on the basis of such predispositions.

If the new US legislation is defended by appealing to this conception of fairness, then further reforms should also be advocated. There are many practices already adopted by health insurers which disadvantage people on the basis of factors beyond their control. Consider the situation of someone who is excluded from health insurance, or charged a higher than usual premium, because she already suffers from some medical condition. Unless this person could have avoided acquiring this medical condition, it will be unfair, in the present sense of fairness, to exclude her from insurance.

To avoid committing themselves to further drastic insurance reform, defenders of the US law could instead appeal to some alternative argument for the proposed law. For example, rather than appealing to the unfairness of genetic discrimination, they could simply note that such discrimination might deter people from undergoing useful genetic tests. Allowing discrimination would thus have at least one bad consequence.

But banning genetic discrimination in insurance may also have bad consequences, owing to the phenomenon of adverse selection. Suppose that you undergo a genetic test showing that you have very ‘safe’ genes – you are not predisposed to any serious diseases. If your health insurer cannot genetically discriminate, you will be charged the same premium as higher risk individuals. But relative to those higher risk people, you have little to gain from insurance, so you may choose to opt out of insurance coverage. As you and other low risk people opt out, the risk profile of the insurer’s clients will deteriorate, and insurers will be forced to charge higher premiums. This will induce those now at the low risk end of the insurers clientele to opt out as well. The cycle may continue until the insurance market has collapsed entirely.

In countries such as the US, where there is very limited public healthcare provision, it seems unlikely that it would be worth tolerating the collapse of private health insurance markets merely so that individuals could feel more free to undergo genetic testing. Banning genetic discrimination by insurers would be justified only if some way could be found to prevent this collapse. The obvious way to do this would be to prohibit those with low genetic risk from opting out of insurance by making health insurance compulsory. Low risk people would then be subsidising higher risk people, as they do in public healthcare systems.

It seems that whether we try to defend the US law by appealing to fairness, or to good consequences, we end up committing ourselves to much more drastic insurance reform than merely the outlawing of genetic discrimination. Of course, this doesn’t necessarily undermine the case for banning genetic discrimination. On the contrary, it may be that the new US legislation doesn’t go far enough.