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What genetic testing means for life insurers

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Genetic testing: it’s the crystal ball of health predictions. Are you more likely to develop cancer, Alzheimer’s or Huntington’s disease later in life? With a few strokes of a cotton swab, you can have that information. And life insurers argue they should have it, too.

Genetic testing has been around since 1985 when biological material such as skin, hair, blood and other bodily fluids emerged as the most reliable physical evidence at a crime scene. Since then, genetic tests have been used to convict — and exonerate — countless individuals. They’re also used to determine paternity as some daytime television shows like to dramatize. Footballs used in the Super Bowl are even marked with DNA to prevent counterfeiting — just run a genetic test on it to see which one is the legit pigskin.

The use of genetic testing has spread from crime scenes and footballs and evolved from convicting and exonerating. It now allows a person to equip themselves with vital information about their bodies. They can find out whether they are more predisposed to certain health risks.

The life insurance implication

As voluntary genetic testing for disease has become more popular, so too have the laws aimed at preventing discrimination based on the results of such tests. In 2008, the Genetic Information Nondiscrimination (GINA) Act was signed by President George W. Bush, effectively protecting Americans against discrimination from employers and health insurance companies based on genetic information. After 13 long years of debate in Congress, the bill passed, allowing people to take advantage of personalized medicine without the fear of discrimination.

But GINA applies only to health insurance; the law spares companies that sell life insurance, disability insurance and long-term care insurance (LTCI), effectively giving them the go-ahead to deny coverage based on a human’s genetics. Representative Louise Slaughter, a Democrat from New York, introduced GINA in the House back in 2007. Though pleased with the outcome of the bill, it has been reported that she knows the law still has gaps that need to be closed — and she has hinted that it’s something she aims to do. (Slaughter declined to comment on this story.)

Many feel that, as this type of testing becomes more popular, regulators will be forced to do something to prevent discrimination in the disability, long-term care and life insurance sectors.

“Most regulators are going to reach landing ground that says this cannot be used as a sole bar to qualification for life insurance,” said Daniel Gerber, chair of the Defense Research Institute’s (DRI) life, health and disability committee. “As genetic testing refines and says, ‘Listen, we can tell this person is going to have this disease and die within 10 years,’ that may act as a bar to insurability and the regulators may permit that. But if it is just a coding that says the person is predisposed [to a certain disease], I think regulators will eventually preclude insurance companies from just discarding that person.”

Life insurance agents can legally set a higher premium for a policy if their client is, say, a smoker or overweight or a Formula 1 racecar driver by trade. “You can decide to stop smoking, you can decide to change some life habits that alter cholesterol, but you can’t change your genetics,” said Gerber.

Life insurers could potentially take matters into their own hands and test each applicant’s genetics, much like they do now with blood, before writing a policy on their behalf. Though that process is not taking place currently, there is a path leading toward it, and trailing right behind would likely be regulations. “If the carriers try and do their own genetic testing, then there will absolutely be a need to legislate against life carriers using such testing to underwrite policies,” said Glenn Kantor co-founder and attorney at Kantor & Kantor, a Los Angeles-based law firm. “I think the carriers know that if they take that action, legislation will follow.”

But is it fair?

Those within the life insurance industry simply want an atmosphere of openness where there are no secrets in the application process. Life insurers stress that — as it has always been — in order to set fair premium levels, not only for current customers but for future ones as well, they need to be aware of the risks they will be assuming.

“What we’re looking for when we are underwriting is to underwrite fairly and accurately and to set the appropriate price,” said Jack Dolan of the American Council of Life Insurers. “We are relying on making sure that we’re on a level playing field with an applicant so that when it comes to medical information, both sides are on the same page and there aren’t any secrets.”

Genetic testing represents a new development and sometimes these new medical developments can spook consumers, leading them toward the protection of insurance. “What we have found historically is that medical advances tend to increase the number of applicants that are given coverage,” said Dolan. “So it’s really important to recognize that we are an industry that, because we are always focused on accurately measuring the risks we assume, we want to make sure if a new development, like a medical advancement, becomes a standard of practice, that we have access to it.”

Providing insurance companies with access to genetic profiles of current or potential clients, though highly controversial, may become necessary. If the evolution and modernization of genetic testing continues on the path it’s currently on, and government regulation prevents life insurance companies from obtaining genetic profiles, it has the potential to cause a situation of asymmetric information — or a case in which one party to a transaction (consumers) has more or better information than the other party (insurers). In other words, an insurer’s worst nightmare.

Robert Green, a researcher in the genetics department of Harvard Medical School, conducted a study about how people reacted after they discovered they have a gene associated with Alzheimer’s and found they are five times more likely than the average person to buy long-term insurance. These findings upset those in the life insurance and long-term care industry, and rightfully so. This could, essentially, create such a costly asset that the entire market could disappear.

Increasing interest and availability

A 2010 study published in Health Economics found that up to 88 percent of people said they would like to take a test that could predict their odds of developing Alzheimer’s, arthritis, Huntington’s disease and other afflictions. As genetic tests become more accurate, widely available and inexpensive, its popularity will only continue to grow. History has shown that when new techniques have become widely recognized and used in the medical community, insurers often choose to incorporate them into the underwriting process. And genetic testing is no different. It is, however, something that is catching on so quickly, it has the potential to leave the industry in its dust.

Consumers can now order at-home genetic tests with the click of a computer mouse. For example, 23andMe, a California-based genomic and biotech company, offers “rapid genetic testing” kits to customers for use in the privacy of their home for a mere $99.00. The Genetic Testing Laboratories, Inc. offers mail-to-order genetic testing kits for $285.00, though if you buy in bulk, say one for each member of your household, the price drops in accordance — kind of like the Sam’s Club of genetic testing supplies. c

Though genetic testing, either at a facility or at-home, may not be commonplace just yet, the drastic drop in price and spike in interest over the last several years has the power to make it a common practice. According to National Institutes of Health National Human Genome Research Institute, the cost of genome sequencing has been in free fall, dropping as much as 90% since 2007. The drastic change in cost represents the rapid evolution of DNA sequencing technologies that has occurred in recent years.

But it’s not just the drop in price that shows genetic testing is becoming more mainstream. “There are more companies entering the market, more genetic counselors being trained, more genetic-based practices being set up in university hospitals around the U.S. and more patients seeking genetic testing for familial disorders,” said Lisa Salberg, founder and CEO of Hypertrophic Cardiomyopathy (HCM) Association, a resource center for HCM patients and medical providers. This, along with its accessibility and affordability is “proof of its increasing usage,” said Salberg.

Life insurance industry access to genetic information is controversial. Consumer groups argue that access will increase discrimination in life insurance premiums and discourage individuals from undergoing genetic testing that may provide health benefits. Conversely, life insurers argue that without access to risk information available to individuals, they face substantial financial risk from adverse selection.

Life insurance industry access to genetic information is controversial. Consumer groups argue that access will increase discrimination in life insurance premiums and discourage individuals from undergoing genetic testing that may provide health benefits. Conversely, life insurers argue that without access to risk information available to individuals, they face substantial financial risk from adverse selection.

Without government regulation, both consumers and insurers are left in limbo. It’s certainly a frightening situation for insurers, not having access to crucial information. And for consumers, privacy prevails. Trying to cater to both parties will be all but impossible. Regulations, which are surely on the horizon, will be bipartisan at best and anti-industry at worst.