Introduction and Executive Summary

Medical tests can now identify genetic traits in people not showing symptoms or external signs. Some of these conditions can produce disease later in life, or in some offspring. In the context of risk assignment for health insurance, these genetic tests have recently become controversial.

AAPS finds that genetic testing is not fundamentally different from other tests or examinations used to assign people to insurance risk categories. Such information is currently confidential and restricted to legally and morally appropriate usage and disclosure, regardless of the origin of the data. In private insurance markets, genetic testing poses no inherently unique or new problem requiring additional government legislation or regulation. However, the use of such tests by government for social engineering is fraught with dangers.

To help preclude dangerous use of such testing and to allow Americans more complete exercise of their inalienable rights, AAPS recommends

1) requiring any person to be individually liable in the event of unlawful disclosure of genetic testing information (as well as in other civil matters) by repealing sovereign immunity protection of government employees, and

2) allowing Americans greater freedom of choice in health insurance, such as the freedom to choose insurance either with or without genetic testing.

The Concept of Insurance

Historically, "natural" insurance was created to protect assets against unlikely but statistically predictable accidents. (1,2,3) For example, centuries ago, ship owners risked loss of ships and cargo due to unpredictable storms, uncharted reefs and human error. Nevertheless, they knew that only a small number of ships would be lost in any one year and that these losses tended to average out over a number of years. Several owners voluntarily agreed among themselves to mutually protect each other against such losses; they pooled funds to pay a ship owner who lost a ship in an accident. This was essentially a form of "indemnity" insurance; the pooled funds were essentially premiums paid in exchange for mutual protection. Ship owners facing lesser risk of loss, such as those sailing only in more protected waters, could insure themselves by contributing smaller amounts to their own pools.

Natural insurance thus groups or pools people with similar risks together by charging similar premiums. Risk against unlikely and expensive events is divided among the insured people. Later, separate companies were formed to mutually manage the risk assessment, premiums and administration on behalf of the insured people, and were called "mutual" companies, essentially a partnership of the insured people. Later, "stock" companies took on themselves the risk for losses rather than the pool of insured people and sold insurance, in exchange for the hope of profit. The insured people had the benefit of a contractual relationship with an independent party and were protected from losses inherent in a mutual company arrangement; the stock insurance company had the chance to make a profit in exchange for assuming the risk. But the basic function - dividing the risk of unlikely expenses among people facing similar risks - remained the same. Insurance provided a mechanism for people to voluntarily share and divide risk, enhancing human freedom.

Health Insurance

A century ago, available forms of health insurance were largely variations of natural insurance, providing a set amount of money in the event of death or accidental injury. In the 1930s, early Blue Cross and Blue Shield plans started offering medical service benefits rather than paying a set amount if specified injuries or death occurred.

In the 1940s employee health insurance and medical expenses were made an income-tax-deductible business expense. Employees and employers found it mutually advantageous to buy health insurance through the employer. Because of the tax advantage, this health coverage was extended to cover routine expenses in addition to unlikely and unpredictable expenses. Thus, by the 1970s "health coverage" no longer acted as natural insurance but sometimes paid for nearly all small, expected, or discretionary medical care. Though unlikely and unpredictable events were still covered in employer-provided health coverage, much of the coverage amounted to pre-payment for the consumption of health care services, rather than natural insurance.

More recently, several states have required insurance companies to "guarantee" issue of health insurance, regardless of any condition or disease the person might have. This are often called a "guaranteed issue" requirements; we call this a form of "social insurance." (In this context, we use "social insurance" to mean providing benefits sought by politicians to fulfill political goals, whether through direct government action or through regulations and mandates placed on others, in this case, insurance companies.) As was expected by some, these requirements make this insurance more expensive. For many individuals and families, health insurance is no longer worth the expense and has become "unaffordable."

Politicians rarely admit that legislation is the primary cause of the problem. As some studies predicted, fewer people now have health insurance in these states. (4) Essentially, these states force consumers to pay for "social insurance" under penalty of law and essentially outlaw "natural" health insurance. In other words, insurance companies are forced to do unnatural things to meet political agendas, and are not allowed to offer insurance at realistic, actuarial rates reflecting risk. Likewise, these bureaucratic requirements demean responsible individuals and families, and constrict human choice and freedom.

Genetic Testing

In the context of this statement, "genetic testing" is similar to other examinations for the purpose of assigning a person to an insurance risk class. For example, these examinations include medical history, physical examination, family history, blood tests, electrocardiogram and other physiological examinations. Assessing risk is a natural insurance function as it allows insurance companies to assess the individual's risk and assign the person to the appropriate risk pool and corresponding premium. Thus, those at lower risk for an expensive event are charged less, while those at higher risk are charged more. For instance, mature adults in their 40s and 50s have a lower than average automobile accident rate and pay lower premiums. Young males have a much higher accident rate than average and cause disproportionately higher payouts by insurance companies; insurance companies charge these young men higher premiums reflecting the higher risk. Thus, the higher rates for young males allows people in other groups to purchase reasonably-priced insurance. The variation in rates also lets young men know that driving is more expensive for them; this probably reduces accidents, as some young men decide that insurance is not worth the cost and do not drive.

In addition to its potential value in assessing insurable risks, genetic testing has likely medical and individual benefits. For instance, such testing is now available for Huntington's Disease, an autosomal dominant genetic disorder; affected individuals suffer early dementia, psychosis, movement disorder, and death. Symptoms do not start until about age 30. Unlike most genetic traits and conditions, only a single gene transmits the condition to children. [Sidebar or footnote? Genes are carried on the chromosomes in the nucleus of human germ cells. Germ cells are the cells that transmit genetic information to children. Each parent provides one of a pair of chromosomes to each child. Therefore, each child has a 50% chance of inheriting the condition if one of the parents carries the Huntington's Disease gene.]

Testing for Huntington's Disease can be helpful to people with a family history of the condition. Knowing whether or not they have the gene producing the condition can allow these people to better plan and organize their life. Because those carrying the gene for the disorder can pass on that gene before they show any symptoms, knowledge about having or not having the disorder can have very significant effects on others, such as a possible spouse or possible children.

Likewise, genetic testing for colon cancer traits could be valuable to individuals who could then modify their diet and exercise habits to reduce the likelihood of developing the cancer.

As with all medical evaluations, varying degrees of accuracy are associated with genetic testing, which limits the predictive or prognostic value of many tests. These accuracy variations are due to many factors, such as the complexity of the human genome, the interaction of many genes, variations in technique, and variations in interpretation. Also, interactions between genetic traits and the environment are not we;; understood; incorrect interpretation of findings could incorrectly associate genetic findings with physical or other traits. For example, in the now discredited field of phrenology, the shape of the head was related to intelligence and other traits. Publicity about phrenology in France caused a fad of head binding to change the shape of the skull, in an attempt to cause the child to grow up with the positive traits associated with the desired head shape.

Thus, people with a family history of genetic disorders but who are found to not carry the disordered gene on testing could purchase health and life insurance at standard rates. Without such testing, insurance companies would be justified in charging more to all individuals who could possibly be at risk. Thus many people might pay lower rates than they would have without genetic testing. If a person did have the gene for a genetic disorder, natural insurance could still be available in many cases but would be more expensive. In addition, modified standard insurance could be available, which cover other unpredictable medical problems, but not cover the genetic condition. In any event, it is likely that insurance would be more available and/or affordable for a larger number of people.

It is unfortunate that some people carry genetic disorders. It is unfortunate that such disorders may entail large medical expenses and disability. However, it is a fact of life that diverse individuals have diverse intelligence, looks, and upbringing, all of which affect their lives to various degrees. People with knowledge of their own genetic disorders have more opportunity to manage their own future and fate. Families and friends are in a better position to help. Others can also help these individuals, such as through charitable organizations. Private organizations and insurance companies can help set up high risk pools to help these individuals purchase insurance. If government involvement is required to help meet the needs of otherwise uninsurable people, high risk pools have been much more effective and efficient than guaranteed issue and similar regulatory efforts.

[Irrelevant side thought: In addition, advances in biochemistry and pharmacology are likely to allow treatment for many genetic conditions. Thus, the demand for genetic testing for therapeutic reasons will likely expand further in the future. It is likely that such therapy will be much more expensive. (David Ranney MD, personal communication) Insuring against such conditions would be correspondingly expensive. Thus, allowing freedom of choice in insurance will likely be a practical as well as financial necessity. Those willing to insure could do so. Those willing to purchase therapy directly could also do so.]

In a natural insurance market, genetic testing could provide further information allowing more accurate risk assessment and insurance policy pricing. This could permit more individuals to afford reasonably-priced policies. Thus, if reducing the number of uninsured people is an important policy consideration, competitive pricing of insurance products should be a priority.

Further, part of the cost of insurance compensates for the variability of risk between individuals; it is therefore quite possible that the cost of insurance might decrease, if the testing results in significantly more accurate risk assessment.

With "one size fits all" legislative mandates, all insurance companies might be required to test or not to test for certain medical condition. But some insurance companies might well find that they do not want to try to "fine tune" their risk pools by requiring extensive testing, or they might find a market among those who don't want to undergo a lot of painful or time-consuming medical tests. Thus, freedom from mandates provides wider consumer choice among insurance products.

In addition, with social insurance or with government controlling or regulating most of the medical market and the practice of medicine, certain tests might be mandated by government, despite subsequent evidence of ineffectiveness or even counter-effectiveness. Indeed, government policy makers in many agencies have suppressed scientific evidence or terminated innovative scientific studies because the discovered scientific facts would require change in established government policy, to the disadvantage of the bureaucrats' jobs or power. A similar process of bureaucratic sclerosis and self-serving would likely affect genetic testing if government becomes further involved in health care financing and decision making.

Judging from historical experience, only government power brokers and their favored agents ultimately benefit when legislation and regulation distort the workings of natural markets, including the natural insurance market. The vast majority of citizens find themselves paying more for less effective insurance and more bureaucratic interference in their lives.

Concerns Over Genetic Testing

As with other tests, some people are reluctant to learn something inherent and permanent about their biological condition. Many people are concerned about possible loss of their privacy. In a natural insurance market, the potential loss of privacy in undergoing genetic testing involves the same trade-offs as providing other confidential information, such as your medical history; it is information voluntarily traded for the opportunity to enter the insurance risk pool. A normally functioning natural insurance market tends to preserve the confidentiality of the medical information. Currently, health insurance companies share such information in private arrangements with other companies; this saves the expense of repeating tests and helps augment the individual's medical history, which results in more efficient and cost-effective risk assignment. Government health agencies maintain similar information on government patients. History shows that this information will sometimes be leaked or misused, regardless of who controls it. When private companies leak information and break people's confidence, they have often been exposed and punished, as people no longer buy their services or sue. In contrast, when government agencies do the same, the guilty bureaucrats have often been protected and rewarded instead of suffering meaningful consequences.

Genetic testing could be used for purposes found immoral in the Hippocratic medical tradition. For example, a utilitarian use of testing, in this example also immoral, would be to test for conditions which would make an individual less useful to society for the purpose of killing that person, as has been done in some totalitarian systems, such as Nazi Germany. Likewise, the use of genetic testing in attempts to breed a super race would be immoral and unethical. In these examples, the utility of the person to the society is the deciding factor, a position antithetical to the Hippocratic tradition of primary responsibility to the individual patient rather than to an amorphous society or relativistic social policies.

Because of these dangers, we find that all individuals in America, should be held to the same standard of behavior before the law. We find that "sovereign immunity" for government employees and agencies for actions which would be illegal for private citizens is neither pertinent nor appropriate for Americans. We believe that government officials would be much more responsible and responsive if they were held to the same legal and moral standards as other Americans.

Summary

It is the position of the Association of American Physicians and Surgeons that genetic testing for insurance purposes, like other innovations, has potentially advantageous as well as potentially harmful effects. If used to provide information to more accurately evaluate risk, such testing could beneficially increase the effectiveness and efficiency of a natural health insurance market and could allow more fair pricing of insurance services. This would likely increase the ability of more individuals to purchase reasonably priced or affordable insurance.

Similarly, other measures, such as providing equal protection and responsibility for all citizens before the law, eliminating guaranteed issue requirements, abolishing mandated benefits, and establishing tax equity in the purchase of health insurance would also advance the options and freedoms of Americans.

The Association of American Physicians and Surgeons calls for stringent confidentiality of medical information maintained by all insuring agencies, whether private insurance carriers or government enterprises. Currently provided confidentiality should be enhanced with equal protection of individuals regardless of whether the insuring agency is private or governmental. Significant incentives to maintain confidentiality and penalties for violations of confidentiality should be required of all insuring enterprises.

Endnotes

1 E F Haislmaier, "A Policy Maker's Guide to the Health Care Crisis," Part III, August 14, 1992 and Part IV, November 5, 1992, Heritage Foundation Washington D.C.

2 Michael Tanner, "Health Care Reform: the Good, the Bad and the Ugly," Policy Analysis No. 184, November 24, 1992, Cato Institute, Washington D.C.

3 Catherine England, The Business and Regulation of Insurance: A Primer, March 1996, Competitive Enterprise Institute, Washington D.C..

4 Melinda Schriver and Grace-Marie Arnett, "Uninsured Rates Rise Dramatically in States with Strictest Health Insurance Regulations", Backgrounder No. 1211, August 14, 1998, The Heritage Foundation, Washington, D.C.