Future Shock for Insurers

The Genetic Information Nondiscrimination Act will have a profound effect on insurers, even if we’re not quite sure what it will be

John Carroll

Contributing Editor

Individuals shopping for health insurance have traditionally had to deal with an underlying principle that guides their relationship with an insurer. They’re expected to be open about their health status so that insurers and their underwriters can consider the risk they’re taking on and the premiums that need to be charged.

Until now, that relationship has allowed underwriters to examine the medical history of the member. But following the passage of the Genetic Information Nondiscrimination Act (GINA), there’s a section of the medical record that will remain blank to the medical underwriters from now on: the results of genetic tests that determine whether an individual is running a heightened risk of an explosively expensive medical condition.

By the time lawmakers gave their final approval — fully 13 years after the issue was first raised — insurers were all on board with the final piece of legislation.

Karen Ignagni, CEO of America’s Health Insurance Plans, said in a prepared statement that the law “ensures that patients can continue to benefit from health plans’ innovative early detection and care coordination programs that improve the safety and quality of care.”

The new privacy guarantees are taking effect, though, just as genetic testing is poised to become a highly promoted predictive health tool. Companies like 23andMe, Navigenics, and DecodeMe have just begun marketing a range of genetic tests that cover breast cancer, heart disease, diabetes, and other serious conditions. And while genetic information has only rarely been a concern for insurers until now, an army of genetic researchers is rapidly adding to the list of conditions and medical signposts that can be genetically identified in each person.

As the underwriters’ blank page grows into a volume of genetic insights, some longtime students of health policy say that the shift in risk assessment could fundamentally change the way insurance works in the U.S. — and the wary relationship between consumers and insurers. If a negative (no problems) genetic checkup causes people to cancel their policies, then only the sick or those people likely to become sick will buy insurance, possibly bringing on legislative mandates to keep the coverage pool broad enough and deep enough to keep rates down.

Eventually, the insurance industry’s whole approach to health and risk could be radically altered.

“Insurance today is all about covering unknown risks, and underwriting is making sure we can make a distinction between what is known and what is unknown,” says Karen Pollitz, the director of Georgetown University’s Health Policy Institute and lead author of a study on underwriting practices published late last year in the journal Inquiry. “In the future, there won’t be a distinction.”

The genetics mandate?

Changes in the law haven’t quieted a chorus of critics who believe that insurers are given far too much leeway in deciding which individuals are covered, what they pay, and whether specific conditions are excluded from coverage to blunt the insurer’s risk.

The individual health insurance market “is still the wild, wild West for America’s health care consumers,” claims Ron Pollack, executive director and vice president of Families USA. In mid-June the organization published a 50-state survey focusing on the widespread use of practices like cherry-picking healthy members and rejecting the sick, rescinding policies at will, or refusing to pay claims based on part of a medical history that failed to come to light when the policy was issued.

But the use of genetic data up to now has never sparked a controversy. Only one genetic discrimination lawsuit has been reported.

Underwriters have been able to factor in the results of genetic tests for individuals — until now — but could never require them, says Tom Wildsmith, an expert on underwriting who represents the American Academy of Actuaries Health Practice Council on the issues presented by genetics. In the overall scheme of things, though, the data haven’t played much of a role in deciding who gets coverage or how much they pay for it.

Not many tests have been available, he explains. More important, the data show a person’s medical horizon, and insurers are always more concerned with near-term costs.

“Individual insurance is more of a short- to mid-term medical cost,” says Wildsmith. Individuals rarely hold on to those policies for long, moving soon to group plans where underwriters have long been excluded by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) from considering genetic test results, or to other coverage as they experience life’s various transitions: changing jobs, graduating, marrying, and so on. “Most genetic tests we’ve seen so far are predicting long-term risks.”

The biggest concern for the underwriting community came during GINA’s early development, says Wildsmith, when it appeared that genetic data would be defined in a way that included many of the health factors — cholesterol levels, for example — that are in use now. After 13 years of discussion and negotiation, Congress accepted a more narrow definition that also was acceptable to the industry.

The biggest impact of the new law, he adds, may ultimately be on the way consumers buy insurance.

“If everybody knows if they are going to be sick or healthy, only those expecting to be sick will buy insurance,” says Wildsmith. And that could set up an enormous problem with adverse selection, adding fuel to the calls for insurance mandates. “One of the approaches offered has been to say, we’ll make the healthy people buy insurance, too.”

No more unknowns

GINA’s passage has been one of the abiding passions of Francis Collins, PhD, the government’s lead geneticist and director of the National Human Genome Research Institute, who foresees a day when genetic tests will provide a blueprint for maintaining an individual’s health, guiding preventive measures and dictating therapies. The new law, he maintains, will get us to that day much faster.

“The biggest impact of GINA may be that people will no longer feel they need to refuse testing or be tested anonymously based on the fear of losing their health insurance,” says M.K. Holohan Quattrocchi, the institute’s senior health policy analyst.

People will be more likely to volunteer for genetic research projects and to use them to assess their health risks.

But as insurers are denied the right to charge higher premiums for people with positive genetic test results, they may be encouraged to charge other people with only weak indications of a future health problems more for their policies, notes Russell Korobkin, a professor of law at the University of California – Los Angeles and the author of “Stem Cell Century: Law and Policy for a Breakthrough Technology, in a recent article. And that would upset the whole notion of fair rules applied equally to all consumers.

“The only way to solve the problem is to extend federal law to ban what is known as medical underwriting — basing coverage and pricing decisions on any indicators of health status — and instead require what is called community rating of all people within the same age category,” he writes. “Exceptions should be permitted to allow insurers to surcharge customers who engage in risky activities within their individual control, such as smoking.”

As the science of genetics advances, calls for those kinds of reforms are likely to increase.

“Dr. Collins has testified that all of us are likely walking around with dozens of genetic mutations that will someday be understood, and we’ll be able to predict what health conditions we’ll have,” says Pollitz. “Much of life’s uncertainty about health will become much more known to us, and since insurance is all about protecting people from the unknown, that will be a profound change.”

So profound, she adds, that it could ultimately make the insurance industry obsolete.

That’s a message that can hit hard in the underwriting community.

Pollitz briefed some underwriters on the future impact of genetics and, she says, they left shaking their heads. One asked: “Who will we sell to?”

Pollitz gave that briefing after she and some other researchers delved into the way that underwriters used genetic data before the law was passed. In a study published last fall, the group presented experienced medical underwriters from 23 insurance companies with a set of four pairs of prospective policyholders. Each pair included one applicant who had tested positive for an increased risk of a future health condition.

Out of the 92 coverage decisions, seven included denials, policy limitations, or surcharge premiums to account for the risk.

Every insurance company has its own philosophy to guide underwriters’ decisions, notes Wildsmith, and any “industry standard” for coverage decisions would probably spur antitrust concerns. So it’s not unexpected to see insurers coming up with different decisions when presented with the same information.

The genetic tests that the underwriters looked at for the study wouldn’t be available to them now because of GINA, but the experts were stumped on one question concerning where the law draws a line between genetic data and a person’s medical history: In the study, several insurers said they would use a doctor’s consideration of surgery to prevent the risk of cancer as fair grounds for either denying coverage or adding a rider excluding coverage for the preventive surgery as a way to avoid adverse selection by an unhealthy group of people. And they saw no problem with the 43 state laws that already outlined various rules preventing genetic discrimination.

“My understanding is you will still be able to look at medical records but can’t use information obtained as a result of a genetic test,” says Wildsmith. The risk can’t be factored in, but he added that he didn’t know whether physicians’ treatment decisions made as a result of the data could be considered.

Wildsmith, though, says that all that should be hammered out soon.

“I’m not an attorney,” he says. “Every insurance company has a compliance department. I suspect that lawyers are busy reviewing how to change policies and procedures on compliance.”

And you can bet that any gray areas will be dealt with quickly.

Lacking knowledge, but making decisions

Karen Pollitz at the Georgetown University Health Policy Institute led a study last fall, before passage of the Genetic Information Nondiscrimination Act, that asked experienced medical underwriters for 23 insurers what they knew about the genetic tests that were on the market and how they would handle the data. To get a better idea of how insurers were handling genetic test results, the researchers concentrated on a handful of relatively well known tests, including tests for BRCA mutations, which have been linked to a significantly higher risk of breast cancer. The responses were decidedly mixed.

Level of knowledge
Condition/test None at all High Some No answer
BRCA in cancer survivors 5 10 2 6
BRCA in unaffected patients 6 13 1 3
Hemochromatosis 8 10 2 3
Testing for cardiovascular disease 15 3 2 3
Lifetime cancer risks associated with BRCA 1 / 2 mutations
Cancer site Risks in BRCA 1 / 2 carriers Risks in general population
Breast 0% to 85% (high incidence of premenopausal breast cancers) 8%
Second breast cancer (opposite breast) after an initial diagnosis 40% to 60% 0.5% to 1% per year after diagnosis
Ovarian 10% to 40% (higher in BRCA1) <2%
Other Elevated risks of cancers of the prostate
Male breast, pancreatic
Rare, except for prostate cancer

Source: Pollitz K, Peshkin B, Bangit E, Lucia K. Genetic discrimination in health insurance: Current legal protections and industry practices. Inquiry. 2007. 44: 350-368.

GINA takes a bow

By the time lawmakers passed the Genetic Information Nondiscrimination Act of 2008 earlier this year, they had boiled it down to a few key measures. In specific, insurers were prohibited from using genetic test results to establish eligibility for an individual policy, to set premiums based on test results, or to impose preexisting-condition exclusions. The same rules apply to Medicare policies. Federal law already provides the same protections for group health plans.

Employers face an even more stringent set of rules, including prohibitions against hiring or firing anyone based on genetic test results. Employers are also prohibited from discriminating against employees by adjusting their compensation because of test results or altering their opportunities at work in any way. Labor unions are prevented from making membership decisions on test results. And any genetic test results that employers and unions do have will have to be kept separately from employment records and handled as a confidential medical record.

Congress was persuaded by the experts in the field that fear of retaliation was holding many people back from taking part in new genetic studies or causing some people to get their tests done confidentially. Now that the bill has been signed by President Bush, researchers will look at whether people actually have been reassured.

Medical records are accessible, but you can’t use information obtained from a genetic test, says Tom Wildsmith of the American Academy of Actuaries.

Several insurers said they would use a doctor’s consideration of surgery to prevent the risk of cancer as grounds for denying coverage or for adding a rider excluding coverage of the surgery.

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