Time for Genetic Insurance

The Genetic Information Nondiscrimination Act that cleared the Senate Tuesday on a 95-0 vote would bar employers from using people’s genetic information or family histories in hiring, firing or assigning workers. Insurance companies could not use genetic records to deny medical coverage or set premiums. (from ABC News)

I understand the desire to pass such a bill but if genetic “discrimination” is made illegal then as genetic testing becomes common we risk serious problems of adverse selection. People who test postive for a genetic disease will buy more life and health insurance threatening the financial stability of insurance companies.

Genetic insurance is a better way of handling the problems brought on by genetic testing. Genetic insurance would pay out depending on the results of a genetic test. If you turn out to have a gene implying a higher risk of heart disease, for example, then the test would pay you enough to cover your now higher health and life insurance premiums and perhaps also something to cover the possibility that you will have a shorter working life.

I think of genetic insurance as a “free-market” idea but it also has Rawlsian undertones. We are all behind the veil of ignorance as far as (some) of our genes are concerned. Buying insurance before a genetic test lifts the veil goes some way to compensating those who, through no fault of their own, were unfortunate to get a bad draw from nature’s lottery.

Addendum: I originally discussed genetic insurance in Tabarrok, A. 1994. Genetic Testing: An Economic and Contractarian Analysis. Journal of Health Economics 13:75-91. A shorter version is in Entrepreneurial Economics.