Taking an Ancestry Test Could Make It Harder to Buy Life Insurance
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I explained that insurance companies had already been denying claims for people laid up in the hospital based on "pre existing risk" that they might be at risk for getting cancer or becoming an alcoholic.
He had me submit a FOIA request which bought me some time. It went all the way to Al Gore. I received boxes of paperwork that essentially amounted to "The Chief Medical Officer can decide what to do with DNA information and how it is managed." That bought me enough time to hit my four years and get out without having to challenge them in court. I never gave them any samples and I do not regret my actions.
As I understand it, the entire concept of insurance is based around gathering relatively large groups of people with a solid understanding of their average risks for certain types of loss. Given the averages hold accurate over time, those that need a payout can get one, and the insurance company makes money in aggregate.
However, the better the insurance companies can understand our risk profiles as individuals (going well beyond age/sex/smoking/etc/etc/etc) - eventually (in theory) a motivated insurance company is going to be able to determine that I have a 90% chance of developing Serious Syndrome X while you have a 97% chance of developing Minor Issue Y.
Today we might get put into the risk pool. But as the science advances, the risk pools can be cut into finer and finer (and more accurate) risk pools. Why should a profit-seeking insurance company insure me past some point when the data strongly indicates i'm going to need drastic and expensive intervention.
It seems like the three ways to avoid this are: 1. "Advances" like the one mentioned here don't turn out to have enough predictive power and insurance continues to operate much as before 2. Some people just can't get for-profit insurance, at least not for health coverage (I'd think accidents will always remain much harder to predict than e.g. heart disease). Pushing them into some kind of not-for-profit 3. Regulation forces blinders on to underwriters essentially saying "actuarial science advances to here and no further"
The idea is not to put people with similar levels of risk in the same pool. The idea is to make the pool as large as possible, charge everyone for their expected cost + a margin, and then pay out everyone for their actual costs.
It's the law of large numbers at work here. Take the mean value of a large number of variables with high variance and you end up with a mean that has low variance.
Not only is it normal for people with condition X to be in the same pool as condition Y, but this is a good thing because the costs for people with condition X are less correlated with the costs for people with condition Y, and this reduces risk in the pool. For example, if you have a pool that only contains people with condition X, and then it turns out that a commonly used medication prescribed for condition X has horrible side effects, then that single problem is disastrous for the entire pool.
> Why should a profit-seeking insurance company insure me past some point when the data strongly indicates i'm going to need drastic and expensive intervention.
Because you pass laws that make it illegal for insurance companies to deny coverage on this basis, and then you turn around and pass laws to keep the pool healthy enough for insurance to still be profitable. Or you just nationalize it.
How is it different? Both of you are talking about risk pools consisting of large groups of people with different risk profiles for different healthcare liabilities. The commenter you replied to seems to be talking about this concept breaking down as insurance companies increasingly slice risk pools down such that their profit depends less on understanding the mean and more on predicting the future.
That being said, your last point sounds like a decent proposal for how to combat this problem. I'm not sure if it would work in practice, however, as healthcare legislation seems to be hotly contested on all sides.
As a consumer who is fortunate enough to get life insurance at the "Super Preferred" low-risk rate, I would prefer be in a small pool that excludes people with higher actual costs. That's an economic preference, not moral, though my morals are not bothered by using the system as designed.
As long as insurance companies are free to offer plans that admit only really healthy people and exclude people with higher actual costs, my plan will be cheaper. Really healthy people will drop out of the larger pool and into the cheaper pool. The larger pool will, as a result, get more expensive. And the people remaining in what's effectively the shallow end of the pool will be offered a "Preferred" rate that's more expensive than super preferred but less than the large pool.
Eventually you end up with small risk pools, with the least insurable, highest-risk and highest actual cost customers unable to buy affordable life insurance. If you're a 20-year-old obese diabetic who smokes and has a family history of cancer, and the actuarial table says there's a 50% chance that your 50-year $1M policy will have to pay out, your premiums before a margin are 1M * 50% / 50 / 12 = $833/month. That's not really affordable, even if it would be wise for our unhealthy friend if he or she has dependents. My super-preferred policy costs me $21.25/month.
I empathize with the plight of the uninsurable. Given my voting history on health insurance issues, I would probably vote in favor of a law that limited segmentation and would bump my premiums to, say $50/mo and would offer life insurance to the $833/mo individual at the same rate. But I'm not going to jump from my pool into a more expensive pool by myself if that signal will fall on deaf ears.
Now, if we find a lot of negative things about one person their premiums might become unaffordable but otherwise it's not a big deal for the industry.
Seems like a good argument for single payer insurance.
Correct. And whoever is more efficient wins. That's no different from any other retail business. My grocery store sells lettuce to anybody. Some are more efficient and can offer better prices. Or they sell better lettuce. But regulation sets minimum requirements so nobody can sell fake or toxic lettuce.
I thought that's how the market works.
However, due to the nature of insurance, even a relatively small number of people developing expensive conditions can be catastrophic. Remember, in your scenario, you are REQUIRED to cover them.
If you're going to have only one combined risk pool, you need to be able to guarantee coverage even facing catastrophic insurance costs. The only real way to do this is to be backed by somebody with very, very deep pockets, like, say, the federal government.
Checkout adverse selection and moral hazard.
They shouldn't.
Why wouldn't we just extend this to cover more things? We are free to design what kind of insurance market we wish to have. For-profit companies don't have to be operating in some kind of absolute free-for-all.
That's false. After EU came meddling insurance was raised for men to the same level women had even though men have statistically lower risk of accident.
For the person who downvoted OP was referring to the EU. Previously men paid less but when EU decided statistics are sexist now both pay the same higher amount. Yay for the consumer
The best I could do in 5 minutes googling was newspapers complaining that, on average, men still pay more... because they drive (on average) further, in more expensive cars.
And rumours that they are setting the rates for different professions as a way to get around the rule... huge differences like this:
Dental Nurse Less than 1pc male £840
Solicitor 59pc male £848
Sports and leisure assistants 56pc male £880
Civil engineer 92pc male £910
Social worker 21pc male £920
Plasterer 98pc male £950
The premise was that women would pay the same amount as men lowering the rate (Good thing). But for everyone who have followed politics knew it's not going to be a so simple. You have countless of examples where companies just skirt around the law and it end up hurting consumers.
Pretty much sums many EU decisions. On paper they can seem decent enough but in reality not so much. And women were affected as well as you might imagine low income families took the biggest relative hit.
So, I think (though I will admit it was long ago last time I looked this up), that men have a lower accident rate per mile driven but have a higher accident rate per time period (not time period driving). The reason is that men drive more (or at least use to, back when I read these statistics).
There is also the difference between different kinds of accidents. While per mile driven men have less accidents than women, they tend to, as you mentioned, be worse accidents. I forget if this actually made them cost more per mile driven or not, but once you also add in that they drive more, in a given year men do cost more and are charged more. (There is also the impact of younger men who have more thrill seeking behavior, so if you compared men and women within a specific age group you might find the statistics don't match the statistics across all age groups.)
So, thanks to the beauty of statistics, we can say that men are better drivers than women and men are worse drivers than women by using slightly different definitions of better or worse that, in layman English, are glossed over.
This reminds me of red light cameras. People love to complain that they only exist to make money because they statistically cause more accidents. And it's true, they do cause an increase in total number of accidents. But they decrease the number of serious accidents. You get more rear end collisions, but fewer T-Bone collisions which tend to be much more serious.
Health (and perhaps life) insurance should be not-for-profit, period. Healthcare providers in general should also be either nonprofit, or they should be mandated to publish their prices and stick to them, so that transparent competition exists in the marketplace.
>However, the better the insurance companies can understand our risk profiles as individuals (going well beyond age/sex/smoking/etc/etc/etc) - eventually (in theory) a motivated insurance company is going to be able to determine that I have a 90% chance of developing Serious Syndrome X while you have a 97% chance of developing Minor Issue Y.
Even as predictive models improve, insurance will always rely on risk pooling. Even if you believe that insurable events like death are completely deterministic, insurers' information will always be imperfect. So models will always have an epsilon (noise) term, which is diversifiable.
>Today we might get put into the risk pool. But as the science advances, the risk pools can be cut into finer and finer (and more accurate) risk pools. Why should a profit-seeking insurance company insure me past some point when the data strongly indicates i'm going to need drastic and expensive intervention.
Because they will still profit on average if they charge you more than the expected value of claims. Insurers have historically been hesitant to insure high-risk individuals for any price, in part because they're not confident enough in their ability to accurately quantify the risk associated with them. I'd argue that more granular and accurate rating will actually improve high-risk individuals' access to life insurance for that reason. Edited to add: I suspect that the same would be true of health insurers, though that's currently moot in the US due to the ACA.
>It seems like the three ways to avoid this are: 1. "Advances" like the one mentioned here don't turn out to have enough predictive power and insurance continues to operate much as before 2. Some people just can't get for-profit insurance, at least not for health coverage (I'd think accidents will always remain much harder to predict than e.g. heart disease). Pushing them into some kind of not-for-profit 3. Regulation forces blinders on to underwriters essentially saying "actuarial science advances to here and no further"
The status quo is mostly #1 for life insurance, and I'd contend that it's likely to stay that way for the foreseeable future. Health insurance is squarely in bucket #3 in the US, but who knows how long that will last or where it will go from here.
N.B.: I'm a (non-credentialed) life actuary.
In this particular case the insurance company should not be able to request data from the past. If they want any data they should order tests themselves and only use that data.
I'm with you on this paragraph …
> In this particular case the insurance company should not be able to request data from the past. If they want any data they should order tests themselves and only use that data.
… but you lose me here. By this logic, it seems like car-insurance companies shouldn't be able to look at my driving history, but should have to administer me a driving test themselves. This would clearly make premiums skyrocket, and I don't think is the right solution.
On a side note I am not even sure if individualized car insurance (and health insurance) prices are worth the effort of collecting all that data. You have to build up a big bureaucracy that evaluates all the data. Maybe it's cheaper to just take a nationwide average and save money by not needing that bureaucracy?
Hypothetically, if I were to give my DNA to many of these services, I'm giving it to them with full understanding that they are allowed to share that information with anyone they see fit. Well, I can't now complain that they saw fit to share it with my insurance company can I? I certainly can't complain that my insurance company was interested in getting that data. The insurance companies collect relevant historical data for every other type of insurance.
I do agree with you that your DNA should be private. And it is private, so long as you keep it private. Telling a thirdparty, especially one who is a known loudmouth, the details of your DNA is the opposite of keeping it private.
I know legally this is ok but "sharing as they see fit" practices just need to stop. We have to go back to a model where the customer pays for a service and that's it. No sharing in the background to subsidize the cost of the service. That would make some services more expensive but then the customer can share his data for a price. If he chooses to do so .
I'm not sure that I agree with your summary of my point. In fact, I think that stronger regulations against data vendors are probably the right thing. I was merely arguing that a reflexive argument against allowing companies to gather external data might have unexpected consequences.
The answer (to this narrow question[1]) is to not do business with shops like 23andme, who are horrible gossips. Find a service that actually respects you and your wishes if you want a test.
Admittedly this will become harder as testing becomes part of medical care. But telling your doctor not to tell the insurance company what's going on would never fly anyway.
[1] To the broader questions of medical privacy, well, burning the private insurance industry to the ground and chumming the PBMs would be a good start.
If they hold onto the data for any purpose at all, then their is always the risk that they go bankrupt and ownership of the data passes to someone who doesn't respect it.
The actual problems with health insurance markets have less to do with information asymmetry and adverse selection than with too much information. That can make some people’s insurance very expensive at actuarially sound rates. For instance if you have a cancer of a given kind, this is verifiable to the outside world, and if the treatment costs are $200,000, the cost of an insurance policy will in turn be about $200,000. Buying the policy won’t be cheaper than buying the treatments, and in that sense the market for insurance is not always present. That is a very real public policy problem … The cheap sequencing of the genome may accelerate and intensify these issues. …
https://www.cato-unbound.org/2015/04/06/alex-tabarrok-tyler-...
1) Get tested
2) Use the test results to determine the actuarial value of your hypothetical life insurance
3) If the price is less than the value, buy the insurance. If not, don't buy.
How recently did you do this, and was there any information collection like that?
And does the kit have any sort of identifier with it? If so, I was considering some sort of 23andme kit remixing service, where people pool funds to buy a bunch of kits, and then randomly select a kit from the shipment. :-)
This data isn't something an individual has full control over. What if one of your relatives took a genetic test? If that relative was denied for a policy on genetic test grounds, can you be denied for the same reasons?
Common sense would be wrong in this case. Common sense would say that intimately private genetic information would be protected and not shared with anyone willing to throw ten cents Ancestry.com's way, lest there be lawsuits and fines.
Often, this type of service is pitched to those with disease that runs in their family. Wouldn't you want your family member to know if they're affected so they can adequately treat disease before it becomes unmanageable?
I recently bought life insurance and I'm pretty sure they didn't even bother to ask my primary care doctor for her records (though they had the right to), and they certainly didn't ask me about any tests I may have done on my own. (I think they did obtain at least some of my Rx history though. I assume from CVS Caremark.)
Right now I think there's kinda the opposite problem with Long Term Care insurance where people who take a genetic test that shows high risk for e.g. Alzheimer's run out and buy LTC insurance which messes up the risk pool.
Health insurers were really bad about "prior conditions" before Obamacare. I think life insurance has always been more tightly regulated.
FWIW, my policy says the insurer can only challenge the application within the first two years.
It's good to know that the current administration is determined to take us back to those glory days :)
The time to guard against infringement of your rights is before it happens. Once it's happened … well, we've always done it that way; you should have spoken up before.
https://www.bloomberg.com/news/articles/2018-06-15/deleting-...
Your genetic info is sort of like a trade secret in the USA, but without criminal sanctions when it's wrongfully appropriated.
How would the ancestry testers react if I sent several samples in my name?
Will there be a market for clean blood that you can use to confuse the records and get a sort of plausible deniability of identity?
Interesting, I'd like to read more commentary on this act. Anyone?
Honestly, I just don't see the point of life insurance at all, unless someone has a family with children and doesn't have any significant wealth accumulated.
"while health insurers may not use or consider genetic test results when selling a policy, companies that sell life insurance, can."