Why 23andMe Terrifies Health Insurance Companies
fastcompany.com
fastcompany.com
This seems reasonable. Someone does a genetic test, gets a result, and sees a proper doctor to discuss the results. If that person has a strong family history, and has the mutated genes, they might take preventative action which imght include surgery.
Insurance companies should be paying for that.
It's not like someone's got a whole body CT scan and is then getting unnecessary tests from the uncertain results of the scan.
> At the same time, health insurers can’t increase premiums for these potentially expensive customers because of the Genetic Information Nondiscrimination Act (GINA), a law that makes it illegal to do just that. The logic goes: People don’t get to pick their genes, so it’s unfair to penalize them for the unfortunate bad luck of having a predisposition to Alzheimer’s.
I expect to see a bunch of people who don't disclose their 23andMe results and who then have their insurance cancelled.
Insurance companies have departments dedicated to finding ways to avoid paying out. See, for example, the woman who was about to get treatment for breast cancer when her insurance company cancelled, stating her undeclared visit to a dermatologist for acne several years earlier. (http://edition.cnn.com/2009/POLITICS/06/16/health.care.heari...)
Also, in other countries than the U.S., insurers are supposed to maximise well being and life expectancy...
Isn't a mastectomy for a 35-year-old cheaper than paying for years of chemotherapy for a fragile 80-year-old person whose cancer has already spread too far for surgery and needs to be hospitalized for months on end?
The danger to insurance companies is that people might do that before purchasing insurance and use the result to inform their purchase decision. The net result is adverse selection and fewer people purchasing insurance.
Explanation of the math here: https://news.ycombinator.com/item?id=6807426
One is that genetic testing possibly increases the overall cost of healthcare, by introducing new tests preventive treatments that people are advised to get. Before modern cancer treatments, many cancer patients were untreatable and they died. Now there are new and expensive treatments that are worthwhile, but they cost money. So, total amount spent on treating cancer goes up. Genetic tests & subsequent tests and testaments are a new cost, that will probably increase overall medical costs and insurers liabilities. Eventually, premiums will just go up to cover this. It's a long term problem.
The second thing for insurers to worry about is information asymmetry & adverse selection.* This is a more structural problem. The more predictable future costs are, the less suitable insurance is as a way of paying for things. If you have a 1% chance of huge medical bills in the next ten years, you can pay 1% of those potential bills as a premium and get pice of mind. If you have a 50% chance of those bills, you probably can't afford the 50% premiums.
In the post-ACA U.S. "rescission" like this is now illegal, short of actual fraud. And it would have been illegal prior to ACA in the case of genetic testing due to HIPPA and GINA. Not that rescission was ever nearly as common as reform proponents liked to suggest.[1]
[1] http://healthblog.ncpa.org/rescissions-much-ado-about-nothin...
I've had a professional relationship with the FDA for a few years. Sometimes I like what they do, sometimes I don't. I'm not going to show my hand on how I feel about them (or their 23andMe action) any more than that. Ever since the FDA sent the warning letter, the reaction online reminds me of the Pavlovian whining I hear from folks in the industry every time the FDA issues new guidance that effectively says "don't cut corners X Y and Z" regardless of the merit in the FDA decision. You'll have to forgive me if I'm unsympathetic, I read way too much of what comes out of the FDA to stomach the broad knee-jerk against everything they do, or middle management suits just looking for something to bitch about.
edit: Rolled my already not-saying-anything about the FDA back even further, I'm talking about the response: http://i.imgur.com/tAfqLKY.png
Here's a hypothetical example: Say there's a horrific genetic condition (let's call it 'The Lurgy') that would involve lots of expensive treatment if you developed it. Now, a cheap genetic test kit comes along that can give an accurate prediction of whether or not you are likely to eventually suffer from the lurgy. What happens?
The first effect is that more people test themselves, and go out to buy quality healthcare plans if they see that they are going to get the lurgy. These people might not have otherwise bought the insurance. Result: the insurers suddenly get a much higher % of lurgy sufferers. Their costs rise, and this pushes the insurance price up. This exacerbates the problem: Non-lurgy people are less likely to buy the insurance. Worst case, the cost of insurance comes close to the general cost of treatment, meaning that the insurance is useless.
BUT: The obvious counter to this is that the insurance companies can adjust their range. They can split their insurance offerings up into two products: One that covers the lurgy, and one that doesn't. People are free to buy either. Naturally, the lurgy-inclusive policy is much more expensive. Suddenly the risk is back on to the consumers. They don't have to declare their genetic tests, and the insurers can't force them. But now they can't afford not to take the genetic test and buy the appropriate insurance (and in so doing, effectively 'declare' their genetic test results - after all, you'd buy the cheaper insurance if you could)
So the endgame is that everyone suffers. You can imagine a world where there are genetic tests for all kinds of disorders and combinations of insurance coverage that cater for all. But now the insurance pools are smaller, the uncertainty of costs is reduced, and so the insurance costs come closer to the expected costs of treatment. i.e. insurance costs are high, the insurers still profit, and the benefit to the consumer is vastly reduced.
Doesn't this just mean the eventual death of health insurance completely?
Insurance needs 1) a large pool of coverage, where the combined average costs will cover the peak extremes. It also needs 2) variability: you have to have people with lower-than-average costs to balance out the higher-than-average costs. If everyone has average costs then once again, you've lost the uncertainty and any benefit of insurance.
To get 1), you could enforce insurance on people. To get 2), you have to ensure insurance products aren't ultra-specific. Neither of these are popular!
You are certainly free to advocate for your government to initiate a wealth transfer. Perhaps you will also consider a variety of ways of conducting this wealth transfer. (On that note, our current approach of "make young people buy more expensive insurance or get fined to pay for it" is a dubious one, and quite regressive.)
Insurance is designed to restructure uncertainty: it replaces a tiny risk of needing HUGE AMOUNTS OF MONEY with a 100% risk of paying a small amount of money. If the long-term health outcomes are known, as he proposed, then there is NO UNCERTAINTY about it. You either need the huge amounts of money to pay for care, or you need no money. All else being equal, the same amount of money is needed, and less money is spent on the overhead of running an insurance company and paying off the capitalists in charge of it.
Now, if you'd like to argue that society has a duty to assist someone who needs this care by transferring wealth to them to cover cost of the healthcare procedures they need, that's a perfectly legitimate thing to argue. It's also another matter.
Even in a situation with no uncertainty, you can still have forms of personal health insurance, e.g. you have a system where everyone is enroled, everyone pays and everyone gets the same cover. The collective benefits of insurance still apply, even if one individual's outcomes and costs are known. Whether this system counts as 'healthcare insurance' or it is now a 'national health service' just depends on how you want to name it...
> insurance costs come closer to the expected costs of treatment.
In general, insurance costs are above the expected cost of treatment (this is essential, or insurance would be unprofitable). As such, insurance costs coming closer to the expected cost of treatment is a good thing.
If I know for sure that I will need treatment (assuming my insurer has the same information), I shouldn't seek to buy insurance.
Insurance is designed as a cover for risk - the only reason I can buy insurance at a rate cheaper than the treatment itself because of the possibility that I won't need the treatment, and the insurance company will keep the money.
I think we're confusing terms here. Insurance policy costs are always below the cost of payout. Otherwise, why buy them? My house insurance costs less than my house, my car insurance costs less than my car, and so on.
Sure, insurance cost x probability must be above the expected payouts. I am referring to the insurance prices that people pay, not the insurer's expected costs.
In any case, I still don't agree with your point.
If everyone knows what's going to happen in the future, there's no insurance industry beyond pre-payment stamp collecting. I don't see that as necessarily a bad thing.
Thinking about how to prevent such a potential inequality seems essential to me.
- The risk was always on the consumer, that's how insurance works. For common major ailments (breast cancer, heart attacks etc.) those are already factored in and does not change the actuarial calculations in any way.
- As far as splitting insurance coverage being an option - That's not possible, not anymore anyways. Obamacare takes care of that. If the insurance co's can't do it for pre-existing conditions (aka the insured had the condition already) there is no way they will be able to do it for this.
Also, considering:
- Insurance is already mandatory
- ACA (The Affordable Care Act) does away with pre-existing conditions and gender discrimination so these factors will no longer affect the cost of your insurance on or off the marketplace.
- You can’t be denied health coverage based on health status.
- You can’t be dropped from coverage when you are sick.
- All new plans sold on or off the marketplace must include a wide range of new benefits including wellness visits and preventative tests and treatments at no additional out-of-pocket cost
The only real result of knowing that you may be of higher risk of the lurgy, results in you using these preventative treatments, thus reducing the future costs of illness if you actually mitigate the risk/avoid the lurgy all together.
And the endgame would be that there is a higher probability that everyone wins.
Assuming the ACA is not going anywhere this can only reduce costs in the long term for both the insured and the insurers.
You don't need the insurers to drop coverage, deny insurance based upon health status, or do any form of discrimination. The system still breaks if the consumers, the healthcare insurance buyers, know more.
If there are two healthcare plans on the market, one that covers the lurgy, and one that doesn't, then buyers with knowledge of their own health prospects will flock to the one that covers them best. The lurgy-covering plan will have to raise prices to remain viable.
And so those with the lurgy genes get penalised despite the insurers being completely regulated and without them breaking any of the rules that you have listed.
The worst case scenario they used was if someone at risk for breast cancer got mammograms early. The horror, but also the cost savings from early detection! If you claim your grandmother had breast cancer you will no hassle getting a mammogram at an early age, there should be no difference if you have genetic hints at the same risk-factor. No insurer would pay for a preventative mastectomy without strong medical evidence (e.g. not just a genetic test), there's no sense in bringing up a world-famous rich actress who almost assuredly paid for her surgery out of pocket.
The most expensive thing for a health insurer is the customer who doesn't get a mammogram when she should.
If you can't deny coverage for a pre-existing condition, or raise premiums when someone develops a new disease, you shift to reducing your cost by doing what's most effective. That's the best part of the ACA.
Luckily Congress is looking out for women and passed a law requiring medically useless tests.
http://www.bloomberg.com/news/2012-07-31/in-mammogram-debate...
http://www.uspreventiveservicestaskforce.org/uspstf/uspsbrca...
>23andMe’s tests, designed to tell people if they're at risk for certain health conditions, could lead to an increase in care--necessary or not--which insurers could end up covering
Many people (most?) would not have purchased health insurance when they were young and healthy, and they certainly would never purchase long-term care insurance.
Those people who get Health Insurance typically either get it as part of a Group Insurance Plan from a company (in which case, they insurance company gets a nicely mixed up group of healthy and unhealthy people).
With systems like 23andMe - otherwise healthy people now start loading up on various kinds of insurance, with a greater chance that the Insurance Company will have to pay out on the policy. It's somewhat like someone having advance notice of an arsonist in the neighborhood loading up on fire insurance. No guarantee that you will use it - but a much better chance than average.
Consider a world without GINA/other regulations and with simple actuarial pricing of insurance. Say you have a 1 in 100,000 risk of a disease costing $10k before a genetic test. After the genetic test, you risk is either 1 in 1,000,000 (if negative) or 1 in 10,000 (if positive). The insurance company would charge you $1.10 for a policy if untested, $11 for a policy if tested positive, and $0.11 for a policy if tested negative. These policies result in a 10% profit per person (ignoring admin costs, etc). If you lie about getting tested, that's grounds to revoke your policy.
As a result of GINA, people can get tested but the insurance company can't price insurance accordingly. As a result, the people with a negative test will drop coverage while people with a positive result will buy it, and prices will have to go up. If everyone behaved this way, then P(disease|buys insurance) = 1/10,000 in spite of the fact that P(disease)=1/100,000. Prices will rise to $11.
Price increases will reduce the quantity purchased (resulting in lower profits) and result in political/regulatory pushback.
Why aren't you going to get coverage? If you mean catastrophic coverage, the exchanges have them if you are young (under 30) or poor. It's not a terribly smart plan to have now that the other plans are available, but to each his own:
https://www.healthcare.gov/can-i-buy-a-catastrophic-plan/
If you're not poor you really should buy insurance, besides the obvious health benefits you're going to be paying 1% of your household income as a penalty in 2014, 2% in 2015 and 3% after that. Many people would pay more in penalties (and get nothing in return) than they would for getting insurance, it's a no brainer.
Also I only live in the US part of the year, and it's unclear which state I'm even allowed to buy insurance from (I have no US address right now). I'd certainly be paying for months of care I couldn't use since you can't buy month to month.
Lastly my income is low right now since I'm building a startup, so 1% won't hurt me much.
... Only a percentage (60%) and only after you reach the deductible (in my area that's over $6k), which is how these sort of high-deductible plans work (and is what I currently have because that's what was available before the exchanges). Again, from my link:
> A catastrophic plan generally requires you to pay all of your medical costs up to a certain amount, usually several thousand dollars. Costs for essential health benefits over that are generally paid by the insurance company.
Unlike a high-deductible plan that you may have now, the new ones do provide for 3 primary care visits annually as well as preventative care (essentially screenings and vaccines which end up saving everyone money).
> Lastly my income is low right now since I'm building a startup, so 1% won't hurt me much.
Since your income is low you would qualify for a subsidy and likely be able to get insurance for little to no cost. Or you could be bankrupted by some bad luck and pay a penalty for the privilege.
Whoever reads this, be careful before having your DNA tested. In some countries (as, for instance my native Germany) you have the legal obligation (!) of sharing any relevant results with insurers before buying insurance.
Wth? Do people not understand the point of insurance?
This also stifles innovation since they would otherwise have an incentive to invest in this technology. And more importantly it would save people's lives if the insurance made them take tests and caught this stuff early.
If we still have private health insurance in 2050 then we have failed, and society will probably be like in that rock opera, "Repo! The genetic opera."
Also, we all know that they'll be the first ones to use genetic data against people.