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Genetic testing and genetic discrimination: Public policy when insurance becomes “too expensive”

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  • Posey, Lisa L.
  • Thistle, Paul D.
Abstract
We examine public policy toward the use of genetic tests by insurers when a positive test makes actuarially fair insurance too expensive for some consumers. With state-dependent utility, consumers may decline actuarially fair insurance if the probability of becoming ill exceeds a threshold. In markets with adverse selection, a positive genetic test may cause all or some high risks to drop out of the market (complete and partial genetic discrimination, respectively). Full participation in the market by all consumers requires cross-subsidization. We show that the consent law and mandatory testing are equivalent. Under complete genetic discrimination, the duty to disclose is never Pareto dominated, but either the code of conduct or consent law can yield the same outcome. Under partial genetic discrimination, the duty to disclose is never Pareto dominated. However, partial genetic discrimination and cross-subsidization imply the information ban is noncomparable to the other policy alternatives.

Suggested Citation

  • Posey, Lisa L. & Thistle, Paul D., 2021. "Genetic testing and genetic discrimination: Public policy when insurance becomes “too expensive”," Journal of Health Economics, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:jhecon:v:77:y:2021:i:c:s0167629621000266
    DOI: 10.1016/j.jhealeco.2021.102441
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    References listed on IDEAS

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    More about this item

    Keywords

    Asymmetric information; Value of information;

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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