I S S U E B R I E F Sp ri n g 1 9 9 8 A M E R I C A N A C A D E M Y o f A C T U A R I E S

Genetic Information and Voluntary Life Insurance Rec ent scien t ific advan ce s , par tic u l a r ly those achi e ved by the Human Genome Project , ha ve increa s ed un d e rstanding of gene tic proce s s es and hold out hope for significant prog ress in the trea tm e nt of di se a se . At the same tim e , th e s e advan c es have crea t ed con c ern that newly avai l a b le inform a t ion about the gene tic ma k eup of in d i vid uals could be used to their disadvan t a ge . Among the con c erns most freq u en t l y rai s ed is the question of the permi s s i b le use of gene tic inform a t ion in cla s s i f y ing risk for insura n c e coverage . The proc ess of risk cla s s i f i c a t ion is fundamental to volu n t a r y life insura n ce . Risk cla s s i f i c a t ion pla c es appli - cants into groups with rough l y equival e nt levels of ri s k ,t h ereby ensu r ing their premium cost is com m en s u - rat e with their risk level. Ind i vid uals who know, or sus pe ct , that they have gene tic disord e rs fear that this in fo rm a t ion could be used to deny or termi n a t e insura n c e coverage . As a resu l t , some individ uals may avoid taking gene tic tests that might provide potenti a l ly benef i c ial inform a t ion about their con d i t ion and eventu a l ly help prevent ion or trea tm en t . While these con c erns are felt most stron g ly with regar d to health in su ra n ce , in some cases they are extend e d to life insura n c e as well. This issue brie f wil l examine fea r s regar ding life insura n c e and risk cla s s i f i c a ti o n , as well as off er pos s i b le solu ti o n s . Genes and Insurability gene s . A comp l e te map of the human geno me cou l d all o w gene tic i s t s , res e a r che rs, and the medical profes - The discovery of DN A has produc ed an exp l o s i o n of si o n to bett er understand and deal with disease. Ea r ly res e a r ch into the gene tic struc tur es that are fundamen- on in the proje ct, it was recogni z ed that as we map the tal to life in gene ral and heredi t y in partic u l a r .Sin c e human geno me and gain the abil i t y to test individu a l s 19 9 0 , the Human Geno me Proje ct, a $3-bi ll i on ,f i f teen- for gene abno rma l i ti e s , a host of eth i c a l , le gal , an d year joint eff ort of the Nati o nal Ins ti t utes of Health and so cial issues must be conf r ont ed. In recogni ti o n of th e the U.S . Depa r tme nt of En er g y, has worked towa r d the im p orta n c e of suc h issue s , the Eth i c a l , Legal , and Soci a l ma p ping of the human geno me and seque ncing of al l Iss ues (ELSI) program has been establi s h e d as part of the Human Geno me Proje ct to actively cons i d er the The Ame ri c an Academy of Actu a r ies is the public pol i c y organization for so cial implicatio ns of gene tic tes ti n g . the United States actu a r ial profe s s i o n , pr oviding unbiased actu a ri a l The possibility of testing for abnormal genes has,in in f ormation to elected officials, reg u l a to r s , and the news media. The particular, raised fears about insurance and insurabil- Academy Task For ce on Genetic Testing educat es legislators and reg u l a - tors about actu a r ial aspec ts of genetic testing and its use by insurer s . ity. Insured individuals who learn that they carry genes linked to medical conditions worry that their Me m b ers of the Task For ce on Genetic Tes t i n g : David J. Chri s t i a n s o n , MA A A , FS A , Cha i r pe r s o n ; Ronald I. Bec ke r , MA A A , FS A ; Jay D. Bie h l , coverage may be canceled or their premium raised. M A A A ,F S A ; Cecil D. Byke r k , M A A A ,F S A ; Gene Hel d , M A A A ,F S A ; Joan E. Potential applicants for insurance fear that they may Her m a n , MA A A , FS A ; Bruc e J. Hol m e s , MA A A , FS A ; Ric h a r d A. Kip p , be forced to take genetic tests, receive unwanted infor- M A A A ,F S A ; Robe r t M. Mu s e n , M A A A ,F S A ; David Scarl e t t , M A A A ,F S A ; Ir win J. St ri c ke r , M A A A ,F S A . The task for ce grate f u l l y ackno wledges the mation about their health status, and perhaps be as s i s t a n c e of Arnold Dic k e,M A A A ,F S A , in draf ting this issue brie f . denied access to coverage now and in the future. Individuals also are concerned about the privacy of genetic information and the implications such infor- A M E R I C A N A C A D E M Y of A C T UA R I E S mation may have for their families. Researchers worry 1100 Seventeenth Street NW 7th Floor Washington, DC 20036 that fears about use of genetic information will deter Tel 202 223 8196 Fax 202 872 1948 volunteers for research projects. And finally, there is Wilson W.Wyatt, Jr.,Executive Director John Trout,Director of Public Policy concern that insurers will use genetic tests to select Ken Krehbiel, Director of Communications only low-risk individuals, leaving many other individ- Jeffrey Speicher,Manager of Member Communications uals excluded from coverage. These concerns lead ©1998 The Ame ri c an Academy of Actu a ri e s . All Rights Res e r ved . some to believe that insurers should not be permitted to take into account genetic test results in determining ma y be cha n g ed onl y on a class basis and not for spe- the cost and availability of insurance products. cific individu a l s . Gua ra n t eed maximum premi ums pro- Actuaries recognize that many individuals rely on vid e a furth e r limitatio n on the insur er’ s abil i t y to the financial protection of life insurance and that the in c r ease premiu m s . potential loss of insurability is a matter of great con- cern. On the other hand, actuaries also recognize that 3. Perception: Genetic testing will cause more people to be denied life insurance. antiselection, the purchase of insurance more fre- Reality: Genetic tests will not have a uniform effect quently and in higher amounts by individuals who are on availability of insurance. Some people could gain aware of risk that remains unknown to the insurer, greater access to coverage; others with specific genetic could cause great financial damage to insurers and conditions could see reduced access to coverage or consequently to policyholders. higher premium costs. The Academy Task Force on Genetic Testing antici- pates that, like past medical advances, genetic testing Separating Perception from Reality will not in the aggregate reduce the ability to obtain Actuaries are trained to distinguish appearances from insurance. As individuals are tested and learn how to fact. In that spirit, the Academy Task Force on Genetic manage genetic disorders, genetic testing should actu- Testing has examined several commonly voiced con- ally improve overall mortality. Thus, in the future an even greater percentage of applicants might be accept- cerns about the use of genetic information, with the ed for coverage. aim of separating well-founded fears from misplaced However, the use of gene tic tests wil l not have a uni- anxieties. The following “perceptions” and corre- form eff ect. Some people wil l bene fit from grea t er acces s sponding “realities” reflect the current status of regu- to coverage , while others with specific cond i ti o ns may lation and company practice but are not intended as ha ve reduc ed opportun i t y to obtain life insura n ce . the final word on the rapidly evolving role of genetic For ex a m p l e , an indivi dual who su f fers from information in the life insurance industry. hemochromatosis, or iron-rich blood, faces serious medical consequences if the condition is left undetect- 1. Perception: An individual who tests positive for a ed and untreated. However, if a test reveals genetic gene linked to a specific disease will contract that predisposition for the condition, early treatment can disease. prevent complications and avoid early death due to Reality: With few exceptions, a positive genetic test the condition. With early detection and treatment,the result indicates only an increased probability of individual will likely be classified a standard risk. Pers ons with a family pred i s po s i ti on for developing such a disease. Hu n ti n g ton’s disease may also ben efit from te s t s . A few gene tic abno rma l i t ies wil l lead directl y and cer- Cur rent l y, an insur er cannot rule out the strong pos s i - ta i n l y to disease. However, the vast majorit y of gene tic bi l i ty that a pers on with a family history of cond i ti o ns requi r e a combi n a ti o n of gene tic and envi- Hun ti n g t on’s wil l develo p the disease. However, if ronm e ntal factors to res ult in disease. Almost all of us gene tic tests reveal that the individ ual does not carry ar e born with gene tic risk factors, but it is not pos s i bl e the Hun ti n g t on’s gene , st a n d a r d life insura n c e coverag e to determine when , or even if, in d i vid uals who are pre- can be obta i n ed . di s po s e d to disease wil l actua l ly cont ract it. The ris k A pos i t ive test for BRCA1 may reveal a predi s po s i ti o n profile of ma n y people who are predi s po s e d to gene tic to breast cancer that was not evid ent from other under- writ ing informa ti on . Depending on age and other fac- diseases wil l conti n ue to allo w them to qualify as stan- tors, it is pos s i b le that the perso n may be deeme d a high- da r d risks for life insura n ce , just as they do toda y. er risk than would have been presu m e d otherwis e . 2. Perception: Life insurance companies will cancel Converse ly, a negat ive test may improve the assessment coverage or raise premiums if harmful medical of a perso n with a strong family history of breast cancer. conditions are revealed by genetic tests. 4. Perception: Insurance companies may require appli- Reality: Voluntary individual life insurance cannot cants to take genetic tests. be canceled, and premium increases are either Reality: While the Academy does not know of any life prohibited or tightly restricted. insurer that currently requires DNA-based tests, it is Fe a rs of c a n cell a ti on and prem ium increases are possible that such tests may be required in the future. un fo u n d ed in the cont ext of volu n t a r y life insura n ce . A 1994 Ohio Depa r tme nt of Insu ra n c e Task Force sur - On c e a cont ract is establi s h ed , it remains in force as vey did not find a single health insur er that requi r ed gen etic te s ti n g, and the Am erican Ac ademy of lo ng as premi ums conti n ue to be paid. Premi um cos t s Actua r ies is not awa r e of an y life comp a n y that has ar e set at the time the policy is issue d and in most cases suc h a requi r emen t . At pres en t , these tests are qui t e ar e fixed for the life of the pol i c y . If not fixed, premiu m s exp ens i ve and reveal a limited incidenc e of si gn i f i c a n t gene tic abno rma l i ti e s . As a resu l t , the overal l val ue of restricted. In the 1980s and early ’90s, many states the informa ti o n from insur er-r equi r ed tests is current - reviewed and strengthened their confidentiality laws ly far outw ei gh ed by the cos t . In the future , it is pos s i - in response to the AIDS epidemic, and the continuing ble that gene tic tests wil l be more accu ra te , wid ely regulatory trend is to toughen such safeguards. avai l a bl e , and inexp ens i ve. His t ory shows that whe n ne w techn i q ues have beccome wid ely recogni z ed and 8. Perception: Genetic testing will alter the way life us e d in the medical commu n i t y, in su r ers oft en choo s e insurance is sold, resulting in decreased coverage. to incorporat e them into the underwrit ing proces s . Reality: The Academy Task Force on Genetic Testing believes that genetic testing will not greatly change the 5. Perception: Life insurers will require applicants to current life insurance market. reveal results of genetic tests already performed. Insu r ers, li k e other bus i n e s s e s , ar e highl y motivat ed to Reality: To prevent antiselection, insurers may in c r ease the num b er of ne w custome rs. In fact, th e y indeed require applicants to reveal such results. could not stay in business wit h o u t them. Almost 1,700 The goal of in d i vid ual life insu ra n ce underwrit ing is to companies and 200,000 agents market individ ual life classify applicants into groups with similar proba bi l i - in su ra n c e and have strong incent ive to off er coverag e to as many people as pos s i bl e . In add i ti on , so me comp a - ties of death and to set premi ums appropria t ely. If nies speci a l i z e in placing coverag e that other comp a - both insur er and applicant have the same amount of nies deny. in f orma ti on , the applicant can be cla s s i f i e d wit h o u t Und er exi s t ing underwrit ing crit eria , 91 percent of an ti s el e ction . However, if an applicant has materia l ap plicants are off ered coverag e at standard or preferred in f orma ti o n abou t a health cond i ti o n that is unknown rate s , 5 percent are requi r ed to pay an ext ra premiu m , to the insur er, it is likely that the individ ual wil l bring a and 4 percent are deni e d coverage . These percent a ge s hi gh e r than normal risk to the insur er by appl yin g ha ve rema i n e d rela t ively constant over the last 40 yea rs , mo re oft en and for larger amounts of coverag e than even as diagno s t ic procedur es have advan c ed and been th e y would have purcha s ed . Ulti m a t ely, hi gh e r ris k s in c orporat ed into the underwrit ing proces s . Man y le a d to increa s e d cos t s . As premi ums become insuf f i - gene tic a l ly rela t ed cond i ti o ns are current l y identi f i e d th ro u g h family historie s , blo od tes t s , exa m i n a ti on s , ci e nt to cover cos t s , the monet a r y impact wil l be felt by and medical records . The manifes t a ti o n of gene tic in su r ers, pol i c yh o l d ers, and other pot ent ial appl i c a n t s . abn o rma l i t ies has alwa ys been implicitly taken into Suc h antis el e ctio n is an activit y that threa t ens the account by insur ers. financial health of the individ ual volu n t a r y insu ra n ce sys t em. (F or more informa ti on , se e the Aca demy’ s Legislative Initiatives is s ue brief , “R isk Cla s s i f i c a ti o n and Volu n t a r y Life Insu ra n ce .” ) In response to growing public concern, legislators at both the state and federal level have developed pro- 6. Perception: It is difficult to recruit participants for posals to regulate the use of genetic information. genetic research studies because of insurance fears. Many of these initiatives are limited in scope to med- Reality: Some people may decline to participate in ical expense insurance, or reinforce well-established research projects because they fear loss of insurability. industry practices concerning confidentiality and dis- Researchers currently report some difficulty in recruit- closure of sensitive information. However, some leg- ing research study participants. This is a result of the islative initiatives would go so far as to ban use of any informed consent process and fears about the use of genetic information. Such limitations are in conflict information and resulting discrimination. As already with the principles that underlie the financial sound- noted, there is no reason to fear losing life insurance ness of voluntary life insurance. that is already in force or being singled out for a rate It has been sug ges t ed that banning the use of in f or- increase. Although there could be implications for new ma ti o n gai n e d from gene tic tes t ing in risk cla s s i f i c a ti o n applicants,participation in a blind study that does not would alle via t e proble ms in recru i t ing res e a r ch subj e cts , inform participants about their test results would have enco u ra g e individ uals to seek out test resu l t s , an d no effect on insurability. reduc e insura n c e fea rs . Unf ortun a t ely, suc h propos a l s 7. Perception: Insurers will not keep genetic test results oft en contain two elem e nts that are of se rious conc ern confidential. to actua ri e s : the defi n i ti o n of “gene tic tes t ” and limita- Reality: States require insurers to keep all under- tio ns on insur er knowled g e of app l i c a n t s ’ health status writing information confidential. that would res ult in “as ym m e tric information.” Currently, an applicant’s consent is required before an i n su rer is perm i t ted access to pers onal med i c a l Definition of genetic tests. It is commonly assumed records. Disclosure of this information is governed by that the term “genetic testing” is reasonably well- regulation and law, and its use by insurers is tightly defined. Actually, the range of procedures that are sometimes considered genetic tests is broader than is time. This is primarily due to the fact that the new commonly assumed. genetic tests of DNA currently are very expensive and DN A-b a s e d tests that tie specific cond i ti o ns to speci f - provide little additional information about the proba- ic genes are becoming more comm o n as res e a r ch ble mortality of an individual. When tests become advan c es throu g h the work of the Human Genom e more accurate,less expensive,and better able to detect Proje ct. These tests are comm on l y cited in the deba t e a wide range of conditions, this will likely change. abo u t gene tic privacy in underwriti n g . However, gene t- Some argue that individ uals would be more likely to ic informa ti o n also is revea l e d throu g h tests that insur - use suc h help ful gene tic informa ti o n if li f e insur ers were ers have used for many yea rs . For exa m p l e , blo od and proh i bi t ed from using gene tic informa ti o n alrea dy ur ine tests reveal evid enc e of gene tic cond i ti on s , whi c h kn o wn to appl i c a n t s . Certa i n l y, put t ing “off li m i t s ” in su r ers take into account in their risk cla s s i f i c a ti o n pro- in f orma ti o n abou t minor cond i ti o ns that have no severe cedur es as a matter of cou rs e . Should suc h analyses be im p l i c a ti o ns for morta l i t y would not have a serio u s cons i d ered tests for gene tic informa ti o n similar to DNA- im p a ct on the insur er. However, in the case of a medi c a l ba s e d tests? Any attemp t to regu l a t e use of gene tic tes t s cond i ti o n with more serious cons e quen ce s , an informa - and the informa ti o n derived from them should provid e tio n disequi l i b rium allo ws the applicant to cho ose the a clear defi n i ti o n of the tests being regu l a t ed. timing and amount of the insura n c e purcha s e . This is The scope of suc h a defi n i ti o n would have a serio u s pa r tic u l a r ly significant for coverag es suc h as life insur - im p a ct on insur ers and consu m e rs in the event of regu - an ce , whe re the consu m e r cho oses the bene fit amount. la t ory res t ric tion s . A total ban or morat orium on infor- A few people with serious cond i ti o ns who purcha s e ma ti o n obta i n e d from gene tic te s t s ,i f broadly defi n e d to la r g e amounts of coverag e could skew an insur er’ s port- in c lud e family and medical history, would severely ham- folio of ris k , exp osing the insur er to unantic i p a t ed loss- per life insura n c e underwriti n g .Und er suc h a ban, th e es . This antis el e ctio n would have a great impact on mo rta l i t y risk of so me people would be unknown and rate s , ul ti m a t ely raising the cost of in su ra n c e to every- hen c e the pool of in su ra n c e purcha s e rs would soon one . in c lud e a disproportion a t e num b er of in d i vid uals at ris k for prema tu r e dea t h . Suc h individ uals also would be Current Options,Possible Solutions mo re likely to purchase rela t ively large amounts of in su ra n ce . This antis el e ctio n would cause premiu m Although over 90 percent of life insurance applicants rat es to ris e , and a pric e spiral could ens ue that wou l d receive standard or preferred coverage, some individ- ma k e life insura n c e unafforda b le for most peopl e . (For uals are declined. However, other options are available m ore inform a ti on , s ee “ Risk Cl a s s i f i c a ti on and to individuals who are denied standard coverage: Voluntary Life Insurance.”) • Coverage with an extra premium reflecting the Asymmetric information. Would a ban on the use added risk. of genetic information in life insurance underwriting •Gu a ra n teed issue insu ra n ce , wh i ch typ i c a lly merely prohibit insurers from asking for tests to be requires a higher premium and limits coverage in performed or would they also be barred from obtain- early policy years. ing test re sults alre ady known to the app l i c a n t ? Clearly, a more encompassing ban would more com- • Limited underwriting coverage, for which typically pletely remove applicant fears of genetic-based denial. only a past personal history of serious disease causes However, from an actuary’s point of view there is a denial of coverage. This is also a higher-premium world of difference between the two prohibitions. coverage. When e ver crit ical informa ti o n is known by the appl i - • Autom a tic gro u p - i n su ra n ce covera ge thro u gh cant and not the insur er, the asymm e try of in f orma ti o n employers, trade associations, and affinity groups. le a ds to antis el e ctio n and res ults in less afforda b le and avai l a b le insura n ce . As pric es ris e , consu m e r buyin g • Social Security survivors benefits. pa t t erns cha n ge , claim costs increa s e , and pric es rise yet • Purchasing insurance when young, before the onset ag ain to keep the syst em in balance. This rat e spiral of any serious disease or prior to taking a genetic test. would not onl y affect afforda bi l i t y, but over the long • Buying life-insurance options, before health prob- term could also cause insur ers to wit h d r aw from the lems become evident, that guarantee the right to pur- ma r ket or res t ric t coverage . chase defined amounts of insurance at specific ages or The impact of a ban on insurance company use of life events. genetic tests would depend on the ban’s duration and the scope of the definition used. A moratorium on These alternatives, combined with the wide avail- some types of tests would cause minimal disruption at ability of standard and preferred rate coverage, permit first, but would have more severe consequences over the vast majority of individuals who desire life insur- ance coverage to obtain it. However, the Academy A Floor of Protection realizes that the small percentage of individuals who Cu rren t ly, Social Sec u ri ty provi des a very limited are unable to obtain coverage may be seriously disad- amount of basic life insurance protection. As a result, vantaged. On the other hand, a long-term ban on many of the administrative mechanisms are already in genetic testing would likely be disruptive to the volun- place if there is a societal mandate to increase the t a ry life insu ra n ce sys tem , u l ti m a tely hu rting the amount and scope of the Social Security life insurance Am erican people by making life insu ra n ce more benefits. Other options for wider insurability involving expensive and more difficult to obtain. For these rea- government and insurance industry cooperation would s on s , the Ac ademy bel i eves that furt h er re s e a rch need additional research into feasibility. Such solutions should be undertaken on the insurance-related prob- may include high-risk pools and other risk-sharing lems raised by genetic testing.Such research should mechanisms. be directed toward identifying and building support for solutions that will both provide increased options Designing New Coverages for individuals with genetic disadvantages and main- Some innovative coverages that could accommodate tain a sound life insurance system. high-risk individuals are: • En d owme nt coverag e for individ uals with little ext ra Finding Solutions mo rta l i t y in early du ra ti ons and rap i d ly rising morta l i t y Physicians, insurers, and test recipients all are con- in later one s . cerned with, and need information about, the impli- cations of genetic test results on mortality and mor- • Limited early benefits for those with high short-term bidity. Researchers typically focus on survival rates of mortality risk, but with increased benefits for those who five years or less. Actuaries, rigorously trained in mor- survive. tality analysis, focus on lifetime mortality. A research • Exclusions for certain disorders. project reviewing high-interest genetic abnormalities, such as BRCA1, BRCA2, or multiple sclerosis, would • Premium credits for proactive risk management. benefit from the combined efforts of researchers and actuaries. Not only would patients better understand Conclusion their prognosis, but physicians could improve treat- ment modalities, and insurers could classify risk more These research proposals and new products could be accurately. helpful in answering questions and eliminating fears raised by genetic testing.The American Academy of Options for Research Participants Actuaries, working with the Actuarial Foundation and Recognizing the difficulty of recruiting research sub- other sources, will explore these research options and jects because of genetic-related fears,the following are product innovations. Those interested in learning more offered for consideration: about the actuarial profession’s work on genetic testing, • E n co u ra ge participants to purchase insu ra n ce including comments on specific legislative proposals, before they participate in research studies. are invited to contact the Academy for more informa- tion. •Explore the possibility of providing group insur- ance to research subjects. • Requ i re all participants to obtain “g u a ra n teed insurability” coverage.