Medical Testing and Health Insurance

August 1988

NTIS order #PB89-116958
Recommended Citation:

U.S. Congress, Office of Technology Assessment, Medical Testing and Health Insurance,

OTA-H-384 (Washington, DC: U.S. Government Printing Office, August 1988).

Library of Congress Catalog Card Number 88-600536

For sale by the Superintendent of Documents

U.S. Government Printing Office, Washington, DC 20402-9325

(order form can be found in the back of this report)
Foreword

Tests to identify individuals who are likely to develop serious diseases are being

rapidly developed. Some of these tests are directed at diseases for which there are presently no known therapies, thereby raising questions over the social consequences of

identifying susceptible persons. Other tests are directed at diseases that are among the

foremost causes of morbidity and mortality, such as cardiovascular diseases and cancer, but for which clear-cut relationships between test positivity and a high probability

of developing disease have yet to be established. Available tests for identifying persons

infected with the AIDS virus are very accurate, but whom to test is a highly controversial issue because of the social consequences of being identified as a carrier of the AIDS

virus.

The health status and risk of developing disease of individuals applying for health

insurance are routinely evaluated by private health insurers, and applicants may be declined altogether, charged higher premiums, or have certain illnesses excluded from coverage. Medical testing may be included in evaluating the applicant, so wider use of diagnostic and predictive medical tests by insurers is a real possibility as such tests are

improved and more tests become available. Many employers—especially large

employers—are also foregoing the use of traditional insurers and are self-insuring the

health care costs of their employees, so they may have similar incentives to use medical

tests when hiring prospective employees.

Such uses of medical tests may lead to substantial costs to government if private

insurance becomes too costly or unavailable to selected individuals. Furthermore, approximately 15 percent of the population of the United States do not have health insurance, and an additional 8 to 26 percent of the population under age 65 are underinsured. Thus, use of medical tests in determining insurability and employability not only

affects the balance between governmental and private sector financing of health care,

but also can aggravate the problem of the uninsured and underinsured.

This assessment examines existing and developing medical tests and their current

and potential uses by health insurers and employers. Two related reports have previously been issued as part of this study. AIDS and Health Insurance: An OTA Survey

was issued in February 1988 and examined health insurance underwriting practices and

AIDS claims experience for individually underwritten insurance policies. The Impact

of AIDS on the Kaiser Permanence Medical Care Program (Northern California Region) was released in July 1988.

OTA was ably assisted in this study by an advisory panel, chaired by Irving Lewis,

Emeritus Professor of Public Policy and Community Health at the Albert Einstein College of Medicine. Many individuals and organizations with expertise and interest in these

areas also provided information and reviewed a draft of the report. The final responsibility for the content of this assessment rests with OTA. Key staff involved in the analysis and writing were Larry Miike, Jill Eden, Maria Hewitt, Laurie Mount, and Ellen

Smith.

Director

,.,

Ill
Medical Testing and Health Insurance Advisory Panel

Irving Lewis, Chairman

Emeritus Professor of Public Policy and Community Health

Albert Einstein College of Medicine

Bronx, New-York

Donald Chambers

Chief Medical Director

Lincoln National Life

Insurance Co.

Ft. Wayne, Indiana

Rashi Fein

Professor of the Economics

of Medicine

Harvard Medical School

Boston, Massachusetts

Peter Groom

Senior Counsel

Department of Insurance

State of California

San Francisco, California

William Hagarl

Insurance Commissioner,

Iowa Division of Insurance

Des Moines, Iowa

Robert Hunter

President

National Insurance Consumer

Organization

Alexandria, Virginia

Angele Khachadour

General Counsel

Blue Cross of California

Oakland, California

Barbara Matula

Director

Saul Mines

Associate Company Medical

Director

General Electric Co.

Fairfield, Connecticut

Lee Moskowitz

Director

Immunopathology and

Serology Laboratory

Cedars Medical Center

Miami, Florida

Nanette Newell

The Synertech Group Inc.

Research Triangle Park, North

Carolina

Mark Pauly

Executive Director

Leonard Davis Institute of

Health Economics

Wharton School

University of Pennsylvania

Philadelphia, Pennsylvania

Gordon Polley

President

Molecular Diagnostics, Inc.

West Haven, Connecticut

Mark Rothstein

Director

Health Law Institute

University of Houston

Law Center Division of Medicaid Assistan~~ Houston Texas on

State of North Carolina r

Raleigh, North Carolina

‘From October 1987.

‘Until October 1987.

3

Former Director of Insurance, State of South Dakota.

Tom Stoddard

Executive Director

LAMBDA Legal Defense and

Education Fund

New York, New York

Deborah Stone

David Pokross Professor of

Law and Social Policy

Heller School

Brandeis University

Waltham, Massachusetts

Robert Swanke

President

Swanke, Inc.

Bloomington, Minnesota

Paul Volberding

Chief, Medical Oncology

Division and AIDS Activities

Division

UCSF/SF General Hospital

San Francisco, California

Susan Walker2

Director

South Dakota Lottery3

State Capitol Building

Pierre, South Dakota

Harry Woodman, Jr.

Vice President

New York Life Insurance Co.

New York, New York

NOTE: OTA gratefully acknowledges the members of this advisory panel for their valuable assistance and thoughtful advice. The panel does not, however, necessarily approve, disapprove, or endorse this report. OTA assumes full responsibility for the report and the accuracy of it contents.

iv
OTA Project Staff—Medical Testing and Health Insurance

Roger C. Herdman, Assistant Director, OTA

Health and Life Sciences Division

Clyde J. Behney, Health Program Manager

Project Staff

Lawrence H. Miike, Project Director

Jill S. Eden, Analyst

Maria Hewitt, Analyst

Laurie Mount, Research Analyst

Ellen Smith, AnaZyst*

Administrative Staff

Virginia H. Cwalina, Administrative Assistant

Carol Ann Guntow, P.C. Specialist

Karen T. Davis, Secretary/Word Processor Specialist

Carolyn D. Martin, Clerical Assistant

Contractors

Glenn Markus, Health Policy Alternatives, Inc.

Katherine Swartz, The Urban Institute

Kaiser Permanence Medical Care Program (Northern California Region)

‘Unti] September 1987.

v
List of Abbreviations

ACLI

ACLU

ACS

AIDS

ALT

AMA

APS

ARC

ASO

AST

BC/BS

BLS

BUN

CAD

CAP

CDC

CEA

CFR

CHD

CHIPS

CMPS

COBRA

CPS

Cso

DHHS

DNA

DOD

DOT

EIA

EKG

ELISA

ERISA

ESRD

FDA

FH

GAO

GC/MS

GGT

GHAA

HCFA

HDL

HIAA

HIS

HIV

HMO

HORL

HRA

IFA

LDL

METs

MI

MIB

vi

—American Council on Life Insurance

—American Civil Liberties Union

—American Cancer Society

—acquired immunodeficiency syndrome

—alanine amino transferase (formerly SGPT)

—American Medical Association

—attending physician’s statement

—AIDS-related complex

—administrative services only

—aspartate amino transferase (formerly

SGOT)

–Blue Cross/Blue Shield

—Bureau of Labor Statistics

—blood urea nitrogen

—coronary artery disease

—College of American Pathologists

—Centers for Disease Control

—carcinoembryonic antigen

—Code of Federal Regulations

—coronary heart disease

—catastrophic health insurance plans

—competitive medical plans

—Consolidated Omnibus Budget Reconciliation Act of 1985

—Current Population Survey

—claims services only

—U.S. Department of Health and Human

Services

—deoxyribonucleic acid

—U.S. Department of Defense

—U.S. Department of Transportation

—enzyme immunoassay

—Electrocardiogram

—enzyme-linked immunosorbent assay

—Employee Retirement and Income Security Act

—end-stage renal disease

—U.S. Food and Drug Administration

—familial hypercholesterolemia

—U.S. General Accounting Office

—gas chromatography/mass spectrometry

—gamma-glutamyl transpeptidase

—Group Health Association of America

—Health Care Financing Administration

—high density lipoproteins

—Health Insurance Association of America,

—Health Interview Survey

—Human Immunodeficiency Virus

—health maintenance organization

—Home Office Reference Laboratory, Inc.

—health risk appraisals

—indirect immunofluorescence assay

—low density lipoproteins

—multiple employer trusts

—myocardial infarction

—Medical Information Bureau, Inc.

MRI —magnetic resonance imaging (formerly

NMR)

NAHMOR—National Association of HMO ReguNAIC

NIDA

NIH

NIOSH

NMCES

NMCUES

NMR

ODPHP

OPM

OTA

OTC

PHS

PMA

P r o

RBC

RFLPs

RIPA

RNA

SIPP

SGOT

SGPT

STD

TPAs

VLDL

WBC

lators

—National Association of Insurance Commissioners

—National Institute on Drug Abuse

–National Institutes of Health

—National Institute for Occupational Safety

and Health

—National Medical Care Expenditure Survey

—National Medical Care Utilization and

Expenditure Survey

—nuclear magnetic resonance (former name

for MRI)

—U.S. Office of Disease Prevention and

Health Promotion (PHS)

—U.S. Office of Personnel Management

–Office of Technology Assessment (U.S.

Congress)

—over-the-counter

—U.S. Public Health Service

—premarket approval

—preferred provider organization

—red blood cell

—restriction fragment length polymorphisms

—radioimmunoprecipitation assay

—ribonucleic acid

—Survey of Income and Program Participation

—serum glutamic-oxaloacetic transaminase

(former name for AST)

—serum glutamic pyruvic transaminase

(former name for ALT)

—sexually transmitted disease

—third party administrators

—very low density lipoproteins

—white blood cell

Glossary of Terms

Accuracy (“diagnostic accuracy”): In describing a diagnostic test, diagnostic accuracy is the number of

correct test results (i. e., the total of true-positives

and true-negatives) divided by the total number of

tests performed. Diagnostic accuracy may vary with

the prevalence of the disease in the population. See

also sensitivity and specificity.

Acquired immunodeficiency syndrome: The most

severe clinical manifestation of immune dysfunction

caused by the human immunodeficiency virus

(HIV).

Adverse selection: The tendency of persons with poorer

than average health expectations to apply for or

continue insurance to a greater extent than persons

with average or better health expectations. Also

known as “antiSelection.”
Allele: An alternative form of a gene, or a group of

functionally-related genes, located at the corresponding site on the chromosome. Alleles are inherited

separately from each parent, and can be dominant,

recessive, or co-dominant for a particular trait.

Antibody: A blood protein (immunoglobulin) produced by white blood cells in response to the introduction of a specific antigen (usually a protein).

Once produced, the antibody has the ability to

combine with the specific antigen that stimulated

antibody production. This reaction to foreign substances is part of the immune response. At present,

five classes of antibodies are distinguishable. Most

of the circulating antibodies are immunoglobulin G

(IgG); the others are IgM, IgA, IgD, and IgE. See

also immunoglobulin.

Antigen: A substance, usually a protein or complex

carbohydrate, which, when introduced into the

body of a human or other animal, stimulates the

production of an antibody that reacts specifically

with it.

Autoradiograph: An image produced on an x-ray film

by a radioactively labeled substance.

Biochemical profile: A battery of twelve or more biochemical blood tests (e.g., calcium, glucose, blood

urea nitrogen, total protein) that is conducted using

large-volume, automated instruments. Biochemical

profiles are sometimes used to screen asymptomatic

adults in an effort to identify those with latent

disease or those at high risk of developing chronic

disease.

Cholesterol: An alcohol found in egg yolks, oils, and

fats. Cholesterol is used to synthesize cell membranes, is a precursor to steroid hormones, and is

a component of bile.

Chromosome: A rod-like structure found in the cell

nucleus and containing the genes. Chromosomes are

composed of DNA and proteins. They can be seen

in the light microscope during certain stages of cell

division.

Coinsurance: A provision in a health insurance contract by which the insurer and insured share, in a

specific ratio, the covered losses under a policy. For

example, the insurer may reimburse the insured for

80 percent of covered expenses, the insured paying

the remaining 20 percent of such expenses.

Community-rating: A method of determining premium rates that is based on the allocation of total costs

without regard to past group experience. Communit y rating is required of federally qualified HMOS.

Conversion privilege: The right to change insurance

without providing evidence of insurability, usually

to art individual policy upon termination of coverage under a group contract. Conversion privileges

are mandated by the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) (Public

Law 99-272).

Core antigens: Antigens that make up the internal

structure or core of a virus. Compare envelope

antigens.

Deductible: The amount of covered expenses that must

be incurred and paid by the insured before benefits

become payable by the insurer.

Deoxyribonucleic acid (DNA): The substance of heredity; a large molecule which carries the genetic

information necessary for the replication of cells

and for the production of proteins. DNA is composed of the sugar deoxyribose, phosphate, and the

bases adenine, thymine, guanine, and cytosine.

DNA denaturation: The separation of DNA into its

two strands of nucleotides, for example by exposing

it to near-boiling temperatures or to extremely

alkaline conditions.

DNA probe: A specific sequence of single-stranded

DNA used to seek out a complementary sequence

in other single strands. The probe is usually made

radioactive so that it can be detected.

DNA sequencing: The process of determining the

nucleotide sequences of DNA.

Diagnostic test: A medical test administered to those

asymptomatic but high risk individuals identified

by a screening test or a test used to identify the cause

of abnormal physical signs or symptoms. Compare

predictive test and screening test.

Direct genetic test: A DNA-based test capable of

identifying a specific disease-causing allele. Compare linkage test.

Direct pay: See individual health insurance.

Electrophoresis: A method of separating substances,

such as DNA fragments, by using an electric field

to make them move through a medium at rates that

correspond to their electric charge and size.

Electrocardiogram (EKG or ECG): A graphic tracing

of the changes of electrical potential of the heart

occurring during each heartbeat; usually performed

with the patient supine and at rest.

Envelope antigens: Proteins that comprise the envelope

or surface of a virus. Compare core antigens.

Enzyme immunoassay (EIA): An assay based on antigen-antibody interactions, which uses enzymes to

measure the reaction. For example, in EIAs that are

used to measure drugs in urine, a reagent that

contains antibodies against a specific drug is first

added to the urine specimen. A second reagent

containing the specific drug attached to an enzyme

is then added, and the enzyme-labeled drug combines with any remaining antibody binding sites.

This binding decreases the enzyme activity. The residual enzyme activity relates directly to the

concentration of drug in the specimen. The active

enzyme converts another substance in the reagent,

resulting in an absorbance change that is measured

spectrophotometrically. See also indirect immunoflo

urescence assay and radioimmunoprecipitation assay.

vii
Enzyme-linked immunosorbent assay (ELISA): A type

of enzyme immunoassay; for example, an ELISA

is used to test for the presence of antibodies to HIV.

Exclusion waiver: An agreement attached to an insurance policy which eliminates a specified preexisting condition from coverage under the policy.

Experience-rating: A method of determining group

premium rates based on the actual amount of claim

payments made on behalf of the group in a prior

period, usually the preceding year.

False negative: A negative test result in an indiviudal

who actually has the disease or characteristic being

tested for. The patient is incorrectly diagnosed as

not having a particular disease or characteristic.

False positive: A positive test result in an individual

who does not have the disease or characteristic

being tested for. The individual is incorrectly diagnosed as having a particular disease or characteristic.

Familial hypercholesterolemia (FH): An autosomal

dominant disease caused by inherited defects in the

gene encoding for the low density lipoprotein receptor. The defects disrupt the normal control of

cholesterol metabolism.

Federally qualified HMO: An HMO that is certified

as meeting the qualification requirements of the

Federal Health Maintenance Act of 1973, as amended

(42 U.S.C. Sec. 300e et seq.). Federally qualified

HMOS must adhere to certain financial, underwriting,

and rate-setting standards and provide specified,

medically necessary health services.

Gas chromatography/mass spectrometry (GC/MS): A

method of identifying specific substances (for example, drugs), in which a gas chromatography is

coupled with a mass spectrometer. The gas chromatography is used to separate individual substances

by the rate they traverse the chromatography column.

As these compounds exit the chromatographic column, they may, for example, be bombarded with

electrons, with each substance breaking up into

characteristic pieces that can be identified with the

mass spectrometer. A GC/MS can be calibrated to

scan for many substances in a specimen, or to monitor for only a few masses that are characteristic of

a particular substance.

Gene: A unit of heredity; a segment of the DNA molecule containing the code for a specific function.

Gene expression: The manifestation of the genetic material of an organism as specific traits. Specific gene

products are expressed as proteins.

Genetics: The scientific study of heredity: how particular qualities or traits are transmitted from parents to offspring.

Genome: The total genetic endowment packaged in the

chromosomes. The normal human genome consists

of 46 chromosomes.

Human Immunodeficiency Virus (HIV): A retrovirus

that is the etiologic agent of AIDS.

Huntington’s disease: A disease that generally appears

in adulthood, producing progressive mental and

physical deterioration; it is caused by a dominant

gene.

Hybridization: The placement of complementary single

strands of nucleic acids together so that they will

stick and form a double strand. The technique of

hybridization is used in conjunction with probes to

detect the presence or absence of specific complementary nucleic acid sequences.

In situ hybridization: A method to identify HIV-produced RNA or DNA which involves the use of radioactive-labeled probes.

Immunoglobulin: Any of the serum proteins with

antibody activity. See also antibody.

Incidence: The number of new cases of a disease in a

population over a specified period of time. Compare

prevalence.

Indirect immunofluorescence assay (IFA): An assay

based on antigen-antibody interactions. For example, in searching for viral antigens (such as HIV)

in cells, antibodies to the specific viral antigen are

first added. Fluorescein-labeled goat antihuman

globulin is then added, which binds to antibodies

attached to the viral antigen, and these viral antigens are then detailed with a fluorescent microscope. See also enzyme immunoassay and radioimmunoprecipitation assay.

Individual health insurance: Health insurance that covers an individual and often members of his or her

family without any association with an employer

or membership group of any kind.

Individually underwritten groups: Small employee

groups that usually include no more than so individuals. Small group underwriting requires that individual group members provide a statement of

health and evidence of insurability.

Linkage: The relationship between two genes, or between an identifiable trait and a genetic disorder.

Genes that are located relatively close to each other

on the same chromosome are said to be linked and

generally are inherited together.

Lipoprotein: Compounds consisting of lipids (fatty

substances such as cholesterol) and proteins. Lipoproteins are classified as very low-density (VLD),

lowdensity (LD), and high-density (HD).

Locus: The site of a gene on a chromosome.

Lymphocyte: A white blood cell which is part of the

immune system.

Magnetic resonance imaging (MN): A technique that

produces images of the body by measuring the reaction of nuclei (typically of hydrogen protons) in

magnetic fields to radiofrequency waves. Formerly

known as nuclear magnetic resonance (NMR).

Monoclinal antibodies (MAbs): Antibodies derived

from a single source or clone of cells. MAbs recognize only one type of antigen.

Multiple employer trusts (METs): A method of insur-

. . . Vlll
ance in which small employers band together and

act as a large employer to create a larger risk pool

so that premiums can be lower compared to

premiums based on each employer’s smaller risk

pool.

Myocardial infarction (MI): Necrosis (death) of tissue

in the myocardium (heart muscle) that results from

insufficient blood supply to the heart.

Nuclear magnetic resonance: See magnetic resonance

imaging (MRI).

Nucleic acids: DNA and RNA, the molecules that

carry genetic information.

Nucleotide: A building block of DNA or RNA. It

includes one base, one phosphate molecule, and one

sugar molecule (deoxyribose in DNA, ribose in

RNA).

Oligonucleotide: A short string of nucleotides.

Oligonucleotide probe: A short DNA sequence which

is synthesized from a known gene or segment of a

gene that can be either normal or mutant.

Oncogene: A gene of which one or more mutant forms

is associated with cancer formation.

Oncolipid: Alterations of the lipid moieties of lipoprotein particles found in the plasma of patients

with cancer,

Open enrollment: A health insurance enrollment period during which coverage is offered regardless of

health status and without medical screening. Open

enrollment periods are characteristic of some BC/BS

plans and HMOS.

Penetrance: A term used to refer to the frequency with

which the effects of a gene (whether dominant or

recessive) known to be present are actually seen in

the individuals carrying it.

Phenylketonuria (PKU): An autosomal recessive genetic disorder of amino acid metabolism, caused by

the inability to metabolize phenylalanine to tyrosine. The resulting accumulation of phenylalanine

and derived products causes mental retardation,

which can be avoided by dietary restriction of

phenylalanine beginning soon after birth.

Polymorphism: A single gene trait (e.g., red blood cell

surface antigens) that exists in two or more alternative forms (such as types A, B, AB, and O blood).

A genetic variant would be considered a polymorphism if its frequency exceeded 1 percent, but would

be considered a rare mutation if found in less than

1 percent of the population.

Predictive test: A medical test generally applied to

asymptomatic individuals to provide information

regarding the future occurrence of disease. Compare

diagnostic test and screening test.

Predictive value: The proportion of individuals with

positive test results that have (or will have) the

condition in question.

Preexisting condition: A condition existing before an

insurance policy goes into effect and commonly

defined as one which would cause an ordinarily

prudent person to seek diagnosis, care, or treatment.

Prevalence: The number of existing cases of a specified

disease or condition divided by the number of

people in the total population at a point in time.

Compare incidence.

Radioimmunoprecipitation assay (RIPA): An assay

method based on antigen-antibody interactions,

based on principles similar to enzyme immunoassay but using radioisotopes to measure the

interactions. See also enzyme immunoassay and

indirect immunofluorescence assay.

Rated premium: A premium with an added surcharge

that is required by insurers to cover the additional

risk associated with certain medical conditions.

Rated premiums usually range from 25 to 100

percent of the standard premium.

Recombinant DNA: The hybrid DNA produced in the

laboratory by joining pieces of DNA from different

sources.

Recombinant DNA technology: The techniques for

cutting apart and splicing together pieces of DNA

from different sources.

Reliability: The consistency of measurement or degree

of dependability of a measuring instrument.

Restriction enzyme (or restriction endonuclease): An

enzyme that recognizes a specific base sequence

(usually four to six base pairs in length) in a doublestranded DNA molecule and cuts both strands of

the DNA molecule at every place where this sequence appears.

Restriction enzyme recognition site: The DNA site

where a specific restriction enzyme cuts the DNA

molecule.

Restriction fragment length polymorphisms (RFLPs):

The presence of two or more variants in the size

of DNA fragments from a specific region of DNA

that has been exposed to a particular restriction

enzyme. These fragments differ in length because

of an inherited variation in a restriction enzyme recognition site. See also polymorphism.

Retrovirus: A virus that contains RNA, not DNA, and

that produces a DNA analog of its RNA through

the production of an enzyme known as “reverse

transcriptase. ” The resulting DNA is incorporated

in the genetic structure of the invaded cell in a form

referred to as the “provirus. ”

Reverse transcriptase: An enzyme that produces a

DNA analog of its RNA counterpart, reversing the

usual process of gene expression during which the

RNA analog of DNA is produced.

Risk classification: The evaluation of whether an

insurance applicant will be covered on a standard

or substandard basis, or not at all.

Screening test: Generally, a test used to sort out apparently well persons who probably have disease from

those who probably do not. A screening test is not

ix
intended to be diagnostic. Compare diagnostic test

and predictive test.

Self-insurance: Usually refers to the practice of employers, particularly large employers, of assuming

the risks for the health care expenses of their employees instead of purchasing health insurance

through insurance companies. Such employers often

continue to contract with insurance companies or

other organizations for claims processing and

administrative services, as well as purchasing stop10SS insurance to limit the amount of their liability

for medical claims, Similar arrangements exist in

other lines of insurance; e.g., liability insurance.

Self-pay: See indiw”dual health insurance.

Sensitivity: One measure of the validity (or accuracy)

of a diagnostic or screening test: the percentage of

all those who actually have the condition being

tested for who are correctly identified as positive

by the test. Operationally, it is the number of true

positive test results divided by the number of patients that actually have the disease (true positives

divided by the sum of true positives plus false

negatives). Compare specificity.

Sickle-cell disease: A potentially lethal recessive blood

disorder caused by the mutation of a single nucleotide in the gene for beta-globulin, one of the protein

chains that make up adult hemoglobin.

Southern blotting: A procedure for transferring DNA

fragments from an agarose gel to a filter paper without changing their relative positions.

Specificity: One measure of the validity (or accuracy)

of a diagnostic or screening test: the percentage of

all specimens that do not have the condition being

tested for that are correctly identified as negative

by the test. Operationally, it is the number of negative test results divided by the number of specimens that actually do not have the condition (true

negatives divided by the sum of true negatives plus

false positives). Compare sensitivity.

Standard risk: A person who, according to an insurer’s

underwriting criteria, is entitled to purchase insurance coverage without extra premium or special restrictions.

Substandard risk: A person that does not meet the

normal health requirements of a standard health

insurance policy and whose coverage is provided

with a higher premium and/or exclusion waiver.

Tay-Sachs disease: An autosomal recessive genetic

disease resulting in developmental retardation,

paralysis, dementia and blindness, usually fatal in

early childhood. The defective gene codes for hexosaminidase A, an enzyme that is involved in certain

chemical pathways in the brain.

T4/T8 cell ratios: The ratio of T4 cells (helper cells)

to T8 cells (supressor cells). Individuals with AIDS

have a deficiency of T4 cells and a reversal of the

usual ratio of T4 and T8 cells.

Thalassemias: Recessively inherited blood disorders

caused by various mutations which reduce the

synthesis of one of the protein chains that make up

hemoglobin. The victims of severe thalassemia

require frequent blood transfusions and often die

in their teens or early twenties.

Third party administrators (TPAs): A term originally

used in the Taft-Hartley legislation of 1947 to designate an entity that is neither union nor management but administers joint labor-management welfare and pension funds. In self-insured health plans,

TPAs typically provide administrative services such

as medical claims processing, utilization and charges

review, and data processing and reporting.

Tumor marker assays: Assays (e.g., immunoassay)

that detect tumor-produced proteins.

Underwriting: The process by which an insurer determines whether or not and on what basis it will

accept an application for insurance.

Western Blot: An assay designed to differentiate among

several proteins present in the specimen, using

electrophoresis and antigen-antibody interactions.

Electrophoresis is used to separate proteins by their

molecular weights, and each protein is subsequently

identified through combining with their respective

antibody or antigen. For example, in Western blot

testing for HIV antibodies, the protein components

of HIV are first separated electrophoretically, transferred to blots, then mixed with sera suspected of

containing HIV antibodies. The presence of antibodies

to specific proteins of HIV are revealed by the

combination of antibodies with their specific protein

components of HIV.
Contents

Page

List of Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi

Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi

Chapter1.

Chapter2.

Chapter3.

Chapter4.

Summary and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Private Health Insurance: Background andOTA Survey . . . . . . . . . . . . . . . 41

Employment Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

Tests To Diagnose or Predict Disease . . . . . . . . . . . . . . . . . . . . . . . .........121

Appendix A.

Appendix B.

References . .

The Uninsured, Underinsured, and People With AIDS . ..............161

Overview of State High Risk Insurance Pools and Catastrophic

Health Insurance Plans . . . . . . . . . . . . ...............................169

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199

xi
List of Related OTA Reports

● Staff Paper:

—AIDS and Health Insurance: An OTA Survey.

February 1988. GPO stock #052 -O03-O1093-3; $2.75.

● Staff Paper:

—The Impact of AIDS on the Kaiser Permanence Medical Care Program (Northern California Region). July 1988. GPO stock #052 -O03-01128-O; $2.25.

NOTE: Reports are available through the U.S. Government Printing Office, Superintendent of Documents,

Washington, DC 20402-9325, (202) 783-3238.
Chapter 1

Summary and Conclusions
CONTENTS

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Health Insurance Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Group v. Individual Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Adverse Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Underwriting Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Regulation of Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Results of the OTA Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Testing by Employers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

The Extent of Employment-Based Medical Testing. . . . . . . . . . . . . . . . . . . . . . . . . 13

Diagnostic and Predictive Medical Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Tests Currently Used by Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Tests of Interest Because of High Prevalence

and Physician Screening Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Methods of Interest for Future Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Conclusions, Issues, and Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Prospects for Increased Use of Medical Tests by Health Insurers

and Employers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

AIDS: a Unique Situation ora Paradigm for Future Actions? . . . . . . . . . . . . . . 22

Options Addressing the Use of Medical Tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Options on Strategies for Maintaining and Improving

Access to HeaIth Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Figures

Figure Page

1-1. Comparison of Mortality Risks for HIV Infections and

Other Selected Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

1-2. State Regulation of Clinical Laboratories, 1987 . . . . . . . . . . . . . . . . . . . . . . . . . 28

1-3. State Regulationof Independent Laboratories, 1987 . . . . . . . . . . . . . . . . . . . . . 28

1-4. State Regulation of Hospital Laboratories, 1987 . . . . . . . . . . . . . . . . . . . . . . . . . 29

1-5. State Regulation of Physicians’ Office Laboratories, 1987 . . . . . . . . . . . . . . . . 29

Tables

Table Page

1-1.

1-2,

1-3.

1-4.

1-5.

Percent Distribution and Number of Persons by Insurance

Coverage Status, United States, 1986 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Blood and Urine Tests Used by Commercial Insurers . . . . . . . . . . . . . . . . . . . . 17

Major Issues and Related Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

State Laws and Regulations Concerning HIV Antibody Testing

by Health Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Heath Insurance Legislation Before the 100th Congress Concerning Coverage

for the Uninsured and Provisions for High-Risk Individuals . . . . . . . . . . . . . . 37
Chapter 1

Summary and Conclusions

INTRODUCTION

For the great majority of Americans, access to

health care, and the health insurance that makes

such access possible, is provided through the private sector. Medicare and Medicaid have played

an indispensable role in making health care available to the indigent and near indigent, and to the

elderly and some handicapped persons.1 Yet there

are approximately 31 million to 37 million people, or from 13.3 to 15.7 percent of the estimated

236 million persons living in the United States in

1986, who have no health insurance (table l-l).

An additional 8 to 26 percent of persons under

age 65 have inadequate health insurance. (The

estimates depend on the definition of “inadequate

health insurance” that is used–see app. A.)

Persons who apply for health insurance on their

own, instead of through group policies such as

employment-based plans, usually have their

health status evaluated by health insurers to determine whether or not they are in fact insurable. (This evaluation is commonly referred to as

“underwriting.”) For insurable applicants, some

might be determined to beat such an added health

risk to require higher than standard premium rates

and/or insurance policies that exclude from coverage specified diseases or conditions that the applicant already has or is at significant risk of developing. Those with significant disease or risk

of disease may be denied insurance altogether.

When underwriting individual applicants for

health insurance, insurers rely at a minimum on

a medical history questionnaire, and less frequently on such other sources of information as

a statement from the applicant’s attending physician or actual records from the physician, medical tests, and physical exams.

Advances in predictive and diagnostic medical

testing are increasing our capability to identify individuals who are likely to develop serious disIIn addition, the medical care systems of the Department of Defense and the Veterans’ Administration provide medical care to active and retired military persons, and to military veterans.

Table 1-1 .—Percent Distribution and Number of

Persons by Insurance Coverage Statusj

United States, 1986

Coverage status

Aae Al l

a Covered

b Not coveredc

Percent distribution

All ages . . . . . . . . . . . . . 100.0 86.7 13.3

Under 18 years . . . . . . . 100.0 85.4 14.6

18-24 years . . . . . . . . . . . 100.0 75.3 24.7

25-44 years . . . . . . . . . . . 100.0 85.2 14.8

45-64 years . . . . . . . . . . . 100.0 90.0 10.0

65 years and over . . . . . 100.0 99.3 0.7

Number in thousands

All ages . ............236,348 201,830 31,010

Under 18 years . . . . . . . 63,132 52,862 9,071

18-24 years . . . . . . . . . . . 26,721 19,751 6,466

25-44 years . . . . . . . . . . . 74,260 62,382 10,853

45-64 years . . . . . . . . . . . 44,698 39,708 4,418

65 years and over . . . . . 27,538 27,126 202

apercent tjlstrlbutlof’1 excludes unknown coverage status; frequencY includes

unknown coverage status.

bcovered by private health irlsurarlce, Medicare, public assistance, or militaryVeterans Administration health benefits.

cNo

t covered under any of the four health-care plans. Estimates range frOm 13.3

to 15.7 percent, or 31.0 to 37.2 miiiion parsons (see also app. A of the full report).

SOURCE: P. Ries, “Health Care Coverage by Age, Sex, Race, and Family Income:

United States, 1988,” AfCHS advarrcedafa, No. 139, Sept. 18, 1987.

eases. The use of these tests by health insurers may

(or may not) make private health insurance unavailable or too costly even to a number of presently insured persons and their dependents if analyses of their risks improve. Already, tests to detect the presence of antibodies to the AIDS virus

(HIV, for “human immunodeficiency virus”) have

brought the issue of private health insurance availability to the forefront of public policy discussions

on health insurance for persons infected with HIV.

People with individually obtained health insurance comprise only 10 to 15 percent of all persons with health insurance. Furthermore, group

applicants for health insurance, who comprise 85

to 90 percent of all persons with health insurance

and who obtain their health insurance predominantly through their workplace, seldom if ever

are subjected to individual determinations of their

health status. Premiums for group health insurance policies are usually “experience-rated,” which

is based principally on the actual health care costs

most recently incurred by the group.

3
4

However, even persons presently insured

through group health insurance are not exempt

from the possibility of unavailable or unaffordable health insurance. Containment of everincreasing health care costs is a high priority for

employers, who also might be interested in using

predictive medical tests to screen out prospective

employees who might consume a disproportionate share of funds allocated to meet employee

health care expenses. The increasing propensity

of employers, especially large employers, to selfinsure their employees’ health care expenses is a

reflection of the business community’s concern

over rising health care costs. Furthermore, although self-insured plans are subject to Internal

Revenue Service and Department of Labor review

and regulations, current law makes these selfinsured health care plans free of State insurance

department review and regulations, leading to

fewer restraints on self-insured plans than on

traditional health insurance plans for employers

who might decide to use medical testing to decrease their employee health care expenses.

Such potential actions by the private sector

have obvious consequences on public sector

spending for health care. To what extent are such

actions already occurring, what is the potential

for their occurring, and what are the potential

consequences if these actions are adopted on a

wide scale by private insurers and the business

community? Are the current availability of the

AIDS antibody test, its ability to identify those

infected with the AIDS virus, and the growing

percent of infected persons who progress on to

frank disease, forewarnings of these private-public

sector issues? Will the way in which we address

the financing of AIDS patients be a paradigm for

how we should address the issues raised by the

availability of other medical tests in the future,

or does AIDS warrant a unique response?

Current and future use of medical testing to determine health care insurability, and the impact

that such use of medical tests by private health

insurers could have on public financing of health

care, prompted the request for this study by the

House Energy and Commerce Committee, its Subcommittee on Health and the Environment, and

the Subcommittee on Intergovernmental Relations

and Human Resources of the House Government

Operations Committee. The request was supported by the Subcommittee on Health of the

House Ways and Means Committee and by the

Subcommittee on Natural Resources, Agriculture

Research, and Environment of the House Committee on Science, Space, and Technology. z

The rest of this chapter summarizes OTA’S findings and conclusions and provides options on major issues identified in this report.

Chapter 2 provides an overview of health insurance and the results of an OTA survey of the

underwriting practices and AIDS claims experience of private insurers—commercial insurers,

Blue Cross/Blue Shield (BC/BS) plans, and Health

Maintenance Organizations (HMOS).

Chapter 3 describes the use of tests by employers to screen for medical and health-related

conditions among prospective and current employees.

Chapter 4 describes current and future tests to

diagnose or predict disease.

The Appendices include descriptions of the

uninsured population and State developments in

establishing high-risk insurance pools for persons

unable to obtain health insurance. Two activities

conducted as part of this assessment have been

previously published.3

2A letter of support for the study was also received from Senator

Daniel K. Inouye (D.-Hawaii).

3AIDS and Health Insurance: An OTA Survey (February 1988)

and The Impact of AIDS on the Kaiser Permanence Medical Care

Program (Northern California Region) (July 1988).

HEALTH INSURANCE UNDERWRITING

Group v. Individual Insurance Insurance operates by spreading risks over a number of people so that many individuals who could

The purpose of insurance is to minimize finan- have a loss, but don’t, help pay for the losses of

cial losses that may arise from unexpected events. the few that do sustain losses. Insurance works
5

on the principle that there must be uncertainty

that a loss will occur, and that the loss is beyond

the control of the insured. The size of the potential loss is another factor and should ordinarily

be of such magnitude that its occurrence has a significant financial impact on the insured. Private

insurance operates on the principle that the cost

of insurance generally should be proportional to

the risk involved. Individuals whose potential

losses are large are expected to pay more in

premiums than those whose potential losses are

likely to be less.

Although individual and group health insurance

provide protection against similar types of medical expenses, they are, in a sense, fundamentally

different types of insurance. An individual health

insurance contract is one made by an insurer with

an individual applicant and normally covers that

individual, and, in some cases, his or her dependents. A group insurance contract is made with

a sponsor, usually an employer, and the group

sponsor, not the members of the group, is the insured party. Group insurance contracts are, as a

rule, continuous in nature and ordinarily continue

beyond the lifetime or membership in the group

of any of its individual participants.

Group insurance is generally issued without

medical information or other evidence of insurability of the individuals covered, and group underwriters are usually interested only in whether

the group as a whole can be insured. Group underwriters will accept groups whose expected

claims experience meets the standards established

by an insurer for a plan of benefits and will set

a rate to cover those expected costs. As noted

earlier, larger groups are generally experiencerated, meaning that the premiums charged are

based on the actual amount of claims payments

made on behalf of the group in a prior period,

usually the preceding year. In contrast, applicants

for individual insurance are not part of a welldefined, homogeneous, and generally healthy

group; and individuals are also free to apply for

various types and amounts of coverage. The fundamental purpose of underwriting is to assure that

insured persons within each risk class have the

same probability of loss and probable amount of

loss. Thus, “medical underwriting” is customarily

used by most insurers to determine whether and

under what terms individual insurance coverage

will be approved.

Adverse Selection

“Adverse selection” refers to the situation

whereby, in the absence of any controls, persons

who seek to obtain insurance will tend to be those

who will use it the most; that is, those with a

greater than average probability of loss. Applicants who are motivated to purchase coverage because they are aware of a medical problem that

is not yet evident to the underwriter can select

against the insurer. This is of concern in both

group and individual insurance markets, but particularly in the latter. Group insurers try to protect themselves against adverse selection by using

certain group underwriting techniques. For example, group insurers usually write coverage only

for groups that exist for reasons other than for

the purpose of obtaining insurance. There generally is a flow of members into and out of such

groups so that the average age and therefore the

average risks of these groups do not increase much

over time. Employer-based groups are especially

attractive to insurers, because employees whose

health is good enough to meet employment standards are generally better-than-average risks for insurance purposes.

Adverse selection is a particular problem for

the individual insurance market. Although most

applicants are seeking coverage for the costs of

unknown or unpredictable diseases, some applicants are especially motivated to obtain insurance,

because they know they may have a higher than

average probability or even a certainty that they

will require medical treatment.

Underwriting Factors

The goal of the underwriter is to determine

whether and on what basis insurance can be issued at “standard” rates, offered at higher premium rates or with other limitations (such as

excluding a specified medical condition from coverage), or whether insurance should be refused

(declined) altogether. Each insurer prescribes its

own range of acceptable risk selection factors.

For health insurance, age and current and future health status are the two most important risk
6

factors. Claims costs for different benefits often

vary by gender, so sex is also a factor. Most health

insurers deny any applicant whose probability of

disease exceeds three times the standard risk for

his or her sex and age, and most life insurers will

refuse an applicant whose risk of death exceeds

five times the mortality risk of a person with no

health impairment. HIV infection, for example,

far exceeds the limit of insurability for both life

and health insurance. Insurers estimate that the

mortality risk of an HIV-infected person is 26

times that of a standard risk (figure 1-1), and that

the mortality risk of an asymptomatic 35-yearold male infected with the AIDS virus is 44 times

that expected for a healthy, non-HIV-infected 35-

year-old male.

Two types of information are obtained from

applicants for individual coverage. First, is the

health history. A history of past illness or accident will be given weight depending on the severity of the original ailment, degree of permanent

impairment (if any), possibilities of recurrence,

complications that may develop, etc. Individuals

with conditions that are chronic often have high

costs and large claims and may be refused coverage. Certain family health information may be requested relating to the health of relatives that may

have some bearing on the applicant’s health (e.g.,

family history of diabetes). Second, the applicant’s

current physical condition is evaluated. DependFigure 1.1 .–Comparison of Mortality Risks for HIV

Infections and Other Selected Conditions

Mortallty ratio (%)

3,000 [ I

2,500 -

2,000 -

1,500 -

1,000 -

500 -

(—) ~ —

Standard Smoking Diabetes M18 Quadriplegic HIV

aMyocardial infarction.

Health status

SOURCE: K. Clifford and R. Iuculano, ‘cAcquired Immunodeficiency Syndrome

(AIDS) and the Recommendations of the NAIC Advisory Committee on

AIDS,” statement to the Health Insurance (B) Committee of the National Association of Insurance Commissioners, Orlando, FL, Dec. 9,

1986.

ing on this assessment, certain tests or studies may

be requested (e.g., blood chemistry, urinalysis,

electrocardiogram), depending on the age or kinds

of coverage sought.

Regulation of Insurers

All of the States have established laws that require insurance companies to meet a variety of

financial and other requirements in order to obtain a license to do business in each State. The

general framework is similar, but the exact requirements vary widely from State to State. Certain amounts of financial resources needed to

establish solvency as an insurer are ordinarily

stipulated. Many States also require companies

to maintain membership in a guarantee association, including financial participation in such an

arrangement to cover the liabilities of impaired

or insolvent companies.

While the substance of State regulation is similar to that of commercial insurers, hospital service

(Blue Cross) and medical service (Blue Shield)

plans are ordinarily exempted from State commercial insurance laws and are granted franchises to

do business and are regulated under separate enabling legislation. In response to growing competitive pressures, an increasing number of BC/BS

plans are seeking legislative approval to reorganize themselves as mutual insurance companies.

Group health insurance rates are based on past

experience (“experience-rated”), and health insurance underwritten on a group basis has a history

of being quite competitive. Regulation of individual health insurance contracts is somewhat more

rigorous and also more standardized than for

group contracts. This is due, in large part, to the

view that the people who are individually insured

lack expertise about many insurance matters and

are not in a position to negotiate the terms of contracts with the companies that specialize in this

field.

Some States require the advance approval of

individual policies and related contractual materials (e.g., the application form). In many States,

although information is provided to the insurance

department, these materials will be deemed approved unless advised to the contrary within a

specified period of time.
7

States frequently prohibit certain types of discriminatory practices in issuing, continuing, or

canceling insurance policies, or prohibit charging

higher premiums solely because of certain physical handicaps such as blindness, mental handicaps, etc., unless the discrimination can be justified by sound actuarial practice.

Many States have also adopted various mandated benefit laws. Alcoholism, drug addiction,

and maternity coverage are frequently required.

Some States require insurers to offer prospective

buyers certain benefits, but the inclusion of those

benefits in group contracts is often not mandatory.

Many States also have laws governing some

aspects of group insurance contracts, such as who

constitutes a group for group benefit purposes.

Many States have also adopted laws requiring

group contracts to contain certain types of mandatory conversion and/or continuation-of-coverage provisions, which permit members (and dependents) of a group to continue their insurance

protection on an individual basis when their coverage under a group plan ceases. The continuation is an extension of the original group plan at

the same premium, though the separated group

member pays the full premium costs of coverage,

including any employer contributions made on

behalf of members still in the group. (The Federal Consolidated Omnibus Budget Reconciliation

Act of 1985 (COBRA) (public Law 99-272) has

a similar provision regarding continuation of

coverage. )

States impose taxes on premiums received by

insurance companies. These taxes vary from State

to State, by the type of company involved, and

whether the insurer is an out-of-State or domestic company. Most of the tax rates are in the 2

to 2.5 percent range. Most States do not impose

premium taxes on BC/BS plans, though several

States do impose some charges on them in lieu

of premium taxes.

While the McCarran-Ferguson Act (Public Law

15, 79th Congress) provides that the States have

the major regulatory responsibilities with regard

to the business of insurance, several Federal laws

affect health benefit plans, particularly group

plans. Under the Federal tax code, employer contributions for health benefits are excluded from

the taxable income of their employees. Legislation such as the Employee Retirement Income

Security Act (ERISA), the Health Maintenance

Organization (HMO) Act, and Medicare, each affect the design of many private health benefit programs. Congress has also enacted laws prohibiting certain discriminatory practices relating to age

and sex in the provision of health benefits for employees and their dependents. And as mentioned

above, the tax laws and ERISA were recently

amended under COBRA to require that most

group benefit plans continue coverage for workers and their dependents who would lose such protection due to job termination, death, divorce or

legal separation, and for certain other qualifying

events.

The most important competitive development

in the group health benefits market during the last

15 years has been the movement toward selfinsurance by large employers. Self-insured plans

offer several key advantages to employers. Employers are able to use and retain earnings on

amounts that would otherwise be paid to and held

by insurers to create claims reserves. No premium

taxes are applied to self-insured plans. Most importantly, self-insured plans can avoid the requirements of State insurance laws and regulations because of the Federal ERISA legislation. Thus,

much of the group benefits marketplace is virtually unregulated by the States. Self-insured plans

need not comply with any of the State laws that

require health insurance contracts to include specific benefits or comply with anti-discrimination

restrictions applied to insured plans, need not pay

State insurance premium taxes, and need not participate in State insurance pools for high-risk individuals.’

Results of the OTA Survey

Insurance testing for HIV infection has generated much controversy and disagreement among

insurers, insurance regulators, insurance applicants, legislators, and other policy makers. Yet,

there is little information on who insurers test and

what tests they require. OTA therefore conducted

‘See Appendix B for description of State high-risk insurance pools.
8

a survey of commercial insurers, BC/BS plans,

and HMOS in the summer and early fall of 1987.

The OTA survey was an attempt to provide a

view of HIV testing in the context of other routine tests required by health insurers and had a

twofold purpose: 1) to collect basic information

on underwriting practices and the use of medical

screening by health insurers; and 2) to document

how health underwriters are responding to the

AIDS epidemic.

Approximately 14.5 million individuals under

age 65 (and their family members, when covered)

have health insurance without the benefits of

group membership. These are the individuals that

must meet undenm-iting standards to obtain health

coverage, and their insurers were the focus of the

OTA survey. Commercial companies insure 9.3

million; BC/BS plans, 4.2 million; and HMOS,

1 million.

The survey was sent to 88 commercial insurers

who comprise 70 percent of the commercial, individual health insurance market; to 15 of the 77

BC/BS plans; and to the 50 largest local and national HMOS in the United States. Seventy-three

of the 88 commercial insurers responded, although

only 62 met the survey requirements; approximately 57 percent of the commercial, individual

health insurance market is represented in the survey findings. All 15 BC/BS plans completed the

survey, and 39 of the 50 HMOS responded, but

only 16 reported that they allow individually underwritten enrollment. Overall, 84 percent of the

commercial carriers, BC/BS plans, and HMOS

that were surveyed responded.

Medical and Other Factors

in Risk Classification

Approximately three-quarters of individual and

small group applications for commercial health

insurance were classified as “standard” by the responding insurers and obtained coverage without

extra premiums or special limitations. Twenty

percent of individuals and 1!5 percent of small

group members were rated as “substandard” and

issued policies that exclude preexisting medical

conditions, had a higher than standard premium,

or both. The exclusion may be for a specific condition, such as gallstones, or for an entire organ

system, such as reproductive disorders. Finally,

8 percent of individual and 10 percent of small

group applications were judged uninsurable and

denied coverage. Most serious diseases were uninsurable, including severe obesity, diabetes mellitus, emphysema, alcoholism, coronary artery disease, cancer, schizophrenia, and AIDS.

Risk classification by the responding BC/BS

plans was similar to the commercial approach except for four “open enrollment” plans that accepted all applicants regardless of health status.

The respondents accepted 83 percent of individual applicants as standard, 9 percent with substandard policies, and denied coverage altogether

to 8 percent. Sixty to 100 percent of small group

applicants were also accepted as standard by half

the plans, and up to 25 percent were denied.

HMO risk classification differed from the

others. Federally qualified plans are restricted to

either accepting applicants at a community rate

or denying membership altogether. As a result,

exclusion waivers and substandard premiums are

not common. The responding HMOS, however,

were no more willing to underwrite high-risk applicants than the commercial insurers or BC/BS

plans. They accepted 73 percent on a standard basis and denied membership to 24 percent of individual applicants.

Other factors besides ill health can seriously

hamper access to commercial health coverage by

individual applicants and their family members.

Dangerous health habits (e.g., drug abuse), suspected criminal association or unethical behavior,

age, occupation, and financial status were most

commonly cited by commercial insurers as critical to determining insurability. Healthy habits,

such as nonsmoking, were also rated as important, an indication of the increasingly common

use of premium credits for nonsmokers. Place of

residence was an important factor to a significant

minority of commercial insurers, mostly due to

concerns about insurance fraud known to occur

in certain localities and because of regional variations in health care costs. Contrary to guidelines

proposed by the National Association of Insurance Commissioners (NAIC), 18 companies used

sexual orientation in underwriting, and 5 of these

companies considered it important or very important. (These 18 companies held approximately 10

percent of the individual, commercial health in-
9

surance market. Five were among the 25 largest

in the country. ) Three companies requested an attending physician statement (APS), and two ordered a physical exam based on sexual orientation. It is unclear how insurers ascertained an

applicant’s sexual preference. Most of the respondents (48 of 61) provided samples of their health

insurance applications, none of which included

any questions concerning sexual orientation or

lifestyle.

In contrast, BC/BS insurability was almost

purely a question of medical condition. All the

responding BC/BS plans, except the four that hold

open enrollment, rejected some applicants in poor

health. Nearly half of the plans denied nongroup

applications because of alcohol or drug abuse. No

BC/BS plan reported using sexual orientation in

underwriting.

Access to HMO membership was fundamentally a matter of health status as well. However,

age, type of occupation, health enhancing behavior (e.g., nonsmoking), and sexual orientation

were also considered key to insurability by 19 percent or more of the responding plans. As in the

case of the commercial carriers, it is not clear how

sexual orientation was identified by the four

HMOS that considered it a key underwriting

factor.

Health insurance applicants were rarely subjected to physical examinations and medical tests.

Only 4 percent of individual and 2 percent of

small group applicants to the responding commercial insurers were required to have a physicaI

exam or some type of blood and/or urine test.

Just two of the BC/BS plans required physical

exams; one also required medical tests for some

of its individual and small group applicants. Only

three of the HMOS sometimes required physical

exams or medical tests.

Beyond the health information provided directly in insurance applications, information provided by the applicant’s physician (the “attending physician’s statement, ” or APS) was the most

common supplemental source of information. The

commercial carriers required an APS for 20 percent of individual and 18 percent of small group

applicants. Late applicants to large groups were

also often required to furnish an APS. Almost

three-quarters of BC/BS plans ordered a physician statement for at least 30 percent of their individual applicants, and more than half required

an APS for up to 40 percent of small group applicants. Half or more of the responding HMOS

requested an APS for 10 to 85 percent of their

nongroup applicants and 10 to 20 percent of small

group applicants. In fact for most applicants, in

lieu of ordering a laboratory test for medical reasons, traditional insurers and HMOS alike usually relied on the test results reported by the applicant’s physician. HIV testing was an exception

in a few cases: three responding commercial carriers required an HIV test on every applicant in

areas of high prevalence, such as New York and

California.
10

AIDS Policies

Fifty-one (86 percent) of responding commercial insurers either screened or planned to screen

individual applicants for HIV infection; 41 already

did it and 10 planned to. Efforts to identify highrisk group applicants were also common. Twentyseven small group (77 percent) and 11 large group

insurers (58 percent) either screened or planned

to screen through some method. The most common approach was by incorporating questions in

the health history portion of the application. Asking AIDS-related questions is necessary to screen

out preexisting conditions. If an applicant knowingly misrepresented his or her health condition

(e.g., recognized symptoms of AIDS or fully diagnosed AIDS or AIDS-Related Complex (ARC)),

the insurer may have grounds tor denying reimbursement for the condition or rescinding coverage altogether. An admission of AIDS, ARC, or

HIV seropositivity results in immediate denial of

the application. Forty-two companies (82 percent)

request a physician statement for selected, individual applicants in order to determine the presence of AIDS symptoms or other risk factors. (The

APS may contain the applicant’s HIV status as

well. ) Eighty-one percent of small group (22 of

27) and 64 percent (7 of 11) of large group insurers

also screen this way. HIV testing was also quite

common. Thirty-one companies routinely tested

individual health insurance applicants for HIV antibodies; of these, 7 tested all applicants, 14 tested

only those considered to be “high-risk,” and 10

tested according to various criteria (e.g., State of

residence, medical history, policy amount, etc.).

All those who tested use the ELISA-ELISAWestern blot series. In States and localities where

HIV testing is prohibited, 17 insurers required Tcell subset studies as a substitute. HIV testing is

less common among the responding group insurers; only 9 of the small group (33 percent) and

3 of the large group insurers (27 percent) require

an ELISA and Western blot for some applicants.

T-cell subset studies are also used by 6 small grow

(22 percent) and 3 large group insurers (27

percent).

Eleven of the responding BC/BS plans either

screened or planned to screen individual applicants for AIDS or ARC-related diagnoses; of

these, eight already did, and three planned to.

BC/BS efforts to identify high-risk group applicants are also common. Ten small group (77 percent) and seven large group plans (54 percent) either screened or planned to screen through some

method. Eleven plans ask an AIDS-related question in their nongroup applications. If applicants

answer that they have had or have been treated

by a physician for AIDS or ARC, coverage is denied. As in the case of the commercial insurers,

BC/BS plans ask about AIDS to screen out preexisting conditions. In addition, nine plans (82

percent) may ask for an APS to help evaluate a

nongroup applicant’s risk for AIDS. Seventy percent of small group (7 of 10) and 57 percent of

large group plans (4 of 7) also order an APS for

this reason. Only one BC/BS plan intended to test

high-risk applicants for HIV infection.

Half or more of the responding HMOS screened

or planned to screen individual (8 of 15) and small

group applicants (4 of 8) for infections with the

AIDS virus by one method or another. Three of

the plans that do not are prohibited from doing

any medical screening by State law. All the plans

that screen ask an AIDS-directed question in the

health history portion of their enrollment form.

As in the case of the commercial insurers and

BC/BS, an admission of AIDS, ARC, or HIV

seropositivity results in denial of the application,

and the AIDS-related questions on the application are used to screen out preexisting conditions

(where allowed). Six plans request an APS to help

determine an individual applicant’s risk for AIDS;

two plans similarly screen small group applicants.

HIV testing of high-risk, individual applicants is

done by only two plans and was under consideration by a third. No plan reported testing group

applicants or using the T-cell subset test.

AIDS Claims Experience and Cost Projections

Forty-five commercial insurers had reimbursed

at least one individual policyholder for AIDSrelated care. More than half of the respondents

reported 10 AIDS cases or less, while 4 had reimbursed more than 50 individuals. On average,

each insurer covered the care of 22 AIDS-related

cases. (Of the remaining responding insurers, 6

reported no AIDS-related cases, 10 were unable

to report their experience, and 1 had recently

withdrawn from the individual market. )
11

Of the 20 insurers providing AIDS case data

for their small group policies, 6 reported no AIDSrelated cases and 14 had from 1 to 50, totaling

146. Twenty-two large group insurers reported

613 AIDS-related cases; 3 had no cases, 12 had

less than 10, 6 had 11 to 60, and 1 company alone

had 350.

Twenty-one individual insurers provided projections of AIDS-related claims costs for 1987,

forecasting total claims of $11.04 million for individual health insurance, an average of $0.53 million per insurer. Two companies did not expect

any AIDS cases in 1987—both specialize in insurance for seniors—while four projected costs of

$1.3 to $2.3 million for individual health policies.

(Cost projections were not furnished by 40 companies. ) Twenty-two insurers who had received

at least 1 AIDS-related claim reported linking no

one with a preexisting condition for AIDS; 11

found 1 to 9 percent of cases to be preexisting;

10 companies, 10 to 50 percent; and 2 companies,

more than 60 percent.

Seven small group insurers forecast a total of

$1.5 million AIDS-related costs for 1987, ranging from none at one firm up to $618,000 at

another. Seven large group insurers projected a

total of $489,000 and an additional company reported that it expected 1987 AIDS-related group

claims to total $5 million to $10 million.

Ten BC/BS plans reported reimbursing 3,933

subscribers for AIDS-related care, an average of

393 subscribers per plan (although one plan alone

accounted for 3,000 cases). (The BC/BS plans’

AIDS case and cost data reflected both individual and group policy experience. ) The 7 plans that

never hold open enrollment reported a total of

453 AIDS-related cases, an average of 65 subscribers per plan. Three of these plans are located

in areas of high AIDS prevalence. In contrast, the

3 plans that are continuously open (and thus never

screen) reported reimbursing 3,480 subscribers for

AIDS-related care, an average of 1,160 cases per

plan. Two of these plans are in areas of high AIDS

prevalence, and all three have held large market

shares. Only five plans provided 1987 projections

of AIDS-related costs. Three nonopen enrollment

plans (two are located in high prevalence areas)

forecast a total of $29.6 million in AIDS-related

claims for 1987. Claims totaling $27 million were

projected by two open enrollment plans; $20 million at one plan alone. Eight of the 10 plans that

have identified at least 1 subscriber with AIDS

reported finding that 1 to more than 50 percent

of these subscribers had a preexisting condition

for AIDS. Two of these plans, both in areas of

high AIDS prevalence, connected more than half

of their AIDS cases with a preexisting condition.

Twelve HMOS reported 1,468 members with

AIDS or ARC, an average of 122 members per

HMO. The range varied from none at 2 HMOS

to 940 patients at 1 HMO. (The HMOS’ AIDS case

and cost data reflect their individual and group

membership experience. ) Only two HMOS provided projections of AIDS-related costs for 1987.

One plan that had identified 10 cases during the

first 10 months of 1987 forecast total costs of

$750,000 for the year; the other had 11 cases in

the year preceding September 1987 and forecast

total costs of $700,000 for 1987. (An additional

HMO did not project 1987 costs but estimated that

its diagnosed members had average lifetime costs

of approximately $35,000. ) One HMO, located

in a high prevalence area, reported that more than

half of its individual members with AIDS or ARC

were found to have a preexisting condition.

According to State law and in contrast to the other

insurers, this plan was obligated to provide services for preexisting conditions (without a waiting

period) unless the applicant had deliberately misrepresented his or her health status before joining the HMO.

The commercials, BC/BS plans, and HMOS reported similar methods to reduce their exposure

to the financial impact of AIDS. These activities

included reducing exposure to individual and

small group markets by tighter underwriting

guidelines, expanding the use of HIV and other

testing, adding AIDS questions to the enrollment

applications, and denying applicants with a history of sexually transmitted diseases. Two commercial insurers intended to place dollar limits on

AIDS coverage in new policies, and one was introducing a waiting period for AIDS benefits. One

HMO intended to withdraw from the individual

health insurance market altogether, and a commercial carrier reported withdrawing from the

District of Columbia. A BC/BS plan intended to
12

lengthen the waiting period for new subscribers

with a history of hepatitis, lymph disease, and

TESTING BY EMPLOYERS

There are reasons other than concern over

health care costs for which employers might want

to screen their prospective as well as current employees. First, screening may be used as part of

a preemployment evaluation to disqualify applicants (e.g., testing for illegal drug use) or to determine if the applicant can physically perform

the intended work (e.g., examinations for firefighters and police). Second, after a person is

hired, screening may be used to determine

whether there is any health condition that may

require special precautionary care because of

workplace exposures. Third, screening may be

used to monitor workers exposed to known or

suspected environmental hazards, including preplacement testing to establish a baseline that can

be used for comparison with future worksite monitoring results. Finally, screening may be incorporated into workplace wellness programs to

identify risk factors associated with certain diseases so that these factors can be reduced through

health education.

Incentives to screen prospective employees may

be much more significant for some employers than

for others. Employers with low turnover and high

training costs may be especially interested in

preemployment screening. Similarly, employers

with generous health care and disability benefits

may be more inclined to screen than employers

with limited benefits. On the other hand, employers with high employee turnover may not

have incentives to test for disease susceptibilities

if new employees are young and likely to be employed elsewhere when these diseases become

manifest. However, these same employers might

have greater incentives to test for illegal drug use

because of greater use among younger workers.

A wide variety of legal restraints is potentially

applicable to employment-based screening, although much remains unsettled in this area. Distinctions must also be made as to whether the employer is in the public or private sector (i.e.,

whether governmental action is involved);

mononucleosis, and two others were expanding

their AIDS education efforts.

whether a cause of action by a prospective employee who objects to testing is grounded in an

existing statute or in case law as developed over

the years by the courts; and for employees,

whether or not they are represented by unions and

have the additional protection of collective bargaining agreements. Additionally, States differ in

their approaches and available legal remedies, so

the State in which a cause of action is brought

may also have a substantial bearing on the success or failure of challenges to testing.

The principal statutory remedy available to persons objecting to employment-based testing is the

Vocational Rehabilitation Act of 1973 (29 U.S.C.

sections 701-796), which applies to Federal employment and to employers who receive Federal

funds. In addition, over 40 States and the District of Columbia have legislation prohibiting

handicap discrimination in private sector employment, and while the definitions and judicial interpretations of what constitutes a handicap vary by

State, about one-third follow the Federal law.

Handicapped persons must be hired or continue

to be employed if they can be reasonably accommodated and can perform their work without endangering the health and safety of other workers. In March 1987, in the case of School Board

of Nassau County, Florida v. Arline,5 the United

States Supreme Court ruled that a person with

tuberculosis was a handicapped person within the

meaning of the law and that contagiousness did

not automatically remove the person from the

Act’s protection. The Court, however, expressly

stated that it was not ruling on whether a person

infected with the AIDS virus but without disease

would come under the Act’s protection.

5

107 S. Ct. 1123, reh. denied, 107 S. Ct. 1913 (1987).
13

The Extent of Employment-Based

Medical Testing

Physical Examinations

Perhaps the most prevalent type of medical

screening used by employers is the general physical examination, including the use of blood

chemistry profiles and urinalyses of the same types

used by the insurance industry. For example,

according to surveys by the National Institute for

Occupational Safety and Health (NIOSH), the

percent of employers who require job applicants

to pass medical screening exams increased from

38.5 percent in the early 1970s to 49 percent in

the early 1980s. These exams seem oriented toward improving or maintaining the employee’s

health, because companies with industrial hygiene

and safety programs, and/or unionized companies, are more likely to provide medical screening than other companies.

The use of physical exams and medical testing

is associated with company size and type of business. The larger the company, the more likely that

physical exams and screening tests will be conducted. Employees in transportation and public

utility industries are most likely to have preemployment examinations; in 1981-83, an estimated

73 percent of employees in these industries were

screened, followed by 69 percent in the services

industry, and 62 percent in the manufacturing industry. In 1981-83, an estimated 36 percent of employees had blood tests, and 35 percent had urine

tests. In plants employing more than 500 workers, periodic medical screening included blood and

urine testing for 69 and 66 percent of all workers, respectively. Blood testing was most prevalent in the service industries, where an estimated

60 percent of workers were screened.

Genetic Testing

Genetic testing to screen individuals for hypersusceptibility to hazardous materials has been controversial, because genetic traits frequently are

associated with particular racial or ethnic backgrounds.

In a 1982 OTA survey of the 500 largest U.S.

industrial companies, 50 of the largest private utilities, and 11 large labor unions, only 6 of the 366

organizations who responded to the survey were

then conducting genetic testing, 17 had used some

of the tests in the past 12 years, 4 anticipated using

the test in the next 5 years, and 55 thought it possible that they would use the tests in the next 5

years.

In a 1986 OTA survey of 120 biotechnology

companies that were developing or likely to develop genetic tests for commercial use, of 85 respondents, 12 were developing or planned to develop tests for human genetic conditions. Of these

12 companies, employment-based testing and insurance testing were far down the list of possible

uses. In descending order of importance, these

companies rated likely sites of use as: genetic

clinics; health department clinics; health department screening programs; prepaid health groups;

private primary care practices; and sites such as

reference and DNA labs, insurance companies,

the military, places of employment, private nongenetic specialty practices, correctional institutions, public schools, and homes.

Drug Use Testing

Various surveys have documented the increasing tendency of both private and public sector employers to screen applicants and to test employees for use of illegal drugs. Based on these surveys,

perhaps half or more of employers, especially

large employers, now test or plan to test for drug

use. For example, of the Fortune 500 companies,

urine drug testing for job applicants and/or current employees increased from 10 percent in 1982,

to approximately 25 percent in 1985, to an expected 50 percent in 1987.

In a 1986 survey by the College Placement

Council, whose members recruit on college campuses, the most common reasons given for drug

testing were concerns over workplace safety (by

far the most important reason); security; quality/reliability of products; quality of service; increased productivity; control of medical costs; and

law, government, or noncompany regulations.

The types of employers most likely to test job applicants were utilities (37.1 percent); chemicals,

drugs, and allied products (9.3 percent); aerospace

(8.6 percent); and petroleum and allied products

(7.9 percent). Nearly all screened all applicants,
14

Photo credit: Home Office Reference Laboratory, Shawnee Mission, KS

A rapid flow analyzer used for the quantitative

determination of glucose in human plasma.

whether for management, clerical, or technical positions, and most screened applicants whether they

were seeking full-time, part-time, or temporary

positions.

These trends are found among both private and

public sector employers, including the Federal

government. .

AIDS Antibody Testing

According to the Centers for Disease Control

(CDC), there is no justification for excluding

AIDS or antibody-positive individuals from the

workplace on the grounds of risks to coworkers,

and CDC also recommends against routine testing in the workplace.

Except for a few employers who have tested job

applicants and/or employees for infections with

the AIDS virus, employers have generally rejected

AIDS antibody testing and support education as

the best way to deal with AIDS among their employees. There appears to be a relationship between support of testing and knowledge of the

ways that AIDS can be spread. There is also a

substantial gap between what employers say

should be done versus actually developing educational strategies and programs for their employees. For example, in one survey (by the magazine,

Business Week) in ear]y 1987, employers were

asked what they would do if a coworker objected

to working with an employee with AIDS. Eight

percent of respondents said they would move the

employee with AIDS; 14 percent would move the

coworker; 29 percent would insist that the situation continue unchanged; 3 percent would take

none of these actions; and 46 percent were not

sure what they would do.

Employers who have had to face AIDS among

their employees have generally treated AIDS as

they have treated other illnesses. Many employers

who find they have employees with AIDS try to

accommodate those individuals so that they can

continue to work as long as possible and keep

their health benefits coverage through the company’s health plan.

Most businesses have not yet taken action to

monitor employees with AIDS because most have

not had experience with such employees. However, there are indications that AIDS-related

health care costs (and disability and life insurance

costs) may be increasing for some employers to

the point that employer attitudes may change. The

costs of treating AIDS was not a major issue for

employers in 1985. By the next year, 1986, among

1,500 surveyed businesses in 36 States representing 4.4 million employees, 3 percent of responding employers were measuring the cost impact of

AIDS, and 2 percent indicated they were modifying the design of their health plans. By late 1987,

surveyed companies with AIDS among their employees reported an increase of 4.5 percent from

AIDS in their expenditures for health care, and

expected AIDS-related care to increase their health

care expenditures an additional 16 percent by

1990. (The highest percentage increases among
15

these companies were for life insurance costs, up

nearly 28 percent from AIDS, but employers expected to gain more control over these costs so

that increases in life insurance costs would be

limited to 7 percent by 1990.)

Additional pressure on employers’ health care

costs from AIDS among their employees comes

at a time of extreme health care cost-consciousness

on the part of businesses. With the high rates of

health care cost inflation since the mid-1970s and

the increased health insurance premiums that have

accompanied these rates, employers have sought

ways to shift more of the costs to their employees. Surveys have shown that many employers

have increased their employees’ share of health

care costs and modified health plans to encourage

use of less costly services, and more large employers are turning to self-insurance instead of

purchasing health insurance through insurers.

The rapid growth of self-insurance does raise

special concerns related to medical testing in the

workplace. Because there is little regulation of selfinsured health plans, medical conditions such as

AIDS could affect employees of self-insured employers differently than employees of employers

with conventional insurance, because self-insured

employers have different means of responding to

the problems of high-cost employee health benefit claims.

DIAGNOSTIC AND PREDICTIVE MEDICAL TESTING

Tests Currently Used by Insurers

Information on the types of medical screening

tests used by insurers is based on testing of both

life and health insurance applicants. The great

majority of testing is in the life, not health, area,

because individual life insurance applicants greatly

outnumber individual health insurance applicants.

Most of the tests used by insurers are commonly

used by clinicians and include blood biochemical profiles and routine urinalyses. Both blood

biochemical profiles and urinalyses are mainly

directed at uncovering evidence of underlying kidney, liver, and cardiovascular diseases, and diabetes. However, when applied to asymptomatic

populations, these tests are not very predictive of

disease. For example, in the case of serum glucose, although approximately 2 percent of asymptomatic adults have repeatedly elevated values,

less than 17 percent are found to be diabetic. Because of their poor predictive value, professional

guidelines recommend that they be administered

on the basis of clinical findings. There is evidence

that commercial insurers are limiting the use of

biochemical profiles and urinalyses to selected

high-risk applicants.

Insurers may also screen for evidence of use of

specific prescription drugs, for drugs of abuse, and

more recently, for evidence of infection with the

AIDS virus.

There are two reasons to screen for prescription drug use: 1) to indicate the level of patient

compliance with medically prescribed treatment—i.e., whether the applicant is in fact using

the medications his or her physician has

prescribed; or 2) as evidence that an applicant is

undergoing treatment for a medical condition he

or she has not divulged on the medical questionnaire. The most common medications tested for

are drugs to treat cardiovascular diseases such as

hypertension and heart disease (e.g., diuretics and

beta-blocker drugs) and diabetes (e.g., hypoglycemic or blood-sugar-lowering drugs).

The most frequently tested drugs of abuse are

nicotine and cocaine, with the nicotine test used

to confirm that applicants are nonsmokers because of the increasing use of nonsmoker discounts (for life insurance applicants) by insurers.

Abusers of illegal drugs are considered uninsurable by many companies.

Tests to detect evidence of infection with the

AIDS virus are also being used. In 1986 the Home

Office Reference Laboratory, Inc. (HORL), the

principal lab used by life and health insurers, performed more than 128,000 tests for antibodies to

the AIDS virus, using the ELISA screening test
16

and the Western blot confirmatory test for ELISApositive blood specimens. HORL also performed

more than 25,000 T-cell tests, one of the tests that

is used to indicate immune function status and

used by insurers where use of AIDS antibody testing is prohibited (principally California). During

this same period, HORL performed 213,000 routine blood tests. Thus, if we assume that persons

who had HIV antibody or T-cell testing also had

routine blood testing performed, approximately

70 percent of persons undergoing blood testing

by the insurer clients of HORL were also tested

for signs of infection with the AIDS virus.

The types of blood and urine tests conducted

by HORL for insurers in 1986 are summarized in

table 1-2.

Tests of Interest Because of High

Prevalence and Physician Screening

Practices

Tests to predict cancers and heart disease or to

uncover these diseases in their latent stages may

be of interest to insurers.

Screening tests for latent disease are available

for several of the most common cancers; such as,

colon, breast, and uterine/cervical cancers. However, although effective in reducing mortality

when applied to age-appropriate populations,

most available screening tests will miss a significant percentage of individuals who should test

positive (referred to as a test’s “sensitivity”), and

conversely, will be positive in many individuals

who do not have the indicated disease (a test’s

“specificity”). Furthermore, the follow-up tests required to correctly identify those with cancer are

expensive and invasive.

For example, tests to detect occult blood in the

feces are estimated to detect only 25 to 35 percent of colon polyps and only 70 to 90 percent

of colon cancers. Furthermore, of the positive

tests, only 52 percent would represent true cases

of either polyps (4o percent) or cancer (12 percent). Although the test is inexpensive to administer and interpret, a positive result would need

to be further evaluated by direct and/or indirect

visualization of the colon through sigmoidoscopy/colonoscopy and/or air-contrast barium

enema x-ray studies. The costs of evaluating a

positive result can therefore be as high as $1,000.

Because of the relatively low accuracy of the fecal occult blood test, the American Cancer Society recommends that, in addition to occult blood

testing, persons over 50 years of age have yearly

sigmoidoscopies for 2 years, followed by similar

exams every 3 years.

Available tumor marker assays could be used

to identify applicants with cancer. For example

the carcinoembryonic antigen (CEA) test is positive in more than 80 percent of advanced-stage

colon cancer and 40 percent of early-stage cancers.

However, the test is not very predictive of disease. When applied to asymptomatic populations,

only 12 percent of positive tests represent CEAassociated cancers. However, sources of false posi-
17

Table 1.2.—Blood and Urine Tests Used by Commercial Insurers (as reported by Home Office Reference Laboratory)

Blood tests Associated conditions

Glucos eIncreased glucose associated with diabetes mellitus, glucagonoma, mineralocorticoid excess (many causes),

and hyperthyroidism.

Blood urea nitrogen (BUN) Increased BUN associated with primary renal disease (e.g., medullary cystic kidney, hereditary nephritis),

secondary renal disease (e. g., infectious, immunologic, vascular, metabolic, obstructive), and

prerenalazotemia.

Creatinin e Increased creatinine associated with abnormal kidney function (see BUN).

Uric aci d Increased uric acid is associated with gout, renal failure, myeloproliferative disorders, and leukemia.

Total protein . Increased total protein is associated with systemic infection (e.g., tuberculosis), systemic inflammation (e.g.,

collagen vascular disease), malignancy (e.g., Iymphoma, myeloma), and liver disease (many causes).

Albumin/Globuli n . . . . . . . . . . . . . Decreased albumin is associated with malnutrition, nephrotic syndrome (many causes), protein-losing e

teropathies (many causes), severe liver disease (many causes).

Aspartate aminotransferase (AST, formerly

serum glutamic-oxaloacetic transaminase

or SGOT) . .Increased AST is associated with hepatocellular inflammation (many causes), cardiac inflammation (e. g

infarction, myocarditis, pericarditis), skeletal muscle inflammation (e. g., viral infection, polymyosi

Alkaline phosphatasIncreased alkaline phosphatase is associated with liver disease (many causes), bone disease (many causes). e

Glycohemoglobin (HBAIc) . . . Glycohemoglobin test measures the percentage of hemoglobin molecules that have glucose attached to t

Glycohemoglobin measurements indicate blood sugar activity during the six to eight weeks prior to t

test and are therefore a measure of the success or failure of diabetic management. Test may be used

as a diabetes screening test among asymptomatic individuals.

Bilirubin . . . .Elevations associated with liver disease (e.g., cirrhosis), gall stones, pancreatic cancer, and some anemias.

Alanine amino transferase (ALT, formerly

called SGPT or serum glutamic pyruvic

transaminase) . . Elevations associated with heart muscle damage, liver cell destruction, pancreatitis, infectious mononucle

sis, some muscle diseases, and rickettsial infections.

Gamma-glutamyl transpeptidase (GGT) .A sensitive (but non-specific) indication of liver function. Elevations associated with alcoholism, r

ocardial infarction (within one month), cholestasis, nonalcoholic liver disease, and porphyria cutanea tar

Cholesterol . . Increased cholesterol is associated with primary (e.g., familial) and secondaty (e. g., hypothyroidism, nephro

syndrome, hepatitis) hypercholesterolemia. Decreased cholesterol is associated with hyperthyroidism, mal

sorption, liver disease (many causes), and abetalipoproteinemia.

Triglycerides . Elevations associated with hyperlipidemia (Type l).

High-density Iiproprotein (HDL ., Elevation of HDL is associated with a decreased risk of heart disease. )

Apolipoprotein Al

(Apo Al)-protein is associated with HDL Elevation of Apo Al is associated with a decreased risk of heart disease.

Apolipoprotein B

(Apo B)-protein is associated with LDL Elevation of Apo B is associated with increased risk of heart disease.

Antibodies to Human Immunodeficiency

Virus (HIV) . . . . Presence of HIV antibodies presumes infection with HIV and risk of developing acquired immunodeficien

syndrome (AIDS).

T-cell-lymphocyte typing ., . . Suppression of T cells, a sign of immunodeficiency, is associated with several conditions: e.g., AIDS, CMV,

mononucleosis, and autoimmune disorders such as systemic lupus erythematosus.

Urine tests

Protei n . . . . . . . . . . . . . Protein in urine is associated with kidney disease.

Glucose . . . . . . . . . . . . . . . Oiabetes Mellitus.

RBCS ... . . . . . Kidney disease, bladder injury.

Casts . . . . . . . . . . . . . . . . .Kidney disease.

WBCS ., ~ ~ Kidney disease, infection of urinary tract, bladder, kidney.

Tests for prescription medications (e. g.,

diuretics, beta-blockers, hypoglycemic

agents) . . . . . . . . . .Presence of prescription medication in urine is evidence that the patient is being treated for related conditio

e.g., hypertension, heart disease, hypoglycemia–and may indicate level of patient compliance with

treatment.

Tests for drugs of abuse (i.e., nicotine,

‘cocaine, other drugs of abuse) . . . Presence of drug in urine is evidence of drug use (but not impairment).

SOURCES: H.C. Sex, Jr. (cd.), Common Diagnostic Tests: Use and Interpretation, (Philadelphia. PA: American College of Physicians, 1987); and C. Pinckney, and E.R,

Pinckney, The Encyclopedia of Medical Tests (New York, NY: Facts

tive results include hepatitis, ulcerative colitis, gastric ulcer, and renal disease, all of which would

likely lead to exclusion or coverage on a nonstandard basis. Although these markers have been

on File, Inc., 1982).

available for many years, they have not been

adopted by insurers, because they are not accepted as screening tests by the medical profession.
18

A new test is being investigated that may be

applied as a universal screening tool for cancer.

The test is based on differences found between the

lipid parts of lipoprotein particles (called “oncolipids”) found in the plasma of patients with

cancer as compared to those without cancer. The

differences can be detected using magnetic resonance imaging (MRI). While the test has been

shown to successfully distinguish those with some

types of cancer from healthy individuals and from

those with illnesses other than cancer, there are

two significant sources of false positive results—

pregnant women and men with noncancerous

prostatic hyperplasia. In addition, individuals

who have been successfully treated for cancer continue to test positive. Although currently expensive to administer, the test could be automated

and used for screening in the future.

Current methods to identify those susceptible

to heart disease rely on tests for symptoms of disease, such as the EKG, or on an analysis of known

heart disease risk factors. The three principal

predictors of coronary heart disease (CHD), other

than age and sex, are hypertension, elevated levels

of cholesterol, and cigarette smoking. The risk of

developing CHD can be determined by evaluating these factors (and other risk factors, such as

diabetes) singly or in combination. For example,

the relative risk of developing CHD within 18

years for a 35-year-old male with only high cholesterol, compared to a similar male with normal

cholesterol, is 3.9. The relative risk increases to

23.2 when both cholesterol and blood pressure are

elevated. Generally, smokers have more than

twice the risk for a heart attack than nonsmokers.

Cholesterol screening is being actively promoted by heart disease experts. These efforts have

been somewhat hampered by a lack of uniform

laboratory quality in the conduct of cholesterol

measurement. Measurements of cholesterol,

lipoproteins (e.g., high density lipoprotein or

HDL, and low density lipoprotein or LDL), and

the protein components of lipoproteins (apolipoproteins) are used in the evaluation of CHD risk.

Levels of specific apolipoproteins are the most useful in distinguishing healthy individuals from

those with CHD. Apolipoprotein tests can be conducted using automated instrumentation and are

currently performed by commercial insurers.

As in the case of predictors for cancer, with

available testing methods there will be many who

will develop heart disease among those predicted

to be at low risk, and many at high risk will remain disease-free. Therefore, although the presence of known risk factors raises the relative risk,

the absolute risk remains low.

The prevalence of alcohol abuse or dependence

is estimated to be between 8 and 10 percent among

men and between 1 and 2 percent among women.

The health consequences of alcohol abuse are considerable, and the biochemical profiles currently

used by commercial insurers are used to detect

the effects of alcohol abuse (e.g., liver disease).

Structured questionnaires and laboratory indicators are available to help identify individuals with

drinking problems. Evaluations of these screening methods have shown that structured questionnaires are more effective than most laboratory

tests. Preliminary research on a biologic marker

for alcoholism shows promise (i.e., inhibition of

the enzyme, monoamine oxidase, by ethanol and

stimulation of the platelet enzyme, adenyulate cyclase). In one study, this marker was used to correctly categorize 75 percent of alcoholics and 73

percent of nonalcoholics. Abnormalities were detected in alcoholics who had abstained from alcohol consumption, suggesting that the test may

be a measure of the underlying basis of alcoholism. Further research will be necessary to clarify the utility of this marker.

Methods of Interest for Future Testing

Advances in molecular genetics have led to the

development of a number of new diagnostic and

predictive tests. While several recombinant DNAbased diagnostic tests are now being marketed in

the infectious disease area, a larger market may

be realized when tests for common disorders with

a genetic component are developed. Evidence is

mounting that specific genes may predispose individuals to some forms of diabetes, heart disease,

cancer, and mental illness. When these genes or

genetic markers for these conditions are identified, predictive tests for these and other disorders

may become available. Because genes are present

in all body cells, tests can be applied using easily

accessible tissues, such as blood, or in the case
19

of prenatal diagnosis, through examination of fetal cells obtained through techniques such as amniocentesis. Thus, tests may be administered at

any time prior to the onset of the disease and afford the possibility of therapeutic intervention to

prevent the disease.

Several DNA-based tests for relatively rare

genetic conditions are already available, but they

rely on relatively sophisticated techniques, are difficult to interpret, and therefore are available only

through a few specialized laboratories. The limitations of these tests pose considerable obstacles

to their adoption by insurers.

There are two basic approaches to DNA-based

testing for genetic disorders. The ‘linkage method”

is being used to offer information to individuals

within families in which certain genetic diseases

have occurred. Genetic linkage tests are limited,

because the exact location of the harmful gene is

not known. Instead, the inheritance of gene markers (called “restriction fragment length polymorphisms” or RFLPs) is studied within families. For

example, linkage analysis can be applied to Huntington’s disease, an inherited disorder of the nervous system. These analyses require the cooperation of many family members (often including

more than one generation) and are therefore not

widely applicable. Even when the appropriate

family members are available and the diagnosis

of the genetic condition is well established, linkage tests may not be informative. Not all families have markers that can distinguish affected

from non-affected individuals. Furthermore, since

gene markers associated with the abnormal gene

are examined and not necessarily the abnormal

gene itself, erroneous conclusions are possible; for

example, when genetic recombination occur between the disease-causing gene and the marker.

When a disease-causing gene has been identified, direct tests have sometimes been developed

that avoid many of the problems associated with

linkage analyses. As these tests do not have to

rely on the analysis of multiple family members,

they may be amenable to population-wide screening. However, there are few conditions for which

direct tests are currently available; and with the

exception of sickle cell anemia, these conditions

rarely occur. As more genes are identified that are

associated with common disorders and as testing

is simplified, genetic tests will be commercially

developed. Until recently, one limitation on the

use of genetic tests was the limited amount of

DNA that was available for study, especially

when analyzing prenatal specimens. Methods

have now been developed in which enzymes are

used to multiply the DNA sequences as much as

200,000 fold. These advances have simplified and

accelerated the testing process and will allow more

laboratories to conduct DNA-based genetic

testing.

As of the beginning of 1988, there were no

FDA-approved recombinant DNA tests for human genetic conditions. A limited number of these

tests are available, however, through university

genetic-counseling programs or through a few

commercial laboratories.

Will insurance companies use genetic tests as

part of their underwriting process? Genetic tests

in their present state are impractical to administer, require considerable technical skills, may require analyses of multiple family members, are

expensive to perform, and are currently available

for only a small number of relatively rare diseases.

Thus, it appears that in the near future, they will

not be directly used in the insurance underwriting process. However, as genetic tests become increasingly available and used by clinicians, results

from these tests will become part of the medical

records of their patients. Applicants therefore will

have to acknowledge their existence when filling

out the medical history questionnaires, or insurers

will become aware of these tests through attending physician’s statements or copies of the applicant’s medical records. Thus, insurers will occasionally have to factor these test results into their

underwriting decisions. If tests are simplified and

are shown to be predictive, they will in some cases

be adopted by insurers.

One additional area of medical testing that

could influence insurers’ use of specific tests is the

expected development of more self-testing for the

home diagnostic products market. Insurers are always concerned over the problem of “adverse

selection;” that is, applicants having knowledge

of their medical conditions that is not made available to insurers, who then unknowingly approve
20

these applications on the basis of incorrect risk

assessments. (This has been of concern to insurers

in those States where they have been prohibited

from using the AIDS antibody test.)

There are now approximately 60 do-it-yourself

kits available for a variety of conditions, ranging from pregnancy and ovulation to blood in the

feces (an indicator of colon cancer). The largest

home-testing market so far has been for therapeutic monitoring, such as monitoring by diabetics

of their urine and blood sugar levels. There are

currently few home diagnostic tests that prospective insurance applicants could use to determine

whether they should obtain insurance in anticipation of having to seek medical care, but this

is an area of obvious ongoing interest to insurers.

CONCLUSIONS, ISSUES, AND OPTIONS

Prospects for Increased Use of

Medical Tests by Health Insurers

and Employers

Truly new methods for detecting incipient or

latent disease and even for predicting disease in

healthy persons are being rapidly developed, particularly through recombinant DNA technology.

Yet, many technological obstacles need to be overcome before their routine use and widescale applicability progress beyond hope into reality.

Even when these technologies become available,

they may not be of practical use for insurers and

employers for a number of reasons. First, there

may not be a clear cause-and-effect relationship

between abnormal findings on any single test and

a specific disease, or a significant probability that

a positive test would be predictive of developing

the disease in the future. Current indicators of

predispositions to disease seldom consist of a single factor but instead involve multiple factors

whose interrelationships are still not well understood.

Second, tests will probably consist of two types:

1) less specific tests that identify a large number

of persons with propensities to develop the index

disease, and 2) more specific tests that can identify a subset of susceptible persons who will most

likely develop a particular manifestation of the

index disease. For example, tests may become

available to identify persons who have a higher

probability than average to develop cancer, or

cardiovascular disease. Simultaneously, more specific tests may be found for identifying persons

with a high probability of developing a specific

type of cancer, or cardiovascular disease. In the

first instance, insurers (and employers) will have

to decide whether it is worth it to use a relatively

nonspecific test that will be positive in large numbers of people, many (if not most) of whom will

never develop the disease. In the second instance,

many people would have to be tested in order to

find the relative few with a high probability of

developing disease. In either case, insurers (and

employers) might find such testing not worth the

effort when compared to how they currently deal

with the probability that a certain number of their

applicants (or employees) will develop these diseases. In other words, insurers already expect that

some applicants whom they presently insure will

develop these diseases, account for these diseases

in their actuarial estimates when determining conditions of insurability and setting premium rates,

and therefore might decide it not worth the added costs of testing for the amount of incremental

information gained.

Third, while DNA technology holds promise

in furthering predictive testing for common

chronic diseases, despite rapid progress, it may

still be years before such tests become simplified

to the point that they can be used to screen large

numbers of people in a cost-effective manner.

Fourth, from the viewpoint of clinical medicine,

efforts in these areas are not merely directed at

identifying persons with high probability (or certainty) of developing a particular disease. The ultimate aim is to find a treatment or cure, or even

to prevent the disease. In the long run, many (or

at least some) persons at risk for developing disease may avoid or have their illnesses reduced.

This is especially true for genetic tests for common disorders where an interaction between envi-
ronmental and genetic factors contributes to disease expression. Thus, persons currently at risk

may eventually be more, not less, insurable.

While insurers might not find it cost-effective

to use these tests themselves in screening prospective clients, if such tests are available to the medical community, insurers will still have to take

these tests into account when making decisions

on whether to insure an applicant, and if so, the

terms under which that insurance will be issued.

This will occur in two ways, both of which are

already routinely used in evaluating insurance applicants, First, questions on such testing can be

incorporated into the medical and family history

questionnaire. Second, the use of such tests by

the applicant’s physician may be revealed when

an attending physician’s statement is requested or

the applicant’s medical record is reviewed.

Thus, not surprisingly, the future impact of

diagnostic and predictive medical tests on an applicant’s insurability and on insurers’ use of these

tests will depend primarily on the infusion of these

future tests into medical practice and not depend

as much on the direct use of these tests by insurers

in the underwriting process. The regulatory implications are therefore quite different if insurers’

knowledge of test results comes from the applicant’s medical history and information provided

by the applicant’s physician, rather than from subjecting applicants directly to specific testing.

Will these tests have a significant impact on private insurers’ willingness to continue to insure persons whose risks of developing disease can be predicted with fair certainty? Insurers are in the

business of providing insurance, and they will

continue to provide insurance to as many applicants as affordable. Thus, the impact on future

private insurance availability might be limited;

but even such limited impacts might have major

consequences for access to health care through private financing channels and the related impact on

public health care expenditures, if private financing is reduced, with a concomitant increase in

need for publicly financed health care. Refinements in current methods of assessing risk that

these future tests will provide will probably improve decisionmaking in current private health

insurance practices. Certain risks currently declined or rated as substandard may in fact be insurable or upgraded to standard risks. The greater

impact, however, is likely to occur in the following areas: declining to provide insurance to those

at very high risk, charging higher premiums for

higher-risk applicants, and issuing policies with

certain diseases excluded from coverage. These

practices will aggravate what are already wellrecognized shortcomings in our nation’s health

care system: I) the problem of the uninsured and

underinsured, and 2) inadequate catastrophic and

long-term health care coverage.

Employers are already engaging in practices to

decrease their health care expenditures, such as

self-insurance, increasing cost-sharing by their employees through larger deductible and co-insurance requirements, placing limits on the amount

that will be expended on individual employees,

controlling which providers can provide health

care to their employees, or even ceasing or refusing to provide health care benefits to their employees.

Employers may be more interested in using direct methods to control their employee health care

costs than in using medical testing as a preemptive means to control expenditures for their employees’health care. While some employers may

be incorporating testing into health promotion

programs, when employers are concerned over

the health of their employees, that concern is primarily related to the impact of poor health on

work productivity and the effect on other employees, not on employee health care costs. The focus of employers in testing is presently directed

at drug abuse, and while health is a related concern, the primary impetus among employers to

adopt drug testing is concern over poor performance, not poor health. Even AIDS antibody

testing—when considered by employers for reasons other than uncertainty and fear—seems motivated more by the impact of AIDS on employee

morale and customer perceptions than on the

treatment costs of AIDS.

Will employers find predictive medical testing

more attractive in the future? If they do so,

whether their explicit motives include concern

over employee health care expenditures would be

beside the point, if such screening of applicants
2 2

and employees nevertheless had the effect of shutting out many people from access to health care

through employment-based health care plans.

AIDS: a Unique Situation or a

Paradigm for Future Actions?

What actions insurers and employers might

take as new diagnostic and predictive medical tests

become available are speculations. In contrast, accurate tests for identifying persons infected with

the AIDS virus are already available, some decisions on their use have already been made, and

other uses are under intense debate.

State legislatures have been most active in taking action on the use of tests to identify persons

infected with the AIDS virus, and some of these

laws have been directed at insurance and employment testing. The laws, however, have been quite

variable. States such as Maine have prohibited insurers from inquiring whether the applicant has

previously had an AIDS antibody test performed,

but do not prohibit insurers from requesting such

tests themselves. Wisconsin prohibited the use of

tests for infections with the AIDS virus by insurers

and employers but stipulated that tests that were

found by the State epidemiologist to be accurate

and reliable could be used by insurers. The State

epidemiologist subsequently issued such a finding, so insurers—but not employers—can now test

for AIDS antibodies in Wisconsin. The District

of Columbia prohibited the use of AIDS testing

by insurers but not by employers. New York attempted to prohibit use of the AIDS antibody test

by insurers but has been denied by the courts.

California prohibited the use of the AIDS antibody test by insurers and employers but did not

prohibit other types of tests that might be used

to indicate signs of AIDS. Commercial insurers

in California therefore have been using a test that

indicates impaired immune function—the T-cell

test—to determine insurability of individual

health insurance applicants. Anecdotal reports

have since surfaced of applicants offering to show

proof of negative testing results for AIDS antibodies when they have been refused insurance on

the basis of an abnormal T-cell test, but insurers

have declined to reconsider the application, citing the State prohibition in using the antibody test

in determining insurability.

Insurers are concerned over prohibitions and

limitations on inquiring about prior testing or conducting tests for infections with the AIDS virus

because of the problem of adverse selection; that

is, insuring persons already infected who apply

for health insurance because of their known high

probability of developing frank disease.

Are the approaches to insurance and AIDS that

have been taken by some of the States unique?

Prohibitions on refusing insurance for specific diseases or handicaps—and the complementary policy of requiring certain types of benefits to be

provided—do have precedents. Some States have

taken the position that persons with predispositions to some types of diseases or with some types

of impairment, such as DES exposure (a drug that

was used to prevent miscarriages but which subsequently was found to increase the risk of cervical cancer in female offspring of these women) or

blindness, cannot be declined or charged higher

premiums. And some types of benefits, such as

treatment for alcoholism or drug addiction, are

mandated by some States. Issues concerning AIDS

and private health insurance, therefore, may be

more a matter of degree than novelty when compared to how other illnesses and benefits have

been addressed in the past.

Yet, there are novel aspects to the issue of insurance coverage for AIDS. It is a new disease,

and its major routes of infection—sexual practices

and intravenous drug use—predominantly affect

young people. Employed young adults are the

low-risk groups that subsidize the health care of

other groups through their lesser need and use of

health care services. Furthermore, by affecting

young adults, the costs of caring for AIDS patients, while small relative to total health care

costs, represent unanticipated additional costs.

Furthermore, projections of the number of HIVinfected persons and AIDS cases even over the

next decade are alarming. New treatments for

AIDS are likely to increase health care costs for

AIDs by prolonging the life of afflicted patients

with expensive new drugs. These patients will

probably continue to experience significant morbidity, thereby expanding their current needs for

health and related support services.

Adding to the complexity of insurance coverage for HIV-infected persons is the knowledge
2 3

that, at least for the next decade, the primary

weapon against AIDS will not be found in the laboratory. The primary means to prevent further

spread of HIV infections is, and will continue to

be, education. The essential point of these educational messages is that infections with the AIDS

virus are preventable, and that most persons can

prevent infection through changes in, or avoidance of, known high-risk behaviors. (There are,

of course, significant exceptions to the notion that

risk is avoidable through individual behavior.

These exceptions have included blood recipients,

hemophiliacs, infants born to infected mothers,

spouses of infected persons, and health care workers who have been accidentally stuck with contaminated needles. )

If an individual’s destiny insofar as AIDS is concerned rests in his or her own behavior, why

should exceptions to the health insurance risk

assessment process be made for HIV-infected persons? A partial answer to this question is that insurance availability isn’t the real issue, but that

confidentiality of HIV antibody testing and other

information that might identify an individual to

be at risk for AIDS is the paramount issue, because of the profound discrimination and ostracism currently associated with AIDS. However,

confidentiality is not the only issue. Clearly, persons at risk for becoming infected or who are already infected with the AIDS virus not only want

their confidentiality maintained, they also want

affordable access to health care.

A fundamental issue is whether HIV-infected

persons and AIDS patients have a special claim

on health care resources over persons afflicted

with other catastrophic illnesses. One criticism of

a special claim for AIDS is that such an approach

is in direct conflict with the message that HIV infections are preventable through voluntary behavior, especially when those behaviors are, in

the main, extremely sensitive and socially divisive subjects; such as, sexual practices and intravenous drug use. Even were these practices not

involved, however, equity and cost considerations

would be raised. Since the extension of Medicare

coverage in 1972 to include a specific disease, end

stage renal disease (ESRD), and the attendant high

costs of the ESRDprogram, costs alone have been

an effective barrier against a disease-by-disease

approach to health care for catastrophic illnesses.

Concerns over the accuracy and reliability of

HIV antibody testing raise related and quite similar questions. The technical issues relating to

AIDS antibody testing are important though not

unique. They are highly visible manifestations of

similar concerns that apply to all medical testing,

for there are inherent limitations on the accuracy

and reliability of all clinical laboratory tests.

First, the abnormality or change in body function that is associated with the suspected disease

or condition and which a particular test is designed to detect may not be present, even though

the disease or condition is present. For example,

in the test to detect occult blood in feces, a colon

polyp or colon cancer may be present in the person tested, but there may not be blood in the feces at the time of testing. In HIV infections, an

HIV antibody test may be performed during the

early stages of infection when no or very small

amounts of antibody are present.

Second, every test has its technical limitations;

for example, there will always be some specimens

in which the abnormality is in such low concentrations that the test either cannot detect the abnormality or cannot consistently and reliably detect it. Many tests have a “cutoff” point below

which the results will be interpreted as negative.

In general, when the cutoff point is lowered so

that more test specimens will be interpreted as

positive, more specimens without the abnormality will also be erroneously identified as being

positive. In other words, when a test is made more

“sensitive” so that fewer positive specimens will

be missed (“false negatives”) it will also be less

“specific” and identify more negative specimens

as positive (“false positives”), To illustrate, in

AIDS antibody testing by blood banks, the ELISA

screening test has been deliberately calibrated to

have a very high sensitivity so that as many positive blood donations can be identified as possible. But this also means that most of the ELISApositive blood specimens are not really positive,

so testing of these positive specimens by a different method—the Western blot—is necessary. In

1987, American Red Cross rates for positive

ELISA specimens were approximately 10 in

10,000. Upon Western blot testing, 8 of 10 specimens were negative, 1 was positive, and 1 was

indeterminate. The “indeterminate” result points

out that the Western blot test also has its limita-
2 4

tions, with the indeterminate specimen probably

representing early infection with the AIDS virus

in most but not all cases. (Blood banks do not use

any of the ELISA positive specimens, even when

negative with Western blot testing. )

Third, it is axiomatic that the accuracy and

reliability of tests when performed under everyday rather than ideal conditions will fall below

their technically achievable levels. Moreover,

there will be great variability among individual

laboratories performing these tests. Variable accuracy occurs even when laboratories are tested

and know they are being tested (“open testing”),

and not surprisingly, laboratory performance will

be worse when they do not know they are being

tested (“blind testing”). In other words, there is

a technical level of accuracy and reliability that

is potentially achievable with each test, but most

laboratories will not be able to achieve this potential even when they know they are being tested,

and few laboratories will perform at optimal levels

in their everyday practices.

Finally, even when the tests are performed with

the same degree of accuracy across different populations, the probability that a positive test result will be correct will still decrease as the rate

in which the abnormality is present in the tested

population decreases. This is a simple mathematical fact. Suppose the sequence of tests—the ELISA

screening test and the Western blot confirmatory

test—will identify everyone with HIV antibodies

in their blood and falsely identify only 1 in

100,000 persons as having HIV antibodies when

they do not. In a population in which 10 percent

had HIV antibodies, 10,000 of 100,000 persons

tested would be correctly identified as positive.

Among the remaining 90,000 antibody-negative

persons, only 1 would be incorrectly identified as

being HIV-antibody positive. Of the 10,001 positive tests, therefore, 99.99 percent of positive results would be correct. This “predictive value” of

a positive test changes dramatically when a population with only a few HIV-antibody persons is

tested. If only 10 in 100,000 were antibody positive, again, only 1 in the 99,990 HIV-antibody

negative persons would test positive. However,

in this case, there would only be a total of 11 positive results, and 10 of 11, or only 90.91 percent,

would be correct. (Note that the predictive values

would be even lower if the ability to detect all

positive specimens was not assumed to be 100

percent. )

Tests with false positive rates of only 1 in

100,000 are extremely rare, if not unheard of outside of HIV antibody-testing. Blood bank testing

and the Department of Defense’s HIV-antibody

testing program (and probably HORL, Inc., the

major lab used by the insurance industry) may

perform at this high level because of stringent

quality controls over the laboratories conducting

their tests, but it is not unreasonable to question

whether the average lab conducting HIV-antibody

testing can reach this level of accuracy. There is

in fact evidence that the average lab not only has

a much higher rate of false positives, but is also

missing a number of HIV-antibody positive blood

specimens.

HIV-antibody testing has received much scrutiny because of the controversies surrounding use

of the test in underwriting life and health insurance for individuals and more importantly, in

attempts to make testing mandatory among segments of the United States’ population. Mandatory testing has been implemented in some areas,

such as in the military, among immigrants, and

for premarital testing in Illinois and Louisiana

(and Texas, but the law there requires that infections in the State must reach a rate of 0.83 percent before premarital testing is initiated). However, the underlying technical issues concerning

test accuracy, especially as actually conducted by

laboratories, are common to all diagnostic and

predictive testing. Periodically, questions have

been raised over specific medical tests. For example, laboratory performance Pap testing for cervical and uterine cancer is currently under scrutiny, as is the accuracy and reliability of urine

drug testing. Thus, the issues concerning HIVantibody testing accuracy and reliability are common to all types of medical testing, although HIVantibody testing deserves special scrutiny because

of the societal consequences of being infected with

the AIDS virus.

Options Addressing the Use

of Medical Tests

A wide range of initiatives has been and is being used to improve the accuracy and reliability

of medical testing.
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First, laboratories have been provided “proficiency testing” services to assist them in maintaining and improving the accuracy of their performance. In proficiency testing, participating laboratories are sent prepared specimens (usually on a

quarterly basis), which they then test and report

back their findings. For example, the College of

American Pathologists (CAP) has an extensive proficiency testing program in the various types of tests

used in clinical medicine, as well as in AIDS antibody testing and drug testing (e.g., urine testing for

cocaine, marijuana, opiates, etc.). In these programs, laboratories voluntarily participate for an

annual fee and know when they are being tested—

they receive test specimens at expected times and

report their results back directly to the testing organizations. This is why these programs are called

“open” proficiency testing.

In the 1970s, the Federal government, through

the Centers for Disease Control (CDC), provided

open proficiency testing services in a number of

clinical testing areas. Most of these activities were

phased out in the 1980s. However, because of the

AIDS epidemic, CDC has now begun a proficiency testing program for AIDS antibody testing.

Second, the quality of medical testing can also

be maintained by setting standards for laboratory

personnel and testing procedures. Two methods

are available for setting standards for laboratory

personnel and performance: 1) set standards as

part of direct licensing of laboratories, or 2) use

standards as a necessary condition in order for

labs to be reimbursed for services they perform.

Direct laboratory licensing has traditionally

been in the purview of the States, but there is a

great degree of variation in licensing. Few States

regulate laboratory performance to any significant degree, and even within a State, monitoring

can vary tremendously among the different types

of tests—for example, clinical medicine testing

versus drug screening testing. One variation in this

approach is not “licensing” in the strict sense, but

could be considered for specific types of testing.

For example, New York prohibits commercial labs

from performing AIDS antibody tests and specifies the types of labs that are allowed to perform

these tests. Thus, designating the labs that are allowed to perform testing is a variation on standard setting.

In the Medicare program, laboratories must

meet specified personnel and performance standards as a condition of participation (i.e., if they

expect to be reimbursed for their services). For

example, laboratory directors must meet certain

educational/professional qualifications, and labs

must participate and maintain a certain minimum

score in specified proficiency testing programs

(e.g., those of CAP).

Third, laboratory performance can be directly

monitored. On-site inspections of labs are conducted by a few States whose laws and resources

permit such activities, and similar inspections are

periodically conducted by the Federal government

on labs participating in Medicare. Criticisms over

the frequency of these inspections and the number and types of labs subject to such inspections,

however, are longstanding issues at both the State

and Federal levels. Moreover, on-site inspections

do not directly measure lab testing performance.

Participation in proficiency testing of the types

offered by CAP is a method of monitoring laboratory performance, but this type of “open proficiency” monitoring only reflects at what level a

lab is capable of performing. Open testing is not

reflective of a lab’s performance in everyday testing, and that level of performance can only be

evaluated if the lab does not know it is being

tested. Thus, “blind” testing has been instituted

in some areas in which test samples have been inserted along with specimens received by the lab

from one or more of its actual customers. In blind

testing, labs know they are being tested, but do

not know when they are being tested and which

specimens are the test specimens. For example, in

the Department of Defense’s (DOD) extensive

AIDS antibody testing program, DOD uses a

monthly blind testing program to evaluate its contractor lab’s performance (if the lab fails a certain amount of these tests, it does not get paid

for that month). A similar program has been developed by the National Institute on Drug Abuse

(NIDA) to monitor labs performing tests for the

expanding urine drug testing program for selected

Federal employees and contractors.

In blind testing of labs, implementing and maintaining the program are much more difficult than

in open testing. In open testing, specimens can be

sent directly to the lab, which then reports its re-
2 7

suits to the testing organization. In blind testing,

arrangements must be made with actual customers of each lab; and the lab, because it cannot distinguish between real and test specimens, would

be reporting the results to each customer. Thus,

the administrative costs of a blind program would

be much higher than in open testing.

If blind testing is used, a decision has to be made

whether the Federal government would administer the program directly or by contracting it out,

or whether arrangements would be made with existing, voluntary proficiency testing programs

such as CAP to administer the program.

Finally, it must be remembered that it is the

States, not the Federal government, that are most

involved in regulating the quality of medical testing. Figures 1-2 to 1-5 summarize the extent of

State regulation of laboratories that perform medical testing.

Congressional interest in the accuracy of laboratory testing has increased as a result of expanding urine drug testing programs, the continuing

controversies over AIDS antibody testing, and

more recently, concerns over the accuracy of medical testing in general. Several committees in both

the House of Representatives and the Senate have

held hearings on these issues (e.g., Committees

on Energy and Commerce, Small Business, Post

Office and Civil Service, and Government Operations in the House of Representatives; and Committees on Labor and Human Resources, Judiciary, and Governmental Affairs in the Senate).

Thus, in addition to monitoring and proficiency

testing of laboratories under contract to DOD to

perform AIDS antibody testing and a similar program under NIDA for laboratories performing

urine drug testing on designated Federal employees and contract personnel, current congressional

scrutiny is focused on the laboratories performing medical testing in general, and especially those

who participate in the Medicare program.

More recently, there also have been attempts

to determine the appropriateness of using testing

in specific circumstances, and to determine when

the use of certain tests are justifiable. These approaches in fact have been used by some States.

Thus, there are two options in addition to the

more traditional means of maintaining and improving the accuracy and reliability of medical

testing through standard setting and proficiency

testing.

Option 1: Allow use of a particular test only under specifically defined circumstances; for example, as some States have done for HIVantibody testing for insurance and/or employment and for employment-based urine drug

testing.

This option would be applicable to specific tests

and specific situations. An example is defining the

circumstances in which drug testing of employees will be allowed. For example, in 1987, seven

States passed such laws; six of these States limited

drug testing to circumstances in which probable

cause or reasonable suspicion existed. The other

prominent example is the numerous variations

among the States in defining when and under

what circumstances (e.g., insurance underwriting,

job applicant and employee testing) AIDS antibody testing is curtailed or prohibited.

While this option is not primarily based on an

assessment of a test’s accuracy and reliability, such

considerations nevertheless are at least implicit in

the reasoning. Recall the discussion above on the

poorer predictive value (i.e., that a positive test

result is truly positive) of a test when applied to

populations with lower and lower rates of the index condition. Lower predictive value—and the

increasing chances of a false positive identification—is among the reasons why caution is advised

in screening low-use populations for drug use and

low-risk populations for AIDS antibodies. Costeffectiveness also becomes a consideration in

screening low-use or low-risk populations, because everybody must be screened—and each

positive on screening must be confirmed—in order to find the very few persons who are truly

positive.

Testing does have the potential of helping those

being tested. For example, one rationale for drug

testing is to identify users in order to rehabilitate

them. Tests could also be used to identify lowrisk individuals to “exonerate” those with a positive family history for the disease (e.g., Huntington’s disease).
2 8

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Figure 1-2.—State Regulation of Clinical Laboratories, 1987

Method of regulation

❑ Independent laboratorras

❑ HOSplhllak,atOrl~

❑ Phfitc,anotiice labratorie.

SOURCE D P. Baine, Associate Director, Human Resources Division, US. General Accounting Office, Washington, DC; information provided

to The Honorable Ron Wyden, Chairman, Subcommittee on Regulation and Business Opportunities, Committee on Small Business,

U.S House of Representatives, Feb. 29, 1988,

Figure 1-3.—State Regulation of Independent Laboratories, 1987

(.,--., ,n,-. r m m -—.—- . --- . . . . -. . , , -. . , . - - . — . . auurn~t. u r ~alne, ~ssoclale ulreclor, riuman r-resources ulvlslon, US. tieneral ACCOUfltlflg Office, Washington, DC; information provided to The Honorable

Ron Wyden, Chairman, Subcommittee on Regulation and Business Opportunities, Committee on Small Business, U.S. House of Representatives,

Feb 29, 1988.
2 9

Figure 1-4.–State Regulation of Hospital Laboratories, 1987

No formal regulation

SOURCE D P Baine, Associate Director, Human Resources Division, U S. General Accounting Office, Washington, DC; information provided to The Honorable

Ron Wvden, Chairman, Subcommittee on Regulation and Business Opportunities, Committee on Small Business, US House of Representatives,

Feb 29, 1988

Figure l-5.—State Regulation of Physician’s Office Laboratories, 1987

: 8

SOURCE D.P. Baine, Associate Director, Human Resources Dwlsion, U S, General Accounting Off Ice, Washington, DC; information provided to The Honorable

Ron Wyden, Chairman, Subcommittee on Regulation and Business Opportunities, Committee on Small Business, U S. House of Representatives,

Feb. 29, 1988
30

Option 2: Limit the use of tests to tests that have

been determined to be suffiaently accurate and

reliable in the specific circumstances in which

they are to be used.

An available measure of a test’s accuracy and

reliability is licensing for commercial use by the

Federal Food and Drug Administration (FDA);

that is, FDA makes its licensing decision on a determination of test accuracy and reliability. However, FDA recommendations on when and how

FDA-licensed products should be used are not necessarily followed. This is clearly the case in

prescription drug use, where physicians often feel

that once a drug is approved, they should be the

ones to determine the circumstances of their use.

Some States have gone beyond FDA licensing

and have expressed quite divergent views on this

approach when applied to AIDS antibody testing. The Wisconsin legislature’s approach was to

require a finding by the State epidemiologist on

whether a test was sufficiently accurate and reliable to use for insurance purposes (the State epidemiologist did make such a finding for the AIDS

antibody test). In contrast, a proposed New York

regulation was based on the conclusion that the

presence of AIDS antibodies reflected infection

with HIV and did not necessarily mean progression to frank AIDS, and thereby attempted to

deny use of the test by insurers (initial court decisions have ruled against this prohibitory regulation). In California use of the AIDS antibody

test is prohibited, but not other tests such as the

less specific T-cell test.

Criteria that have been informally proposed by

one insurer on the conditions that usually must

be met before a medical test will be adopted by

insurers are as follows:

●

●

●

●

The test must supply information in addition

to information otherwise available from

other sources (e.g., from the medical history

questionnaire).

The disease tested for must have serious morbidity and/or mortality implications.

The disease must be common enough to ensure that the test is predicitve and that costs

of testing can be justified.

The test must be predictive of disease (or absence of disease) and reliable.

●

●

●

●

The test must be understood, accepted, and

used by the medical profession.

Laboratories must be able to readily perform

the test.

The test must be affordable and able to provide results quickly.

The test must be risk-free.

Criteria such as these could be adopted by

the National Association of Insurance Commissioners (NAIC) and issued as guidelines.

Options on Strategies for Maintaining

and Improving Access to Health Care

In the foregoing discussion on options to improve lab accuracy and reliability, each option

can apply to lab testing of all types, or to specific types of testing (e.g., clinical medicine testing, AIDS antibody testing, drug testing) as circumstances and priorities dictate. An analogous

situation exists in the area of financing of and access to health care. In developing strategies for

maintaining and improving access to health care,

one prominent issue is whether financing for AIDS

care deserves a special, categorical approach or

whether it has no special claim on the use of health

care resources. However one comes out on these

opposing policies, in general, the financing issues

are similar for AIDS patients and patients suffering from other diseases. Thus, the policy choices

are essentially the same for categorical and generic

approaches, and how policymakers address AIDS

versus other illnesses will depend on particular circumstances and priorities.

While the broader policy approaches are relatively easy to identify, the underlying issues are

complex; and the specific policies that might be

implemented are not only controversial, but each

specific policy is also wrapped up in its own set

of complexities and controversies.

Policymakers are well aware of the broad as

well as the specific policy choices, and sustained

efforts have been going on at Federal and State

levels for at least the past 20 years. The financing needs of AIDS patients have only heightened

the intensity of these efforts, but AIDS is not alone

in contributing to the sense of urgency. Similar

issues have arisen for patients in need of transplants or artificial organs and for technology-
31

dependent children. Furthermore, the acute care

needs of persons suffering from catastrophic illnesses is just the front side of the access and finance problem. Shortcomings in long-term care

have long been recognized, which have gained added prominence by recent attention to Alzheimer’s

disease. The care of AIDS patients raises all of

these issues.

Issues concerning health care access and financing include:

● the uninsured and underinsured;

● coverage for catastrophic illnesses;

● discontinuities or gaps in coverage (e.g., between acute and disability care);

● coverage and availability of long-term care;

and

● the apportioning of financial responsibilities

between private and public sector programs.

Given the breadth and complexity of these issues,

it is clear that a list of options addressing these

issues would be no less than an attempt to address

every aspect of the United States’ health delivery

system. For example, there is wide agreement that

long-term care needs are great, but these services

have often not been developed and are often nonexistent even when financing is available. Thus,

certain crucial elements of our health care delivery system are lacking or inadequate. Making

financing available for these elements would assist in developing the necessary resources. Addressing areas in which the underlying services are

in short supply or not available to begin with,

however, makes for an extremely more difficult

task than in addressing how available services

might be made more accessible.

This report has a more narrow focus than the

large issue of how health care can best be made

available in the United States. The report addresses how medical and health-related laboratory tests are used and may be used in deciding

whether specific individuals will be able to obtain health insurance, whether from insurance

companies or through self-insured employers.

Health insurance availability is currently high on

Congress’s agenda through such mechanisms as

extensions of employment-based health insurance

for ex-employees and efforts to require noncontributing employers to provide health benefits to their employees. While these efforts address

the issue of inadequate or unavailable health insurance, they do not directly bear on the issue of

medical testing. For example, a small firm may

not provide health benefits to its employees, some

of whom will have purchased health insurance

policies individually. Or a small firm might have

purchased health insurance for its employees, each

of whom might have been individually evaluated

by the health insurer (recall that small groups are

often underwritten in the same manner as individuals). In the first case, requiring small firms

to provide health insurance for their employees

would obviate the need of individual employees

to seek health insurance on their own. It would

also ensure that all employees would be covered,

not just those conscientious enough to purchase

insurance. In the second case, there would be no

difference if insurance coverage were mandated

(except for the possibility of a change in the benefits covered by the insurance), because the employer already offered it.

If we limit the analysis to those areas most affected by medical screening practices by health

insurers and employers, and further limit the analysis to those areas of health care uniquely affected

by these practices, then the principal issues involve the medically uninsurable population and

coverage for catastrophic illnesses. Those who fall

in these categories will have severe deficiencies in

access to long-term care as well as gaps between

acute and long-term care coverage, but so will

those currently with health insurance.

Finally, one of the issues leading to the congressional request for this report was the possible impact on public health care expenditures if private

insurers declined to underwrite large numbers of

applicants based on improved knowledge of latent and future illnesses. Insurers will in fact want

to underwrite applicants as long as they can

charge premium rates they consider reasonable.

Thus, the premise underlying the following options is that private insurance mechanisms will

continue to be used to the extent possible for employed individuals (and their dependents).

Option 3: Encourage the development of methods to provide insurance to high-risk individuals and those with catastrophic illnesses.
3 2

Insurance pools for high-risk individuals and

for catastrophic illnesses are not only undergoing experimentation among many States with both

State and foundation (e.g., the Robert Wood

Johnson Foundation) funds, but several States

have already established pools, especially for

high-risk individuals who are unable to obtain

health insurance. Current State high-risk pools

have large deductibles, high premiums, stop-loss

provisions, and maximum lifetime benefits. Interest in such arrangements is high among many

of the remaining States. However, experience with

such pools is very limited. Direct costs to participating individuals are very high, yet expected and

actual shortfalls between premiums and claims expenses are the rule. These shortfalls are financed

either through mandatory contributions by insurers doing business in the State (which can be

offset against their premium taxes), or by State

general revenues.

Two of the principal issues concerning these

emerging pool arrangements are: 1) the proliferation of pools with varying eligibility criteria and

benefits, and 2) how shortfalls in revenues are to

be covered.

Option 3A: Amend the ERISA legislation so that

self-insured groups can be required to help finance State high-risk insurance pools.

Because of the ERISA exemption, self-insured

health plans cannot be required to contribute to

meet the revenue shortfall in those States with

pools funded by mandatory contributions by insurers. Thus, insurers have called for Federal legislation to remove this exemption for self-insurers

from ERISA. A limited version of this option is

to require that employers pay the premiums of

employees who would be eligible to join the State

high-risk insurance pool. However, as premiums

already fall short of covering the total expenses

of these pool arrangements, this approach would

increase revenue deficits as the number of participants increase, and such employers may have incentives to terminate insurance for their employers

with high medical costs because of the lesser cost

of transferring these employees to the State highrisk pool.

Option 3B: Provide or require uniformity in eligibility, cost-sharing, and benefits for State highrisk pools.

Although the provisions for these State pools

are similar, there are varying eligibility requirements and benefits. On a voluntary basis, the

NAIC could develop guidelines; or Federal legislation could specify the terms under which State

pools function.

Option 3C: Establish Federal high-risk pools in

place of State pools.

Federal legislation could also be considered to

require States to establish high-risk and/or catastrophic illness pools, or to establish a Federal program along the lines of the catastrophic insurance

proposals that have been periodically considered

in the Congress.

Option 4: Use incentives and subsidies to provide

(and maintain) private health insurance for the

uninsured and persons at high risk or with catastrophic illnesses.

Option 4A: Create larger risk pools for smaller

firms.

By creating larger risk pools, premiums can be

lowered for small employers who band together

and act as a large employer. Multiple Employer

Trusts (METs) have not lived up to expectations along this line, but it is not clear why this

is the case. Larger risk pools for small firms

could also be created through approaches similar to the Federal unemployment insurance tax.

Option 4B: Use public funds to subsidize participation in private insurance arrangements for

high-risk individuals rather than transferring

such persons to public assistance programs.

Direct costs to public programs, as well as the

administrative costs associated with switching

from one claims processor (private) to another

(public), may make public programs that subsidize all or part of private insurance premiums before these persons’ insurance policies lapse more

cost effective than leaving such persons to exhaust

their resources and eventually become eligible for

Medicaid (or Medicare). Another possibility

would be to subsidize or share the costs of premium contributions to State high-risk pools for
3 3

persons who might otherwise become eligible for

Medicaid or Medicare.

Option 4C: Provide ‘gap’’ insurance through further extensions of employment-based coverage

and use of Medicare stop-loss measures for

those persons in danger of losing private insurance.

Little is known about the extent to which persons with private insurance eventually lose coverage because of the duration of their catastrophic

illnesses, either through inability to continue paying premiums, exceeding their coverage limits,

and/or nonrenewal of their insurance policies.

Anecdotes abound of these occurrences among

AIDS patients and their eventual eligibility for

Supplemental Security Income and Medicaid, and

of persons who become medically indigent but not

quite eligible for Medicaid and must continue

treatment through other public (e.g., county, municipal) and private (e.g., unreimbursed) resources.

Under the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985, non-government and nonreligious employers with more than

20 employees must give employees who leave the

option of remaining in the employee group for

health insurance for up to 18 months, as long as

the employee pays the employer and employee

shares of the premium, plus no more than another

2 percent of the total premium.

For those with illnesses and disabilities that

would make them eligible for Medicare coverage,

extension of COBRA could cover the period between loss of private health insurance and enrollment into the Medicare program. As there is a

preliminary 6-month waiting period before Medicare’s 2-year formal waiting period (to establish

permanent disability) begins, thereby resulting in

an actual waiting period of 30 months, COBRA

benefits could be extended to 30 months. Alternatively, COBRA benefits could be extended to

24 months while concomitantly reducing the formal Medicare waiting period to 18 months. This

combination of options, of course, would only

be available to persons who could meet current

Medicare requirements for total and permanent

disability, or who would meet Medicare age eligibility in the interim period.

Option 5: Ease eligibility requirements for Medicare and/or Medicaid.

Option 5A: Reduce the Medicare waiting period

and/or change the disability definition.

Changes in the Medicare program have been

suggested as a way, for example, of financing the

health care of AIDS patients. Suggested changes

include reducing or eliminating the waiting period,

and/or changing the definition of total and permanent disability, such as through disease-specific

categories as is currently the case for end-stage

renal disease (ESRD). However, as discussed previously, this approach brings up the issue of a

disease-by-disease versus generic approach to the

disability provisions of Medicare, and in the case

of AIDS, the issue of favoring AIDS patients over

persons with other catastrophic illnesses.

Option sB: Expand Medicaid eligibility by raising eligibility ceilings.

If Medicaid eligibility were expanded to all people below some fraction of the poverty level, it

would particularly help the very poor in States

that currently have low income eligibility ceilings,

as well as IV drug users and homosexual men with

AIDS who do not meet current categorical eligibility criteria for Medicaid (e.g., custody of children) but who are below the poverty level.

Option 5C: Allow selected buy-ins into the Medicaid program.

Another use of Medicaid to reduce the pool of

uninsured is to allow people who are categorically

ineligible for Medicaid but who have incomes below some multiple of the poverty level (e.g., 75

percent or 150 percent of the poverty level) to buy

into Medicaid on a sliding-scale fee basis. The extent of the Medicaid premium that is subsidized

would determine participation. If only a small

fraction of the premium is subsized, few of the

poor would be likely to buy in.

Option 6: Supplement Federal payments or provide special grants to areas and/or institutions

highly affected by catastrophic illnesses.

The impact of catastrophic illnesses may fall unevenly on different geographic areas and on different institutions in a geographic area. This has been

the pattern with AIDS, and because of the pro-
34

grams of care that have been developed (e.g., San

Francisco) or the types of patients that have been

affected (e.g., drug abusers in New York City),

specific areas and specific institutions within those

areas may bear a burden out-of-proportion to

what would be expected if only permanent residents of those areas sought care. Thus, a double

burden might be imposed: first, on the patients,

for whom financial resources will be less available because of the numbers of similar patients

seeking care, and second, on the providers of care,

because of the additional resources that are needed

to provide the extra care. Many, if not most, of

these patients will have exhausted their private

resources or will already be supported by public

programs.

Supplements could be provided on both individual and institutional bases; that is, through

diagnosis-specific supplements in the Medicaid

program, and direct grants to institutions—

especially public institutions—with disproportionate shares of catastrophically ill patients. In the

current Medicaid waiver program, expenditures

cannot exceed levels currently provided for traditional services. Granting of supplemental funds

could include—or be used exclusively for—

development of alternative sites of care and new

types of services and thus be used to augment the

current Medicaid waiver program.

These options are summarized in table 1-3. Table 1-4 summarizes State laws and regulations

concerning HIV antibody testing by insurers and

by employers. Table 1-5 summarizes health insurance legislation before the Congress as of April

1988, concerning coverage for the uninsured and

provisions for high-risk individuals (excluding

elderly groups).

Table 1-3.—Major Issues and Related Options

Use of medical tests Access to health care

Current situation:

Few States regulate laboratory performance to any significant degree. In the Medicare program laboratories must

meet specified personnel and performance standards as

a condition of participation. Current congressional scrutiny is focused on the performance of laboratory testing

in general; i.e., clinical medicine testing, HIV antibody

testing, and urine testing for illegal drug use. There have

been State actions determining when the use of certain

tests are justifiable and the circumstances under which

it is appropriate to use certain tests (e.g., HIV antibody

tests).

OTA options:

#1: Allow use of a particular test only under specifically

defined circumstances; for example, as some States

have done for HIV-antibody testing for insurance and/or

employment and for employment-based urine drug

testing.

#2: Limit the use of tests to those that have been determined to be sufficiently accurate and reliable in the

specific circumstances in which they are to be used.

Current issues:

Issues concerning health care access and financing include: 1) the uninsured and underinsured, 2) coverage

for catastrophic illnesses, 3) discontinuities or gaps in

coverage (e.g. between acute and disability care), 4)

coverage and availability of long term care, and 5) the

apportioning of financial responsibilities between private and public sector programs. In addressing these

issues, private health insurance mechanisms will continue to be used to the extent possible for employed

individuals and their dependents, and there is great

resistance to a disease-specific approach for coverage

of catastrophic illnesses.

OTA options:

#3: Encourage the development of methods to provide insurance to high-risk individuals and those with catastrophic illnesses.

#3A: Amend the ERISA legislation so that self-insured

groups can be required to help finance State

high-risk insurance pools.

#3B: Provide or require uniformity in eligibility,

cost-sharing, and benefits for State high-risk

pools.

#3C: Establish Federal high-risk pools in place of

State pools.

#4: Use incentives and subsidies to provide (and maintain) private health insurance for the uninsured and

persons at high risk or with catastrophic illnesses.

#4A: Create larger risk pools for smaller firms.

#4B: Use public funds to subsidize participation in private insurance arrangements for high-risk individuals rather than transferring such persons to

public assistance programs.
35

Table 1-3.—Major Issues and Related Options—Continued

Use of medical tests Access to health care

#4C: Provide “gap” insurance through further extensions of employment-based coverage and use of

Medicare stop-loss measures for those persons

in danger of losing private insurance.

#5: Ease eligibility requirements for Medicare and/or

Medicaid.

#5A: Reduce the Medicare waiting period and/or

change the disability definition.

#5B: Expand Medicaid eligibility by raising income

eligibility ceilings.

#5C: Allow selected buy-ins into the Medicaid

program.

#6: Supplement Federal payments or provide special

grants to areas and/or institutions highly affected by

catastrophic illnesses.

SOURCE’ Office of Technology Assessment, 1988

Table 1-4.–State Laws and Regulations Concerning HIV Antibody Testing by Health Insurers (as of April 1988)

Arizona:

/nsurance department action—A circular letter contains

underwriting guidelines implemented to protect against

unfair discrimination. No questions may be asked regarding lifestyle, sexual preference, receipt of blood transfusion, previous AIDS-related tests or exposure. The guidelines prohibit the sale of policies containing a general

exclusion for AIDS and AIDS-related claims. Informed consent required.

California:

Legis/ation—Prohibits using the results of blood tests

which detect antibodies for AIDS to determine insurability, including the ELlSA and Western Blot. Tests for deficiency of immune status, such as T-cell tests, are not prohibited. Prohibits testing without written consent.

Insurance department acfion—A regulation prohibits discrimination based on sexual orientation. Insurers may not

ask about prior blood tests or results.

Co/orado:

Legislation—Prohibits testing for HIV infection without

consent of the individual.

Insurance department action—A regulation includes the

NAIC guidelines. Testing is permitted if the three-test protocol is followed (ELISA-ELISA-Western blot). Policies cannot exclude or limit coverage for AIDS-related treatment.

Connecticut:

Insurance department action—No questions about AIDS

testing may be asked, but insurers are not prohibited from

testing.

Delaware:

Insurance departrnent actior)-A regulation requires written consent in order for an applicant to be tested and outlines the types of questions allowed. The NAIC guidelines

have been issued as a bulletin.

District of Columbia:

Legislation—Proh i bits insurers from requiring or requesting anyone to reveal if he has taken a test to screen for

AIDS antibodies and prohibits insurers from refusing to

insure an individual or limiting or changing coverage in any

way because he has tested positive on any test to screen

for AIDS antibodies. The statute also prohibits using factors such as occupation or sexual orientation to determine

insurability. Testing is, however, permitted where the applicant exhibits symptoms of AIDS. Insurers can deny coverage to an applicant with AIDS but not someone with HIV

antibodies and no symptoms of the disease. Informed consent required.

Florida:

Legislation—Test results from serologic tests conducted

under a declaration by the State Department of Health and

Rehabilitation Services are prohibited from being used to

determine insurability.

Insurance department action —NAIC guidelines adopted.

A regulation requires written consent before any testing

procedure. Coverage may not be written containing an exclusion for a specific disease.

Hawaii:

Legislation—Health care providers are forbidden from testing a person for the presence of HIV antibodies without

written informed consent. The Unfair Trade Practices Law

forbids insurers to refuse to insure someone, or limit his

coverage, because he has previously had an HIV test, or

because he refuses to release information related to a prior

test. The insurer may, however, get permission from the

applicant and have a test done in a manner which satisfies the requirement of the commissioner.

Illinois:

Legislatiort-Any insurance company must have written

consent before testing applicants for HIV antibodies. No

insurer may discriminate in the availability of insurance

on the basis of sexual preference, or apply different rates

on the basis of sexual preference unless the rating classification is based on expected claims, costs, and expenses.

Indiana:

Insurance department action—A pending regulation includes the NAIC guidelines; however, testing is permitted

if testing requirements and protocol are followed.
36

Table 1-4.—State Laws and Regulations Concerning HIV Antibody Testing by Health Insurers

(as of April 1988)–Continued

Iowa:

Insurance department action—The NAIC guidelines have

been adopted; testing is permitted.

Kansas:

Insurance deparfment action—A temporary regulation defines how many and what types of tests must be completed

and how they should be disclosed. Types of questions

which may be asked also specified. Informed consent required.

Maine:

Legislation—No insurer may request any person to reveal

whether the person has obtained a test for the presence

of antibodies to the AIDS virus prior to an application for

insurance coverage. Prohibits testing without informed

consent.

Maryiand:

Insurance department action—Guidelines issued specify

types of tests to use and restrict questions on the application to those that elicit specific medical information

rather than lifestyle or sexual orientation inferences. informed consent required.

Massachusetts:

Legislation)-Prohi bits health care providers from testing

without informed consent.

insurance department action—A regulation prohibits requiring or requesting health insurance applicants to take

any HIV-related test. Includes a nondiscrimination provision which prohibits underwriting based on factors such

as lifestyle or living arrangements. Implementation is currently stayed by court order. A regulation states that no

insurer may ask a proposed insured about a prior HIV-related test or the result and are prohibited from considering any such information in determining insurability.

New Jersey;

Insurance departrnent action—A bulletin prohibits testing

for group health insurance yet permits it for individual coverage if it is “medically justified”. Blood testing may not

be requested based on information about the applicant’s

lifestyle and, when used, must be ELISA-ELISA-Western

blot series. Stipulation on type of question permitted referring to AIDS tests. Informed consent required.

New York:

hsurance department action—A regulation prohibits denying health insurance to an individual based on results of

a test used to determine HIV antibody status. Insurers may

not request an applicant to submit to a test, or ask whether

he has taken such a test, or consider the results of any

previously administered test. Implementation was prohibited by court order.

SOURCE: Office of Technology Assessment, 1988.

Oregon:

Legis/ation—insurance organizations must obtain written

consent before testing for HIV antibodies.

Insurance department action—Temporary rules adopted

contain the NAIC underwriting guidelines. Three-test protocol required (ELISA-ELISA-Western blot). Policies must

cover HIV infection. No general question regarding taking

an HIV test is permitted, though the direct question asking if the applicant has ever tested positive for HIV is

allowed.

Rhode isiand:

Insurance department action—A proposed regulation prohibits testing for group policies, but permits it for individual

policies. Also includes the NAIC guidelines.

South Dakota:

/nsurance department action—The NAIC guidelines have

been adopted; testing is permitted. Informed consent required.

Texas:

Legislation—Proh i bits testing for HIV infection with specified exceptions.

Insurance department action—A proposed regulation clarifies the law, allows testing, and contains testing protocol

(ELISA-ELISA-Western blot). A proposed regulation prohibits discrimination and contains the NAIC guidelines. informed consent required.

Washington:

/nsurance department action—A regulation permits testing only on a nondiscriminatory basis, and requires a test

with high degree of accuracy before an applicant may be

declined or rated substandard. Ambiguous or misleading

questions on the application are prohibited.

West Virginia:

Legis/ation—Prohibits insurers from canceling or not renewing policies because of a diagnosis or treatment of

AIDS.

Wisconsin:

Legis/ation—Prohibits insurers from requiring HIV tests

or using test results in determining individual health insurance rates unless the tests are deemed medically significant by the State epidemiologist and sufficiently reliable by the Commissioner of Insurance. Testing for group

coverage prohibited.

/nsurance department action—A regulation accepts the approval of the ELISA/ELISA/Western blot series for HIV testing from the State epidemiologist. Another regulation prohibits discrimination because of sexual orientation.

Informed consent required. NAIC guidelines adopted.
37

Table 1-5.—Health Insurance Legislation Before the 1OOth Congress (as of April 1988) Concerning Coverage for

the Uninsured and Provisions for High-Risk Individuals (Excluding Medicare”Specific Legislation)

Legislation for High Risk Individuals:

S. 24/H.R. 276—Amends the Social Security Act to eliminate,

for five years, the requirement that an individual be entitled

to disability benefits for at least 24 consecutive months

in order to qualify for hospital insurance benefits for those

with AIDS.

S. 1634—Access to Health Insurance for Medical/y Unirrsurab/e /ndividua/s Act of 1987—Encourages States to set up

pooling mechanisms through a ten million dollar grant program to provide health insurance for medically uninsurable individuals. States will receive funds based on their

proportionate share of the national population to be used

toward establishing health insurance risk pools. The States

themselves would be responsible for financing, design, and

subsidization of the pools.

H.R. 406—Nationa/ Catastrophic Illness Protection Act of

1987—Amends the Social Security Act to establish a national catastrophic illness insurance program under which

the Federal Government, working in conjunction with State

insurance authorities and the private insurance industry,

will make adequate health protection available to all Americans at reasonable cost. The program will involve the creation of State-wide plans providing extended health insurance with the Federal Government reinsuring insurers and

pools of insurers offering such insurance.

H.R. 1182—Hea/th Services Act of 1987—Amends the Social

Security Act to establish a publiciprivate program to provide health services to the medically uninsured not eligible for Medicaid. The program will provide benefits to residents of a State where there exists a Statewide Pooling

Corporation. A Federal Health Trust Fund will be established to pay direct grants to such corporations.

H.R. 2300—Catastrophic ///ness Expense Protection Arnendrnents of 1987—Amends the Internal Revenue Code to

deny employers an income tax deduction for group health

plan expenses unless the plan provides full catastrophic

coverage for physician and hospital services provided to

a covered employee or family member during any period

within the plan year after out-of-pocket expenses for certain medical services exceed $2,000 ($3500 for family coverage) and does not cancel or differentiate in coverage except in cases of failure to pay premiums due.

H .R. 3766—Comprehensive Health Care Improvement Act of

1987—A bill to provide for certification and require the

offering of qualified health plans, to provide Federal assistance to States to establish a program of assistance for

low-income persons to purchase comprehensive health insurance, and a program for coverage of catastrophic health

care expenses.

Legislation For Those With No Health Insurance Coverage:

S. 177—Hea/th Care for the Uninsured Act of 1987-Permits

States to establish health care pools to provide health care

services to all uninsured individuals and to share among

all hospitals in the State the costs of the uncompensated

care. Requires the implementation of the health care pool

at the Federal level where a State does not establish such

a program or receive a waiver form the Secretary of Health

and Human Services. Each uninsured individual seeking

coverage through the pool will pay a premium based on

the individual’s family income.

S. 1139/H.R. 3580—MedAmerica Act of 1987—Amends the

Social Security Act to give States the option of extending

coverage to:

● individuals whose family income does not exceed an income level established by the State at or below 200 percent of the Federal poverty level;

● those who are unable to obtain health insurance coverage from another source by reason of a preexisting medical condition;

● those who have exhausted some or al I of the benefits

under their health insurance policy; and

● those whose employer employs no more than 25 individuals and is unable to provide adequate health insurance coverage for such individuals at a reasonable cost.

S. 1265/H.R. 2508—Minimum Health Benefits for A// Workers Act of 1987—Amends the Public Health Service Act

to require each employer to enroll each of its employees

and their families in a health benefit plan. Makes State employers which do not so enroll their employees and their

families ineligible to receive grants, contracts, loans, or

loan guarantees under such Act. Amends Fair Labor Standards Act of 1938 and Employee Retirement Income Security Act of 1974 to require each employer to enroll each

of its employees and their families in a health benefit plan.

Amends ERISA regarding supersedure of State laws relating to contracts or policies of insurance issued to or under a health benefit plan under this Act.

S. 1370—Amends the Internal Revenue Code to increase from

25 to 80 percent the income tax deduction for the health

insurance costs of a self-employed individual.

S. 1386—Amends the Internal Revenue Code to increase the

income tax deduction for the amount of health insurance

costs of a self-employed individuals from 25 to 100 percent. Permits income tax deductions for self-employed individuals in the amount of their contributions to group

health plans that are not self-insured and that provide medical benefits to employees.

H.R. 200-USHea/th Program Act—Amends the Social Security Act to ensure access for all Americans to quality health

care, regardless of age or disability, while containing the

costs of the health care system.

H.R. 955—Hea/th Care Savings Act of 1987—Amends the internal Revenue Code to permit individuals and employers

to contribute to health care savings accounts. Limits the

amount which may be contributed to a health care savings

account each year to no greater than the combined amount

of employee and employer hospital insurance payroll tax

paid during that year. The employee and the employer will

each receive a 60 percent tax credit for their respective portion of their hospital insurance payroll tax paid.

H.R. 2696 -Universa/ Health Insurance Act of 1%7—Amends

the Social Security Act to make health insurance widely

available to all U.S. citizens. Each enrollee shall pay a

premium equal to six percent of the sum of the amount

of an individual’s verified income and the amount of the

individual’s net assets.

H.R, 3065—(no title) —Amends the Internal Revenue Code

provisions relating to the income tax deduction for t h e

health insurance costs of self-employed individuals to increase from 25 to 100 percent the allowable deduction and

make the deduction permanent.

H .R. 3766—Comprehensive Hea/th Care Improvement Act of

1987—See above.

SOURCE Office of Technology Assessment, 19SJ3

84-750 - 88 - 2 : QL 3
Chapter 2

Private Health Insurance:

Background and OTA Survey

CONTENTS

Page

Introduction . 41

Group v. Individual Health Insurance . . 41

Distinguishing Features of Individual v.

Group Insurance . 42

Individual Insurance Market . . . . . . . . 45

Box

Box Page

2-A, How One Insurer Handles Suspected

Seropositives: Metropolitan Life’ s

Policy . . . . . . . . . . . . . . . . . . . . ., ., ., 49

Predictive Testing – Underwriting v.

Discrimination . . . . . . . . . . . 47 Figures

Predictive Testing and AIDS . . . . . . . 48 Figure

Regulation of Health Insurance. . . . . . . . . . . 49 2-1.

Regulation of Insuring Entities . . . . . . . 50

Regulation of Insurance Contracts . . . . . . 50

Mandated Benefit Laws . . . . . . . . . . . .51

Premium Taxation . . . . . . . . 52 2-2.

Regulatory Authorities . . . . . . . . . . . . . . . . 52

Federal Laws Affecting Health Insurance 52

The Health Benefits Marketplace . . . . . . . . . 53 2-3.

Development of Health Insurance . . . . . 53

The lnsured Group Market . . . . . . . . . . . 53

Self-Insurance . . . . . . 54 2-4.

The OTA Survey . . . . . . . . . 55

Introduction . . 55

Commercial Health Insurers 55

Blue Cross Blue Shield Plans 57 2-5.

Health Maintenance Organizations 58

Survey Results 60

Page

Risk Classification in Individual

Health Insurance: Estimated

Proportions of Standard,

Substandard, and Denied Applicants. 62

Typical Health History Questionnaire

in a Commercial Health Insurance

Application . . . . . . . . . . . . . . ., 70

Attending Physician’s Statement Used

for Commercial Health Insurance

Applicants . . . . . . . . . . . . . . . . . . . . 71

Commercial Health Insurers

Estimated Proportion of Applicants

Required To Have an APS, Physical

Exam, or Blood/’ Urine Screen . . . . . . . 73

Diagnosis-Specific Attending

Physician Statement Used by a Blue

Cross Blue Shield Plan . . . . . . . . . . . . 76
2-6. Commercial Health Insurers

Attempting To Identify Applicants

Exposed to the AIDS Virus . . . . . . . . . 80

2-7. Commercial Health Insurers:

Methods Used To Identify AIDS

Exposure . . . . . . . . . . . . . . . . . . . . . . . . . 80

2-8. Commercial Health Insurers: Number

of AIDS-Related Cases. . . . . . . . . . . . 83

2-9. Commercial Health Insurers: Range of

1987 AIDS-Related Cost Projections

for Individual Subscribers . . . . . . . . . . . 83

2-10. Commercial Health Insurers: Percent

of AIDS Cases Determined To Be

Preexisting . . . . . . . . . . . . . . . . . . . . . . . . 84

2-11. BC/BS Plans Attempting To Identify

Applicants Exposed to AIDS. . . . . . . . 86

2-12. BC/BS Plans: Methods Used To

Identify AIDS Exposure . . . . . . . . . . . . 86

2-13. One HMO’s Guidelines for Health

Evaluation: AIDS and Exposure to

the AIDS Virus . . . . . . . . . . . . . . . . . . . 90

2-14. Health Maintenance Organizations:

Number of AIDS/ARC Cases . . . . . . . 90

Tables

Table Page

2-1. Response to the Survey: Commercial

Health Insurers, BC/BS Plans, and

HMOS . . . . . . . . . . . . . . . . . . . . . . . . . . 56

2-2, Commercial Health Insurers Annual

Volume of Applications for

Individual and Small Group

Coverage . . . . . . . . . . . . . . . . . . . . . . . . . 57

2-3. Characteristics of the 15 Responding

Blue Cross/Blue Shield Plans . . . . . . . 58

2-4. Characteristics of the 16 Responding

HMOs . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

2-5. Risk Classification by Commercial

Health Insurers: Common Conditions

Requiring a Higher Premium,

Exclusion Waiver, or Denial . . . . . . . . 60

2-6. Underwriting by Commercial Health

Insurers: Risk Classification of

Individual and Small Group

Applicants . . . . . . . . . . . . . . . . . . . . . . . . 61

2-7. Individual Underwriting by

Commercial Health Insurers: The

Importance of Non-Medical Factors. . 64

2-8. Blue Cross/Blue Shield Plans: Risk

Classification of Individual and Small

Group Applicants . . . . . . . . . . . . . . . . . 66

2-9. Individual Underwriting by Blue

Cross/Blue Shield Plans: The

Importance of Medical and Other

Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

2-10. Health Maintenance Organizations:

Risk Classification of Individual

Applicants . . . . . . . . . . . . . . . . . . . . . . . .

2-11. Individual Underwriting by Health

Maintenance Organizations: The

Importance of Medical and Other

Factors . . . . . . . . . . . . . . . . . . . . . . . . . . .

2-12. Underwriting by Commercial Health

Insurers: Health and Other

Information Requirements . . . . . . . . . .

2-13. Individual Underwriting by

Commercial Health Insurers: Reasons

for Requiring an Attending Physician

Statement or Physical Exam . . . . . . . .

2-14. Tests Commonly Ordered by

Commercial Health Insurers . . . . . . . .

2-15. Underwriting by BC/BS Plans:

Health and Other Information

Requirements . . . . . . . . . . . . . . . . . . . . .

2-16. Individual Underwriting by Blue

Cross/Blue Shield Plans: Reasons for

Requesting an Attending Physician

Statement . . . . . . . . . . . . . . . . . . . . . . . .

2-17. HMOS: Health and Other

Information Requirements . . . . . . . . . .

2-18. Commercial Health Insurers: HIV

Testing Practices and Criteria for

High-Risk Individual, Small Group,

and Large Group Applicants . . . . .

2-19. Response to the AIDS Epidemic:

Reported Plans by Commercial

Health Insurers, BC/BS Plans, and

HMOS . . . . . . . . . . . . . . . . . . . . . . . . . . .

2-20, Blue Cross/Blue Shield Plans:

Number of Subscribers Reimbursed

for AIDS-Related Claims . . . . . . . . . .

2-21. Blue Cross/Blue Shield Plans:

Projected AIDS-Related Claims Cost

for 1987. . . . . . . . . . . . . . . . . . . . . . . . . .

2-22. BC/BS Plans Reporting AIDS Cases:

Prevalence of Cases With Preexisting

Condition for AIDS . . . . . . . . . . . . . . .

2-23. HMOs Attempting To Identify

Individual and Small Group

Applicants Exposed to the AIDS

Virus . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2-24. HNfOs: Methods Used To Screen

Individual and Small Group

Applicants for Exposure to the AIDS

Virus . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2-25. Commercial Health Insurers: AIDS

v, Other Major Illnesses. . . . . . . . . . . .

2-26. Blue Cross/Blue Shield Plans: AIDS

v. Other Major Illnesses. . . . . . . .

68

69

72

73

75

78

79

79

82

85

87

88

88

89

89

91

92
Chapter 2

Private Health Insurance:

Background and OTA Survey

INTRODUCTION

The majority of people in the United States under the age of 65 who are protected by private

health benefit programs are covered through some

type of group plan, usually sponsored by an employer. In group insurance, the underwriting unit

is the group itself, and not the individual members of the group. The overwhelming majority of

persons with private health coverage in the United

States are protected by some type of group health

benefits program. Thus, with some exceptions

coverage is ordinarily offered without medical examination or evidence of individual insurability.

Individuals and small groups, however, are often

“medically underwritten, ” meaning that their

health history and current health status directly

bear on whether they will be insured.

In a private, voluntary health insurance system,

not all applicants for insurance meet the underIThe Health Insurance Association of America (HIAA) estimates

that in 1985 only 11 percent of commercial health insurance policies covering those under age 65 were for individuals and their family

members (66).

writing criteria established by insurers. Thus, the

marketplace does not meet the insurance needs

of all individuals who want insurance. Those who

are already ill or who, in the judgment of the insurers, present a very great risk for claims, may

be denied insurance altogether. Thus, serious policy problems are posed for dealing with the needs

of the uninsured in general, and the high-risk

uninsured in particular.

In this chapter the following areas are examined:

●

●

●

●

a review of the basic principles of health insurance and the differences between group

and individual underwriting;

an examination of the regulatory framework

for health insurance, and brief discussions of

applicable State and Federal laws;

a discussion of the current health benefits

marketplace; and

a description of the role of medical tests in

the underwriting process, including the use

of AIDS antibody testing by insurers.

GROUP V. INDIVIDUAL HEALTH INSURANCE

The purpose of insurance is to minimize financial losses that may arise from unexpected events.

Insurance operates by spreading risks so that

many individuals who could have a loss, but

don’t, help pay for the losses of the few that do

sustain loss. Insurers are in the business of spreading or pooling risks and, in exchange for premiums,

agree to pay all or part of some definable loss.

Insurance also works on the principle that there

must be uncertainty that a loss will occur, and

that the loss is beyond the control of the insured.

Thus, insurance is not written for losses that are

already occurring—“you can’t buy fire insurance

on a burning building. ” In such cases, the insurer

would have to charge the full amount of the loss

the insurer agreed to cover, plus additional charges

for the insurer’s services.

Insurers establish the costs of insurance (i.e.,

premiums) on the basis of an assessment of the

potential losses that they expect to incur. To accomplish this, they employ the mathematical principles of probability and the law of large numbers

(125). The ability to make reasonable predictions

about expected losses improves as the number of

observations of the events leading to losses increases.

The size of a potential loss is another factor in

insurance. Potential losses should ordinarily be

of such a large magnitude that their occurrence

47
42

has a significant financial impact on the insured.

Budgetable expenses and small losses are generally not insured, because the administrative costs

of such insurance would be very high relative to

claims paid. The insurer would have to collect

premiums not only to cover the small losses but

also to pay the expenses of handling many claims

transactions. The most administratively efficient

forms of insurance, therefore, cover only potentially large losses that seldom occur and that seriously affect the financial position of the insured

when they do occur. Measured by these criteria,

some forms of insurance are less efficient in their

design (e.g., first dollar coverage or no deductible) than other forms.

Finally, private insurance operates on the principle that the costs of insurance generally should

be proportional to the risks involved. Individuals

applying for private insurance whose potential

losses are large are expected to pay higher premiums than those whose potential losses are likely

to be less.

The term “health insurance” broadly includes

various types of insurance—such as accident insurance, disability income insurance, medical

expense insurance, and accidental death and dismemberment insurance—that are designed to reimburse or indemnify individuals or families for

the costs of medical care arising from illness or

injuries.

Distinguishing Features of Individual

v. Group Insurance

Although individual and group health insurance

plans provide protection against similar types of

medical expenses they are, in a sense, fundamentally different types of insurance. Understanding

the differences is important in judging how each

type of insurance responds to the needs of the insured, including those who are at high risk.

The Contract

An individual health insurance contract is one

made by an insurer with an individual applicant,

called a “policyholder” or “subscriber,” and normally covers that individual or, in some cases,

the individual and his or her dependents. A group

insurance contract is made with the sponsor of

the group coverage—usually an employer—and

covers a group of persons (and in some cases, their

dependents) identified as individuals by reference

to the group. The group sponsor, not the members of the group, is the insured party. Group insurance contracts are, as a rule, continuous in nature and ordinarily continue beyond the lifetime

or membership in the group of any of its participants. Though some terminations do occur, most

employers and other groups provide health insurance continually as an ongoing part of their regular fringe benefit programs.

Underwriting Differences

Among the most important of the differences

between individual and group insurance is the

matter of risk selection, or underwriting. Underwriting refers to the processes used by insurers

to select, classify, rate, and accept or deny risks.2

With some exceptions (such as in the case of

small groups), group insurance is generally issued

without medical examination or other evidence

of insurability. Group underwriters are usually

interested only in whether the group as a whole

can be insured. In a large group of employed persons (and their dependents), it is presumed that

the overall risk for the entire group is close to

average and that there are relatively few individuals who have health needs of such severity or

frequency that they would be uninsurable or substandard risks for individual insurance coverage.

In other words, the variation in average risk

among group contracts—where the group size is

reasonably large—is likely to be small.

In contrast, applicants for individual insurance

are not part of a well-defined, homogeneous, and

generally healthy group. Because of the potentially great differences in the health status and potential risks presented to insurers by individual

applicants, insurers evaluate individuals by using

quite different criteria than are used in underwriting groups. Thus, “medical underwriting” is customarily used by most insurers to determine

‘The term “underwriting” is sometimes used in a narrower sense

to refer simply to the process by which an insurer accepts or rejects

an applicant for insurance.
43

whether and under

ance coverage will

what terms individual insurbe approved.

Adverse Selection

“Adverse selection” refers to the situation

whereby, in the absence of any controls, persons

who seek to obtain insurance will tend to be those

who will use it the most, that is, those with a

greater than average probability of loss. Applicants who are motivated to purchase coverage because they are aware of a medical problem that

is not yet evident to the underwriter can select

against the insurer. This is of concern to both

group and individual insurance markets, but particularly to the latter. Group insurers try to protect themselves against adverse selection by using

certain group underwriting techniques. For example, groups organized for the purpose of obtaining insurance are likely to include a disproportionate number of higher risks. Therefore, group

insurers usually write coverage only for groups

that exist for reasons other than for the purposes

of obtaining insurance.

Employment-based groups are especially attractive to insurers. There generally is a flow of members into and out of such groups so that the average age and therefore the average risks of these

groups do not increase much over time. Employees also typically comprise a generally healthy

group because of the implicit (and sometimes explicit) health standards required by employers for

hiring and retaining workers. Employees whose

health is good enough to meet employment standards are generally better than average risks for

insurance purposes. The families of employees,

on the other hand, generally represent average

risks.

The distribution of insurance costs in group

versus individual insurance is also a critical difference, because it bears on the overall affordability of each type of health insurance product. In

most cases, group members do not pay the full

costs of their health insurance protection. Instead,

the sponsor of the group plan—for example, the

employer—usually contributes the major portion

(sometimes all) of the premium costs. Without

these contributions, premiums charged each member in the group would be likely to vary with the

known risk, so that they would increase with age

and could eventually become quite large for the

older members. Charging the actual average group

rate without an employer contribution could also

lead to little or no enrollment among younger

members of the group who might obtain lowercost insurance individually. Thus, the employer’s

contribution makes it feasible to charge all workers affordable rates that do not increase with age

and do not result in asking younger persons to

pay more. This type of cross-subsidy among

group members is not found in much of the individual insurance market and is a major advantage of group insurance.

Adverse selection is a particular problem in the

individual insurance market. Most applicants for

individual insurance are seeking coverage for the

costs of unknown or unpredictable losses. Some

applicants, however, are motivated to obtain insurance, because they know that they may have

a higher than average probability or even a certainty that they will require treatment.

Relative Costs of Group v. Individual

Insurance

Yet another very important difference between

group and individual insurance is the non-benefit

costs and the economies of scale in providing each

type of insurance. Group insurance is essentially

low-cost, mass protection. Group insurance is also

written without assessing each individual, thereby

removing a source of considerable underwriting

expense.

The administrative costs of marketing, acquiring, and maintaining individual accounts—as a

percentage of premium—are far greater than are

ordinarily incurred in the group market. Thus,

the amount of premium dollars available to pay

benefits is much less for individual than for group

insurance.

Tax-Favored Treatment of Group Benefits

Finally, the tax treatment of employer contributions toward group insurance favors enrollees

in group health plans in contrast to purchasers

of individual coverage. Employer contributions

to a group plan are deductible to the employer

as business expenses and, more importantly, not
44

counted as taxable income to the members of the

group plan. Thus, group insurance provides a

greater after-tax value to group members than

comparable wage or salary payments. Put differently, the cost of individual insurance is greater

than the comparable cost of the same coverage

in a group, because all of the costs of individual

coverage is paid with after-tax dollars, while some

or all of group coverage costs are financed with

pre-tax dollars. (The Tax Reform Act of 1986 provides a limited tax subsidy toward the purchase

of individual insurance for some self-employed

persons) (1161 of the Tax Act of 1986).

Underwriting Groups

In the private insurance marketplace, the characteristics of an acceptable group are determined

by each insurer, subject to State restrictions relating to group insurance. Different insurers have

different business goals and market segments in

which they are particularly interested. Their underwriting rules are designed with these goals in

mind. Group underwriters will select group risks

whose expected claims experience will meet the

standards established by each insurer for a plan

of benefits and will set a rate to cover those expected costs.

As noted above, most group insurance is not

medically underwritten. Instead, group underwriting involves examination of the experience of a

group as a whole in terms of the following risk

classification factors: size of the group, industry,

composition of the group, location, plan of insurance, cost-sharing, administrative arrangements, and previous claims experience of the

group. Larger groups are generally experiencerated, meaning that the premiums charged are

based on the actual amount of claims payments

made on behalf of the group in a prior period,

usually the preceding year.

The capacity to spread risks in a group diminishes as the group becomes smaller. Most insurers,

therefore, employ special rules for underwriting

smaller groups. Because of the limited spread of

risk, the experience of small groups is generally

pooled with other small groups, and all groups

in a particular category are treated as a single risk

for rating purposes. Because the potential for adverse selection is quite high in small groups, many

insurers apply especially restrictive underwriting

standards—including the imposition of preexisting condition limitations, plan or benefit restrictions, etc.—that are not applied to the larger

groups.

Very small groups (2 to 15 lives) are often medically underwritten in much the same manner as

applicants for individual coverage (see below). In

such cases, the insurer requires proof of insurability from each member of the group (including

their potentially covered dependents). Where a

member of the small group is determined to be

uninsurable, the insurer may respond in a number of different ways, but generally the entire

group is declined. In group plans where the individual pays a portion of the premium, people who

elect not to enroll when first permitted to do so

may also be medically underwritten if they seek

coverage later on, in order to prevent adverse

selection against the insurer. These individuals are

commonly referred to as “late applicants. ”

Underwriting Individuals

As premium rates are based on expectations,

and not on certainties, the underwriting of individuals involves placing individuals in classes with

about the same expectations of loss. “Preferred

risks”- that is, those with average or less than

average expected losses—will be accepted for insurance. Those with higher than average expected

losses may be accepted but under special conditions. Those with the highest expectation of loss

are declined and deemed uninsurable, except in

some States where Blue Cross/Blue Shield (BC/BS)

is required to accept all applicants (i.e., “open enrollment” is required).

Underwriting Factors

The largest portion of the health insurance

premium consists of expected claims (or benefit)

costs. This amount is determined by the morbidity of the insured policyholders. Morbidity refers

to the estimated frequency and severity (or average magnitude of loss) of illnesses and accidents

in a well-defined class of persons. The probability of loss and the average severity are affected

by such risk selection or classification factors as:
45

age, sex, health status and history, amount of benefits, financial status, occupation, and certain

other factors. Each insurer prescribes its own

range of acceptable risk-selection factors.

Insofar as health insurance is concerned, the

two most important risk factors affecting individuals are age and current and future health status.

For almost every type of benefit, both frequency

of use and severity of illness increase with age.

Underwriting guidelines developed by insurers

often require more frequent use of medical examinations and requests for attending physician

statements from older applicants for individual

insurance coverage. Claims costs for different benefits often vary by gender, so sex is also a factor.

The goal of the underwriter is to determine

whether insurance can be issued at “standard”

rates, offered at “substandard” rates or with other

limitations, or whether insurance should be refused (declined) altogether. The current and future health of an applicant is obviously important. When the applicant is already ill, disabled,

or undergoing treatment at the time of application, coverage will not ordinarily be extended at

all or if approved, will not cover the illness. If

the impairment is minor, a policy might be issued

with a preexisting condition limitation or waiting period in the contract. But if the condition is

more serious, the application may be postponed

or declined altogether. Thus, through an assessment of present medical condition and past medical history, the probable effect of future health

status on expected claims experience is evaluated.

For example, most health insurers deny any applicant whose probability of disease exceeds three

times the average for his or her sex and age (HIAA

manual). Under these standards, human immunodeficiency virus (HIV) infection far exceeds the

limit of insurability for both life and health insurance. Insurers estimate that the mortality for

an asymptomatic 35-year-old man infected with

the HIV virus is 44 times, or 4,400 percent, that

INDIVIDUAL INSURANCE MARKET

The individual insurance marketplace, compared with group insurance, is very small and consists of several different segments. The first of

expected of a healthy, non-HIV-infected 35-yearold (81).

Applicants for individual coverage are assessed

from three perspectives. First is the health history

of the individual applicant. A history of past illness or accident will be given weight depending

on: the severity of the original ailment, degree of

permanent impairment (if any), possibilities of

recurrence, complications that may develop, etc.

Certain types of impairment have high recurrence

rates (e.g., peptic ulcers), while others may have

little or no bearing on future risk for claims (e.g.,

bone fractures, appendicitis), especially if a reasonable time has elapsed without complications.

Conditions that are chronic and that also produce

severe losses (i.e., involve high costs and large

claims) may result in declination altogether. Second, certain family health information may be requested relating to the health of parents, children,

and spouses. Generally, such information is more

important to life insurance than to health insurance underwriting, but it may have some bearing on the applicant’s future health as well (e. g.,

family history of diabetes).

Finally, the applicant’s current physical condition is evaluated. Depending on this assessment

(including judgments by the applicant himself and

the insurance agent’s observations about the applicant), certain tests or studies maybe requested

(e.g., blood chemistry, urinalysis, electrocardiogram), depending on the age or kinds of coverage sought.

Some States have legislated certain limitations

on the underwriting process, precluding insurers

from rejecting or separately rating certain persons

(141). Typically, such provisions preclude refusal

to issue coverage solely because of a physical

handicap or some other circumstance pertaining

to the applicant’s health status. These restrictions

on insurer underwriting are discussed elsewhere

in this chapter.

these is the “primary permanent” market, consisting of persons who generally look to individual

insurance for their principal health benefit pro-
46

tection and who have the means to purchase such

coverage. This market is not as significant as it

once was, because many of the writers of group

benefits–such as Blue Cross and Blue Shield

plans—have expanded their group market offerings down to and including very small groups

(e.g., two to nine members).

A second, but increasingly important part of

the individual marketplace is the “supplemental”

individual insurance area. This, too, is something

of a special market that serves the narrower insurance needs of people whose basic health benefit requirements are already satisfied through

some kind of group coverage arrangement or

through Medicare. The consumers in this market

are looking only to supplement the benefit design

features of that group insurance. “Medigap” insurance for the elderly is an example of this type

of protection. Cancer insurance is another example. Cash-benefit type plans are frequently marketed as supplements to other forms of benefits.

A third segment of the individual market is

sometimes called the “primary interim” market.

This consists of individuals or families caught between group coverage options, usually because

of a break in the insured’s connection to a sponsor of group benefits (e.g., through job loss,

caused by prolonged illness and/or disability,

voluntary separation from work, death of the

worker, etc.). These persons usually seek individual insurance coverage on an interim basis. It is

in this latter market that problems relating to the

availability and/or affordability of private insurance options for certain individuals are often

found.

Many of those interested in individual insurance—sometimes on a permanent, sometimes on

a temporary basis—are those who have converted

from a group policy.3 Once a converted policy

is issued, the administration of the policy follows

that of other forms of individual insurance, including premiums paid directly by the insured to

the insurer. Those who take the opportunity to

convert often do so with the expectation of medical expenses and are generally poorer than average risks.

3Conversions represent a not insignificant portion of individual

enrollments in some Blue Cross/Blue Shield plans.

Companies that wish to compete in the individual health insurance field must price their products low enough to be competitive with other

offerings and affordable to potential buyers but

also high enough to cover expected claims and

administrative expenses, and provide a return on

capital. Understanding this objective helps to explain the importance of the underwriting function,

or risk classification process, in the individual

health insurance field. If, after deciding on the

kinds of business it wishes to have, an insurer

prices its products on the basis of assumptions that

later prove erroneous—including estimates about

expected future claims—the company will lose

money. If the assumptions about expected claims

are very wrong, and the resulting losses severe,

the company may even face solvency problems

that could impair its ability to meet other contractual obligations. The selection and rating processes are used by the companies that medically

underwrite coverage in the individual marketplace

to minimize such risks for the insuring organization. Unless private companies are allowed to exercise reasonable control over risk selection, they

face possible failure as insuring organizations.

This is because a considerable number of persons

would wait to obtain insurance until shortly before they expect to incur large health costs and

would drop coverage when their health care needs

were no longer significant.

The individual insurance market is not regarded

by many insurers as an efficient, effective, or

profitable insurance line, and over the years the

number of major insurance companies involved

in the individual insurance field has diminished.

Individual insurance products are viewed by

many as inefficient because of the high expense

ratios needed to support the costs of acquiring

business, the expensive underwriting processes

required, and the costlier distribution system.

These factors reduce significantly the amount of

premiums that can be returned in the form of

benefits.

Profitability for individual insurance products

is largely a function of actual claims experience,

expenses, and persistency (i. e., the degree to

which policies are renewed by the insured through

continued payment of premiums), relative to the

assumptions used in pricing. Investment income,
47

which is a major factor in the group market, is

not ordinarily a major contributor to earnings on

individual insurance. The ability to earn a profit,

therefore, is very sensitive to pricing assumptions,

such as inflation projections and the willingness

of regulators to view rate increases as reasonable.

The capacity of insurers to adequately price any

insurance product depends on their ability to estimate risks. To assess the risks presented by an

individual applicant for insurance, the insurer

must gather as much information about the applicant as it deems needed to assign the individual to an appropriate class of risk. Insurers argue that they must have reasonable access to

knowledge that has a significant bearing on the

risk assignment process (148).

In order for rate equity to be fair among classes

of insureds, premiums must also be reasonably

related to the degree of risk involved for the class.

Under this theory, two policyholders buying individual insurance and presenting approximately

the same risk in terms of expected claims and expenses are expected to pay the same premiums.

If their risks differ, the premiums should differ

as well. Unless insurers have access to and can

use pertinent information in the risk categorization process, high-risk individuals can become insured without paying premiums commensurate

with their risks. Failure to use underwriting tools

to identify different risks will result in the subsidization of high-risk persons by low-risk groups.

If this subsidization is inadvertent or undisclosed,

it is unfair to the low-risk groups. Even if disclosed, it will induce those benefited to accept insurance and those overcharged to reject it, regardless of the inherent efficiency of the insuring

mechanism.

Both the marketplace and regulatory policies

impose limitations on the charges assessed to lowrisk groups to support high-risk individuals.

Premiums that are high because of the expected

experience of higher-risk individuals that are covered will result in lower-risk individuals seeking

insurance elsewhere from competitors who underwrite differently, or they may drop insurance because the benefits of insurance are not worth the

cost to them. Regulators, too, must be concerned

that premiums are not only reasonable from the

consumer’s point of view, but also that they are

adequate to assure the solvency of the insurer.

Thus, competitive pressures of the marketplace

introduce real limits on the ability of insurers to

accept heterogeneous risks in a single pool.

Predictive Testing—Underwriting v.

Discrimination

Until recently, the need of insurers to inquire

about and/or use tests in the underwriting process for individual coverage was generally accepted

by many in the insurance industry and by the regulatory community. Past regulatory concerns

have focused not so much on the use of test information for underwriting purposes, but rather

on the need to preserve test result confidentiality. High-risk individuals are especially concerned

about privacy issues and about potential discrimination in employment, housing, or other areas,

if their health circumstances are known. As a result, many State insurance departments developed

specific policies regarding insurance company use

and disclosure of medical information about applicants and insureds, including test results. The

National Association of Insurance Commissioners

(NAIC) has developed a Model Information and

Privacy Protection Act that has been adopted by

a number of States to deal with disclosure of personal or privileged information, including unauthorized disclosures of information to employers

(123). Other States, though not using the NAIC

model law, have comparable requirements of one

sort or another (see app. C).

In recent years, however, many of the States

have gone beyond confidentiality concerns to prohibit certain kinds of underwriting approaches

that have been deemed by State legislatures as discriminatory. For example, in 1987 Maine and

North Carolina approved laws prohibiting discrimination in issuing, continuing, or canceling

insurance policies, or charging higher premiums

solely because of certain physical handicaps (141).

Maine prohibits discrimination against those who

are blind, partially blind, or have physical or mental handicaps unless discrimination can be justified by sound actuarial practice. North Carolina

prohibits discrimination solely on the basis of

blindness, partial blindness, or partial deafness.
48

Denial of coverage may not be based on the handicap alone.

Other laws have been approved in recent years

in some States prohibiting rating or rejecting persons exposed to a drug (DES) linked to cancer in

the offspring of certain women or persons having certain genetic characteristics, such as sicklecell traits. At least eight States have adopted

NAIC guidelines barring insurers from using sexual orientation in the underwriting process or in

the determination of insurability, premium, terms

of coverage, or nonrenewal (212, 213).4

The specific rulings from many insurance departments about underwriting limitations seem to

have two major goals: first, to assure that insurer

practices adequately safeguard against discrimination and breaches of confidentiality, and, second, to assure that underwriting decisions are related to the nature and degree of risk covered or

expenses involved. As in the case of Maine, Wisconsin demands that the factors that are used for

underwriting purposes are justified. But Wisconsin has also concluded, for instance, that an applicant’s sexual orientation cannot be used as a

factor in the underwriting process (274).

Predictive Testing and AIDS

The AIDS epidemic has brought about a great

deal of attention to the problems of the high-risk

uninsured and the appropriateness of predictive

testing in the underwriting process, particularly

in individual health and life insurance markets.

In an effort to assess the levels of risk presented

by individual applicants, some insurers ask questions directed specifically at the AIDS risk. Others

seek to have applicants physically examined, including blood testing for AIDS antibodies. Still

others are looking for indications of a recent history of sexually transmitted diseases (STD). (See

box 2-A for a description of how one insurer

handles applicants who may be AIDS antibody

positive. )

These steps have provoked considerable concern among those who are in the highest risk cat41ncluding Colorado, Delaware, Florida, Iowa, Oregon, South

Dakota, Texas, and Wisconsin.

egories for potentially contracting AIDS, AIDSrelated complex (ARC) or other AIDS-related disorders. Consumer and advocacy groups are particularly worried about confidentiality issues and

discrimination—particularl y in the workplace—

and about the ability of some persons to obtain

health or life insurance coverage in the individual marketplace. AIDS advocacy groups have also

charged that much of the antibody testing now

being done is not appropriate or reliable testing

for underwriting purposes. The tests, it is asserted,

may indicate the presence of the AIDS virus, but

not the disease itself.

Regulators and legislators throughout the country have been urged to pass laws or adopt regulations that limit or ban the use of AIDS antibody

testing or test results as a basis for making underwriting decisions. The NAIC has been very active in the formulation of policies relating to insurer medical/lifestyle questions and underwriting

guidelines affecting AIDS and ARC (212). Among

State legislation on AIDS, California has passed

a law prohibiting the use of the AIDS antibody

tests or their results—but not other tests reflecting immune function—for the determination of

insurability. Florida, Maine, and other States do

not prohibit the use of AIDS antibody tests, but

disallow questions regarding prior antibody testing history. The New York Department of Insurance held that the antibody tests are not diagnostic, because they only indicate exposure to the

AIDS virus, not the presence of the disease. It attempted to prohibit AIDS antibody testing in underwriting and rating health insurance or in the

denial of claims, but was denied by the State Supreme Court in April 1988.

The District of Columbia has adopted the most

restrictive legislation regarding AIDS testing and

insurance. The legislation prohibits the use of all

AIDS-related tests for a 5-year period, including

tests for AIDS antibodies, tests for the condition

of the immune system, and tests to identify the

existence of the AIDS virus itself. The legislation

further prohibits the use of personal characteristics such as age, marital status, geographic area

of residence, occupation, sex, or sexual orientation for the purpose of seeking to predict whether

any individual may in the future develop AIDS

or ARC.
49

Box 2-A.—How One Insurer Handles Suspected Seropositives: Metropolitan Life’s Policy

This information is taken from “Impact on AIDS on the Health Insurance Industry, ” a speech by Philip

Briggs, vice-chairman, Metropolitan Life Insurance Co., September 30, 1987, to the Institute for International Research Conference on AIDS.

Insurance testing for AIDS primarily concerns three groups of people:

● Those applying for individual life or health insurance.

● Those in small group insurance plans (usually from 2 to 49 people).

 Those who originally do not accept large group coverage but later apply for the insurance.

Metropolitan Life requires the HIV antibody test when an applicant seeks a substantial amount of coverage, and when the applicant has symptoms possibly suggestive of AIDS. We use two ELISAS and a Western blot. Where such tests are prohibited, we use T-cell testing. No testing is performed without the applicant’s consent. If the person declines the test, the application is marked “no action” and filed.

An application turned down because of a seropositive test is sent to the medical director, where the information is distributed strictly on a need-to-know basis.

To determine if applicants want to know about their seropositive test, we first tell them there was a significant result from their blood test. Then if they return a signed authorization, we offer the information to

them or their doctors.

In group insurance, premiums and rates can be changed annually. But this may not be practical or desirable.

Instead, insurers might suggest redesigning the health plan to included some of these features:

● Longer probation periods.

● Limitations on benefits that involve many conditions in addition to AIDS.

● Add limited coverage clauses to plans that do not have them.

SOURCE: “How One Insurer I-iandles Suspected Seropositives Metropolitan Life’s Policy” AIDS Patient Care, 2(1):6 February 1988.

Wisconsin’s experience in developing AIDS- by rule to be sufficiently reliable for use in unrelated policies brings a different focus to some derwriting of individual life, health, and accident

of the specific issues ielating to predictive testing

and insurance underwriting. In the fall of 1985,

the Wisconsin legislature amended a law passed

earlier in the year prohibiting insurance companies from requiring individuals to take the AIDS

antibody test or to reveal the results of tests already taken. The provision also prohibited insurers from basing rates or any other terms of coverage on whether an applicant had taken the test

or had revealed the results of a test already taken.

The amended law, however, allows insurers to

use a series of AIDS antibody tests which the State

epidemiologist finds to be medically significant

and sufficiently reliable for detecting the antibody

and which the Commissioner finds and designates

insurance.

The State epidemiologist did determine that a

series of multiple ELISA (Enzyme-Linked Immunosorbent Assay) tests coupled with a Western

blot test is medically significant and sufficiently

reliable.

The Commissioner’s office found, however,

that these rulings leave unanswered the much

broader—and much more significant—public policy question of how the costs of treating the AIDS

pandemic should be dealt with, and particularly

for those who are denied coverage sought on an

individual basis.

REGULATION OF HEALTH INSURANCE

There are two broad categories of health insur- insurance companies and hospital service (Blue

ing organizations in the marketplace—commercial Cross) and/or medical service (Blue Shield) plans.
50

More than 800 insurance companies and 77 BC/

BS plans write group and individual health insurance contracts in the United States. In addition

to the insurers, there are also hundreds of health

delivery organizations, such as health maintenance organizations (HMOS) and competitive

medical plans (CMPS) that, in addition to performing a financing role, actually arrange for the

provision of health services for persons enrolled

in their plans. s

Regulation of Insuring Entities

All of the States have established insurance laws

that require insurance companies to meet a variety of financial and other requirements in order

to obtain a license to do business in the State. The

exact requirements vary widely from State to

State but ordinarily stipulate certain amounts of

financial resources needed to establish solvency

as an insurer (289). The specific financial requirements vary according to such factors as the kind

of insurer involved (e.g., a stock versus a mutual

company), how the firm is to be organized (e.g.,

as a domestic versus out-of-State company), the

number and/or combination of insurance lines

(e.g., life, casualty, accident and health, etc.) a

company proposes to market, and the insurance

experience of a firm prior to the licensing request.

Many States also require companies to maintain

membership in a guarantee association as a condition of doing business to cover the liabilities of

impaired or insolvent companies.

Hospital service (Blue Cross) and medical service (Blue Shield) plans are ordinarily exempted

from State commercial insurance law but are

granted franchises to do business and are regulated under separate enabling legislation (289).

BC/BS plans usually do not have to meet the initial capitalization requirements required of commercial insurance companies, but in many other

respects the plans are treated like commercial insurers in such matters as policy filing and approval, reporting and examination requirements,

and investment limitations. On the other hand,

BC/BS plans are frequently subject to a rate5The regulatory framework governing alternative delivery organizations is not reviewed in this report.

making process that does not generally apply to

commercial insurers. Involved in this process are

review and approval of subscriber premiums,

public rate hearings, benefit modification approvals, and the review and approval of payment

agreements and fee schedules with providers of

health services. In response to growing competitive pressures, an increasing number of plans are

seeking legislative approval to reorganize themselves as mutual insurance companies instead of

traditional hospital or medical service corporations under State law.

Regulation of Insurance Contracts

Generally speaking, the statutory requirements

regarding group contracts differ from those applicable to individual contracts. In essence, regulation in the individual contract area is somewhat

more rigorous and also more standardized than

is found in the group contracts area. This is due

in large part to the view that people who are individually insured lack expertise about many insurance matters and are not in a position to negotiate the terms of contracts with the companies

that specialize in this field. Group insurance arrangements, on the other hand, involve negotiations between more equally situated parties who

can better protect their own interests in entering

into a health benefits contract. Thus, group insurance laws are usually not as detailed or as

prescriptive as the statutes affecting individual

contracts, especially with respect to policy language, though some States do require certain uniform provisions in the group area. Some States

require the filing of group rates and information

justifying rates; others require rate information

only when requested by the regulatory authority. However, the States generally do not regulate group health insurance rates on the theory

that health insurance written on a group basis has

a history of being quite competitive.

All States require that individual health insurance policy forms be filed with the appropriate

regulatory authority before being used. Most

States also require similar filings of group insurance contracts. Insurance laws generally authorize an insurance commissioner (or comparable authority) to disapprove policies if they contain
51

unjust, unfair, inequitable, misleading, or deceptive provisions. Many States also permit their

commissioners to disapprove contracts on the

grounds that the benefits provided are unreasonable in relation to the premium charged for protection; that is, the premiums must not be excessive. Actuarial tests have been developed for

making these assessments. Many of the BC/BS

plans are required to obtain prior approval of individual subscriber rate schedules.

Some States require the advance approval of

individual policies, riders, endorsements, and

other related contractual materials (e. g., the application form). Most States, however, make use

of “deemer” provisions which provide that policy forms and related items will be “deemed” approved, unless the insurance authority advises to

the contrary within a specified period of time.

Some States permit the immediate use of new or

revised policy forms without any “deeming” period until some disapproval action, if any, is

taken. States may also require an insurer to obtain prior policy approval from the State in which

the insurer is domiciled before it may be offered

in their own jurisdictions.

States frequently apply statutory provisions

that prohibit certain types of discriminatory practices in issuing, continuing, or canceling insurance policies, or prohibit charging higher premiums

solely because of certain physical handicaps such

as blindness, mental handicaps, etc., unless the

discrimination can be justified by sound actuarial practice (123). Other anti-discrimination statutes require that underwriting decisions be related

to the nature and degree of the risk covered or

expenses involved. Thus, certain factors—some

of which are discussed elsewhere in this report—

may be barred from use in making underwriting

decisions for individual coverages.

The policy form and supporting material filed

by an insurer are assigned within an insurance department to an insurance examiner, who determines that the documents are in compliance with

various statutory and administrative standards

established by the State for policy form and content. A typical filing would include several copies

of the actual policy form, the application for insurance, information regarding rates and the classification of risks used in connection with the policy, an outline of the rules pertaining to any limits

imposed with respect to eligible risks, and statements setting forth anticipated loss ratios (ratios

of expected claim payments to premiums).

Many States also have laws governing some

aspects of group insurance contracts, such as who

constitutes a group for group benefit purposes.

In addition, many States have adopted laws requiring group contracts to contain certain types

of mandatory conversion and/or continuationof-coverage provisions. b A conversion privilege

permits members of a group and their dependents

to continue their insurance protection on an individual basis when their coverage under a group

plan ceases, without proof of insurability (i.e.,

without regard to information that would affect

the individual’s acceptability for coverage under

an individual contract). Such requirements are

often required not only for workers who leave the

employer sponsoring the group plan, but also for

certain spouses and dependents in the case of the

insured’s death or dissolution of marriage. The

continuation is an extension of the original group

plan at the same premium, though the separated

group member (or his or her spouse or dependents) pays the full premium costs of coverage,

including any employer contributions made on

behalf of members still in the group.

Mandated Benefit Laws

In addition to requiring compliance with certain contract provisions, many States have

adopted various mandated benefit laws (123).

Some of these statutes require that contracts include certain specified benefits. Existing contracts

are usually amended to include required coverages on their renewal dates. Alcoholism, drug addiction, maternity coverage, etc., are among the

areas frequently addressed by mandated benefit

laws.

Rather than mandate specific coverages, some

States require insurers to offer prospective buyers

certain benefits, but the inclusion of those benebThe Federal Consolidated Omnibus Budget Reconciliation Act

of 1985 (COBRA) (Public Law 99-272) has a similar provision regarding continuation of coverage.
52

fits in the group contract is not required. Other

State statutes mandate payment to certain providers by precluding insurers from distinguishing

among the providers of certain health services (for

payment purposes) as long as those providers are

licensed or certified by the State and are operating within the scope of their licenses or certifications.

Premium Taxation

States (and a few other jurisdictions) impose

taxes on premiums received by insurance companies, including premiums for health insurance. In

general, these taxes vary from State to State, by

the type of company involved, and whether the

insurer is an out-of-state or domestic company.

The tax rates also vary, but most are in the 2 to

2.25 percent range. Most States do not impose

premium taxes on Blue Cross or Blue Shield plans,

though several States do impose some charges on

them in lieu of premium taxes.

Regulatory Authorities

In each of the States and the District of Columbia, some authority is designated to regulate insurance, including health insurance. (Health insurance

is only one of the concerns of these authorities. )

In some cases, this is an independent State agency,

such as a department of insurance; in others, the

authority is a constituent of some other entity with

broader responsibilities than insurance alone, such

as business regulation. The insurance departments,

however called, are headed by an official (usually appointed, but in some instances, elected)

known as a commissioner, superintendent, or director of insurance (in a few States, the attorney

general’s office performs certain regulatory functions, usually relating to BC/BS plans). Insurance

authorities are charged with enforcing the insurance, hospital, and medical service corporation

and other State laws pertaining to insurance.

Enforcement is carried out through the issuance

of regulations, rulings, and other formal processes, but also frequently through letter communications and informal discussions and meetings.

Not all regulatory policy, therefore, is clearly

spelled out in official, secondary source documents, or materials published by State insurance

regulatory authorities.

The powers of commissioners and their staffs

to affect the business of insurance are numerous

and include the power to issue or withhold licenses; examine an insurer’s records and financial condition; approve insurance products; surveillance and, in some cases, prior approval of

rates; and the conduct of audits of operations.

Other regulatory supervision focuses on the licensing of agents, advertising practices, disclosure requirements, and policyholder complaints.

Federal Laws Affecting Health

Insurance

The McCarran-Ferguson Act (Public Law 15,

79th Congress) provides that the States have major regulatory responsibilities with regard to the

business of insurance. In addition, several Federal laws affect health benefit plans, particularly

group plans. For example, the Federal tax code

has an important impact on health insurance, such

as the exclusion of employer contributions for

health benefits from the taxable income of workers. Legislation such as ERISA (the Employee

Retirement Income Security Act), the HMO (Health

Maintenance Organization) Act, and Medicare

each affect the design of many private health benefit programs. COBRA (Consolidated Omnibus

Budget Reconciliation Act of 1985) (Public Law

99-272) mandates that employers provide continuation of coverage for those employees and their

dependents who would otherwise lose eligibility

because of reduced work hours or termination of

employment. Congress has also enacted laws prohibiting certain discriminatory practices relating

to age and sex in the provision of health benefits

for workers and their dependents.
53

THE HEALTH BENEFITS MARKETPLACE

Development of Health Insurance

The private health benefits marketplace is a

complex and competitive arena that involves

many different parties concerned with the design,

sale and distribution, cost, regulation, and performance of the health benefits industry.

The health benefits market is dominated by

concerns with group benefits, since most nonelderly Americans are protected against the costs

of medical care through group benefit plans usually sponsored by their employers. Modern group

health insurance evolved during the Depression

with the development of hospital service plans

(Blue Cross) that paid for specified hospital room

and board and ancillary services for a pre-determined monthly payment or premium. Also during the 1930s, commercial insurance companies,

that did provide some sickness and accident coverages on an individual basis, began to offer cash

(or indemnity) benefits toward the costs of health

care as part of group contracts.

During the Second World War, interest in

group health benefits began to expand as a component of many collective bargaining activities,

because such benefits were not subject to wartime

wage and price control limitations. Even greater

interest in employer-sponsored group health benefits emerged soon after the War, when the Supreme Court ruled that such benefits were a legitimate part of the labor-management bargaining

process.

Initial worker interest in group health benefits

focused on hospital care, where new technological advances in surgery and anesthesia were taking place and where the largest and most difficultto-budget-for expenses were incurred. Expanding

use of surgical procedures led to a broadening of

basic hospital benefits to include physician surgical expenses as well. During the 1950s, group

health protection grew rapidly to cover non-surgical services provided by physicians in hospitals,

and then to other medical care provided in office

and other non-hospital settings. Today, many

workers enjoy comprehensive group benefit protection that often encompasses a wide range of

medical care, including dental, vision, and other

non-medical benefits as well.

The Insured Group Market

Until the 1970s, most group buyers of health

benefits—such as employers—purchased coverage from a commercial insurance company or

BC/BS plan. Unless the purchasers (e.g., employers) were very large, however, they generally did not have much influence over the design,

financing, or administration of the health plan.

In the smaller group marketplace, the insurers

themselves developed and marketed a range of

standardized products from which an employer

could choose, allowing for some modifications to

meet the employer’s specific needs.

In exchange for premium payments, the group

buyers transferred to the insuring entities—

insurance companies or BC/BS plans—the financial risks of paying benefits. It is the transfer of

financial risk that is the essence of the insured

health benefits plan. In most instances, the insurers also performed other functions relating to

the contract, such as help in the design of benefits, collection of premiums, payment of claims,

and other administrative functions. Thus, the

group buyer purchased a “package” of insurance

services. Larger group health purchasers (e. g.,

multistate employers or large associations) often

have their own in-house staffs of benefits specialists, including experts in group benefits contracting. These employers, using their market power

as buyers, will generally invite proposals from

competing insurers to provide health benefits for

their workforce on the basis of specifications developed by the employer’s own benefits staff, by

insurance brokers, or by health benefits consultants working for the buyer. As a result, larger

group plans are generally tailored to meet the

needs of the purchaser and are offered on a bid

basis. Thus, knowledgeable buyers and sophisticated suppliers make the group health benefits

marketplace highly competitive.

The commercial insurance companies and the

BC/BS plans—which are basically health care
54

financing and marketing arrangements—are not

the only sources of group benefit coverage. Significant growth has also occurred in the numbers

of health delivery organizations (such as health

maintenance organizations and competitive medical plans) that provide, as well as finance, benefits. This growth has further intensified competition in the marketplace.

Self= insurance

The most important competitive development

in the group health benefits market during the last

15 years has been the “unbundling” of the traditional health insurance product.7 Major changes

have occurred in the development of new and

alternate methods to finance and/or administer

health benefit programs. The principal source of

this competition for traditional insurers in recent

years has come from their own potential policyholders—the employers—who have elected to

self-insure their benefit plans and purchase related

administrative services separately.

During the economic ups and downs of the

early 1970s and early 1980s, many larger corporations with health plans experienced significant

pressures on profits and cash flow. At the same

time, health care inflation and rising utilization

resulted in sharp increases in the costs of their

group health plans. As these costs increased, employers began to consider alternative ways to control expenses, including alternate methods for financing benefits and for administering claims.

Many group buyers, particularly those with

more stable workforces, noted that they experienced relatively little fluctuation in their volume

of health claims, and that the annual increases in

their experience-rated premiums were reasonably

predictable by applying a standard medical care

inflation factor. This straightforward relationship

brought home the fact that the insurers were relieving the employers of very little risk, except perhaps to protect one year’s cash flow. In effect, the

employee groups covered by large corporations

had grown to such a size as to render of little value

‘The traditional insurance product consists of various components

including risk assumption, financing arrangements, claims management, actuarial services, legal services, etc.

the essential function of insurance—i.e., reducing the risk by pooling independent exposures. In

fact, if the group is composed of better than average risks, it can reduce its benefit costs by not having to share in any of the costs of other risks taken

on by an insurer.

The logical next steps were to redesign the

financing mechanisms altogether. Many insurers

responded to new demands from their policyholders by entering into a variety of arrangements

through which the employers or groups retained

or “self-insured” part or all of the financial risks

for the payment of claims. Today, self-insured

health benefit plans of various types and design

are the predominant form of group coverage in

the marketplace among larger employers and

groups. In addition to their traditional insured

group products, most major group health insurers

(commercial and BC/BS) now offer various types

of new products, including administrative services only (ASO) or claims services only (CSO)

programs because of the demand from group

sponsors for such arrangements.

Self-insured plans offer several key advantages

to employers. First, self-insured employers are

able to use and retain earnings on amounts that

would otherwise be paid to and held by insurers

to create claims reserves. Both commercial carriers and BC/BS plans are required, under various State laws, to hold reserves to cover claims

that are due but as yet unpaid, in the course of

settlement, or incurred but not yet reported. The

actual amount of these reserves varies from case

to case and from carrier to carrier, but they can

represent a sizeable portion of the annual premium. The insurers earn interest on these reserve

amounts. Competition, however, has led most insurers to negotiate a retention—that is, the amount

retained by insurers for expenses, for contingencies, and for profits or for additions to surplus—

with employers that reflects rate credits for the

interest earned on the reserves. Many employers,

however, felt that they could gain even more by

holding onto these amounts in the first place.

Second, no State premium taxis applied to selfinsured plans. A self-insured arrangement, therefore, depending on its design, can reduce or eliminate altogether the costs of State taxes on health

insurance premiums.
55

A third and very important benefit of self-insurance is that self-insured plans can avoid the

requirements of State insurance law and regulation because of the Federal Employee Retirement

Income Security Act, or ERISA. A provision in

ERISA allows Federal law to preempt State laws,

insofar as such laws relate to benefit plans covered by ERISA.8 While an exemption from the

general preemption rule for ERISA leaves un8

Section s14 of ERISA. Amendments to ERISA have provided

for some State regulatory review of multiple employer trusts.

THE OTA SURVE Y

9

Introduction

Many insurance texts describe the principles of

underwriting and the underwriting process. ]o Yet,

there are few or no details on whom insurers test

and what tests they require. A 1986 survey conducted by the Health Insurance Association of

America (HIAA) and the American Council on

Life Insurance (ACLI) gathered data on screening by insurers for infections with the human immunodeficiency virus (HIV) (127). This survey,

however, had two important limitations. It did

not provide a view of HIV testing in the context

of other routine tests required by insurers, and

it included neither Blue Cross and Blue Shield

(BC/BS) plans nor health maintenance organizations (1-IMOS), a rapidly growing health insurance

sector.

In an effort to fill this gap, the Office of Technology Assessment (OTA) conducted a survey of

commercial carriers and BC/BS plans in July 1987,

and a survey of HMOS in September 1987. Approximately 14.s million non-Medicare individuals have health insurance without the benefits

of group membership. Commercial carriers insure

approximately 9.3 million (66); BC/BS, 4.2 million (203); and HMOS, approximately 1 million

‘This survey was published in February 1988 as the second staff

paper in OTA’S Series on AIDS-Related Issues. The staff paper is

expanded here to include relevant data on group-based health insurance underwriting.

IoUnderwriting is the process by which an insurer determines

whether or not and on what basis it will accept an application for

insurance.

touched State laws that are designed to regulate

the business of insurance, ERISA preempts laws

that have a regulatory impact on employee benefit plans. Thus, self-insured plans need not comply with any of the State laws that require health

insurance contracts to include specified benefits,

comply with certain anti-discrimination standards

applicable to insured plans, pay State insurance

premium taxes, or participate in insurance pools

for high-risk individuals. Much of the group benefits marketplace, therefore, is virtually unregulated by the States.

(146, 239). These are the principal individuals that

must meet underwriting standards to obtain health

coverage, and their insurers were the focus of the

OTA survey.

The survey was developed in cooperation with

HIAA, the national Blue Cross and Blue Shield

Association (BCBSA), and the Group Health

Association of America (GHAA). The purpose of

the survey was twofold:

1. to collect basic information on individual underwriting practices and the use of medical

screening by insurers, and

2. to document how health underwriters have

responded to the AIDS epidemic.

The survey questionnaire varied little among

the three target groups. Terminology was tailored

to each, and some questions were modified to reflect differences in rating and enrollment practices.

The survey of commercial companies is presented

in app. D.

Overall, 84 percent of the total group of commercial carriers, BC/BS plans, and HMOS that

were surveyed responded. Survey responses are

summarized in table 2-1 and described below.

Commercial Health Insurers

The commercial health insurance survey was

targeted to those firms that sell individual policies.

These firms are the principal health insurers who

require some applicants to undergo diagnostic
56

Table 2-1.—Response to the Survey: Commercial

Health Insurers, BC/BS Plans, and HMOS

Commercial

insurers BC/BS plans HMOS

Total mailed questionnaires .. .88 15 50

Replied . . . . . . . . . . . . .......73 (83%) 15 (100%) 40 (80%)

fully responded ., 62a

(70%) 15 (100%) 16b

(32%)

omitted (not relevant) ., 9 (10?4o) – 23 (46%)

company liquidated 1 — —

too late for inclusion . . . . 1 — 1 ( 2%)

No Reply ... . . . . . . . . . . . . . . 15 (17%) – 10 (20%)

%ne of the sixty-two responding companies had recently withdrawn from the

individual health insurance market and responded only to those questions concerning small underwritten group policies.

bone of the sixteen responding HMOS does not allow individual enrollment but

does accept small underwritten groups.

SOURCE: Office of Technology Assessment, 1988.

testing or physical examination .11 The survey was

sent to the 88 largest individual health insurers

identified by the 1985 “Best’s Life-Health Industry Marketing Results” (20). These 88 companies

represented 70 percent of the commercial, individual health insurance market .12 Two insurers

not found on the Best list but reported elsewhere

(217) to be “leaders” in individual health were included. Two companies reported on the Best’s list

were never located. Thus, the survey was sent to

a total of 88 companies.

Eighty-three percent (73 of 88) of the commercial insurers responded, although one response arrived too late for inclusion and nine companies

issued policies that were not relevant to the intent of the survey (table 2-1). These nine companies sold only cancer, intensive care unit (ICU),

guarantee issue, or Medigap policies and were

omitted .13 Another company had been liquidated.

Nevertheless, commercial participation was high;

62 companies (70 percent) completed the survey

ll~rge group health insurers may test, but only in rare cases of

so-called “late applicants. ” Late applicants are employees who are

eligible for group health insurance but choose not to sign up until

after the normal enrollment period. Employees who do not participate when first eligible may later choose to join when they know

they soon will have a claim. Insurers often require proof of insurability to prevent such adverse selection (124).

IZMarket Share Ca]CU]atiOns were based on 1985 direct Prerniurns

earned for collectively renewable, guaranteed renewable, and all

other accident and health insurance.

‘3Cancer insurance provides coverage only for cancer. ICU policies cover only stays in hospital intensive care units. “Guarantee

issue” refers to policies sold without regard to health status. Medigap policies are designed as supplements to Medicare coverage for

the elderly.

in time to be included in the analysis, representing approximately 57 percent of the commercial,

individual health insurance market (20). (One

company had recently withdrawn from the individual health market and responded only to those

questions concerning group policies. ) Response

was especially strong among industry leaders. Of

the 25 largest companies in 1985, 19 completed

the survey (41 percent of the market), 4 were not

relevant to the survey, and 2 did not reply.

Three health insurance populations were defined in the questionnaire:

1.

2.

3.

individuals-those who seek insurance independently and without any association with

an employer or membership group of any

kind (also referred to as direct pay or nongroup in the BC/BS survey and self-pay in

the HMO survey);

individually underwritten groups—those

groups that are too small to qualify for

experience-rating and whose members must

be individually underwritten (referred to in

this report as small groups);

other groups—employee and other large

groups that do not require individual underwriting (referred to in this report as large

groups).

Survey respondents were asked to avoid including group conversions to individual coverage or

Medigap policies in their responses.

It is important to emphasize that the surveyed

companies were selected to target leaders in individual health rather than group-based insurance.

Indeed, a significant number of the respondents

do not sell group health insurance. Of the 62 survey respondents, 38 reported that they underwrite

small group health insurance, and only 27 indicated that they offer large group coverage. While

the survey’s focus was on individual underwriting, these companies were asked to also respond

to questions concerning their group underwriting

practices .14

Companies were selected for inclusion in the

survey regardless of HIAA affiliation. However,

letters endorsing the survey were sent by HIAA,

laThe response to group-related questions was sometimes Poor,

thus only significant findings are reviewed in this report.
57

on OTA’S behalf, to their 52 members. Companies providing confusing or incomplete data were

called for clarifications.

The responding companies reported receiving

a total of 2.24 million applications for individual

health insurance each year. ’5 The annual volume

of applications ranged from 700 to 325,000. The

largest insurers dramatically overshadowed the

others. Although 70 percent of responding companies process no more than 33,000 applications

annually, 6 firms alone accounted for 1.2 million

applications, or more than half the annual volume of the entire group (table 2-2).

Twenty-eight of the respondents reported also

receiving 436,000 small group applications annually. While most of these insurers (17 of 28) process fewer than 10,000, one company alone accounted for 100,000 small group applications or

more than 20 percent of the annual volume of the

entire group (table 2-2).16

Blue Cross/Blue Shield Plans

There are 77 BC/BS plans nationwide, all offering some form of individual health coverage.

BC/BS plans often operate under considerably

different conditions from commercial carriers.

Some plans hold open enrollment periods, all are

regionally based, and many enjoy significant

shares of their local health insurance market.

ISFour of the sixty-one individual insurers did not provide data

on number of applications received annually.

lbTen of the thirty-eight responding companies (26 percent) that

underwrite small group insurance did not report their application

statistics.

These factors may play a pivotal role in underwriting policies.

Twenty-four plans (31 percent) in 15 States, 4

according to State mandate, accept anyone who

applies for individual coverage, regardless of

health status, during certain periods of the year.

Seventeen (22 percent) of these “open enrollment”

plans are termed “continuous,” because they accept all applicants throughout the year (165). The

implications for the underwriting process are significant. Because no individual standards of insurability are applied to open enrollment applicants, there is considerable adverse selection. In

other words, people with poorer than average

health expectations are more likely to apply for

insurance than those with average or better health

expectations. Most plans attempt to hold down

premium rates for open enrollment subscribers by

providing less comprehensive benefits relative to

medically underwritten applicants. Others require

open enrollment subscribers to pay higher premiums than underwritten applicants for identical coverage. Open enrollment coverage of highrisk applicants usually entails waiting periods before initial benefits may be paid and may impose

limitations on coverage of preexisting conditions.

Even though open enrollment plans never deny

an application, applicants may be required to furnish evidence of their health status, including an

attending physician’s statement (APS).17 Individuals enrolling in an open enrollment program

17An attending physician statement is a report summarizing the

applicant’s recent health history that is prepared by the applicant’s

personal physician.

Table 2-2.—Commercial Health Insurers Annual Volume of Applications for Individual

and Small Group Coverage

Individual policies Small group policies

Number of Number of

Average number of companies Percent of companies Percent of

applications per year (n=61) companies (n=38) companies

100-15,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 43’?!0 19 50 ”/0

15,001 -30,000 . . . . . . . . . . . . . . . . . . . . . . . . . . 16 26 5 13

30,001 -45,000 . . . . . . . . . . . . . . . . . . . . . . . . . . 5 8 3

45,001 -100,000 . . . . . . . . . . . . . . . . . . . . . . . . . 5 8 : 8

More than 100,000 . . . . . . . . . . . . . . . . . . . . . 5 8 0 —

Not available . . . . . . . . . . . . . . . . . . . . . . . . . . 4 7 10 26

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 1000/0 38 1000/0

SOURCE” Office of Technology Assessment, 1988.
58

often have the option of undergoing medical underwriting, and even a physical exam, to determine whether they qualify for a more comprehensive benefit package at a preferable rate. In

addition, health information may be required by

the underwriter to develop benefit limits, exclusion riders, waiting periods for preexisting conditions, or premium rates.

Unlike commercial insurers, the BC/BS plans

are regional and do not sell coverage outside a

particular State, metropolitan area, or region.

This has particular significance vis a vis AIDS,

not only because of the disproportionate effect of

the epidemic on certain locales, but also because

of State and local regulations on screening for HIV

infection.

The market share of many BC/BS plans, though

decreasing in recent years, has historically overshadowed that of any individual commercial carrier. In some States, as much as half the population may be BC/BS subscribers. Such a secure

market position can shape underwriting policies

and allow a plan, for example, to enroll high-risk

applicants.

Fifteen plans were selected for the OTA survey

and were chosen to ensure representative geographic distribution, variations in market share,

location in areas of low and high AIDS prevalence, and differing policies regarding open enrollment (table 2-3). The survey was sent to the

plans, on OTA’S behalf, by the national Blue

Cross and Blue Shield Association along with a

letter of endorsement. All 15 plans completed the

questionnaire and reported that they offer individual and large group coverage. Fourteen also

underwrite small groups. Plans providing confusing or incomplete data were called for clarifications.

The commercial questionnaire was adapted for

the BC/BS plans to include appropriate terminology and address BC/BS open enrollment and underwriting practices. ”

IsReferences t. “individua] coverage” were replaced by “nongroup/direct pay” coverage to reflect BC/BS terminolo~. Plans were

asked to verify whether they offered continuous or noncontinuous

open enrollment. Question 11. B. in the commercial insurers survey

(see app. D), which concerns the importance of nonmedica] underTable 2“3.—Characteristics of the 15 Responding

Blue Cross/Blue Shield Plans

Number of plans

Plan characteristic (n= 15)a

In an area of high AIDS revalence . . . . .

F

5

Significant market share

(more than 38°/0 share) . . . . . . . . . . . . . . 7

In a competitive market

(20-31 0

/0 share) . . . . . . . . . . . . . . . . . . . . . 8

Offers continuous open enrollment . . . . 4

asome plan9 appear in more than one Categow.

bMarket share data come from P. Fanara and W. Greenberg, “The Impact of Competition and Regulation on Blue Cross Enrollment of Non-Group Individuals,”

The Journa/ of Risk and krsurance, pp. 188-189, June 1985,

cAn additional plan holds open enrollment, but it is limited to Cefiain rnonttw

of the year.

SOURCE: Office of Technology Assessment, 1988,

Health Maintenance Organizations

HMOS are health care organizations that provide comprehensive services to enrolled members

for a fixed, prepaid amount that is independent

of the number of services actually used. As of

March 1987, there were 654 HMOS in the United

States, with enrollment exceeding 27.7 million

members, or more than 10 percent of the U.S.

population. HMO growth has been phenomenal.

From 1981 to 1986, average annual enrollment increased 20 percent, while the number of plans increased by 48 percent. Thirty-four new plans

started in the first 3 months of 1987 alone (147).

By assuming not only the insurance risk but

also the responsibility for providing their members’ health care, HMOS operate under significantly different conditions from either BC/BS

plans or commercial carriers. Another important

distinction is that while commercial insurers and

BC/BS plans are governed solely by State regulations, many HMOS voluntarily adhere to Federal qualification standards as well.lg

More than half the nation’s HMOS are federally qualified, and 80 percent of HMO enrollment

writing factors, was split into three parts, focusing on the actual

proportion of BC/BS applicants affected by medical as well as

nonmedical underwriting factors.

l~The Federa] Hea]th Maintenance Organization Act of 1973, as

amended (42 U.S.C. Sec. 300e et seq.), created an HMO office within

the Department of Health and Human Services to regulate HMOS

through qualification and ongoing compliance requirements. In order

to become federally qualified, HMOS must meet certain financial,

underwriting, and rate-setting standards and provide specified medically necessary health services (116).
59

is in federally qualified plans (147). Federal qualification shapes HMO insurance practices including rate-setting, risk classification, coverage, preexisting conditions, and waiting periods. It requires

that if an HMO accepts non-Medicare individual

members, they must be either accepted at a community rate or rejected altogether. Exclusion riders

and rated premiums are prohibited. In addition,

benefits for preexisting conditions must be available upon enrollment because waiting periods are

not allowed.zo Medical screening of individual applicants is permitted, however.

State HMO regulation varies. While some

States give HMOS considerable latitude with respect to nongroup underwriting, others are more

restrictive than the Federal HMO Act. Minnesota,

for example, allows medical screening, exclusion

riders and experience-rating (315). In contrast,

Ohio forbids medical screening of nongroup applicants during a mandated 30-day open enrollment period each year (283),

Most industry experts believe that individual

enrollment in HMOS is rare. The Group Health

Association of America estimates that no more

than 4 percent of non-Medicare HMO members

enroll as individuals (239). Many of these “selfpayers” are “conversions” (i. e., former group

members who have converted to individual enrollment because of a change in employment or

marital status). Both the Federal HMO Act Regulations (42 CFR 417.108(e)) and The Consolidated Omnibus Budget Reconciliation Act of 1985

(COBRA) (Public Law 99-272) mandate that

HMOS allow group members to convert to individual enrollment without providing evidence of

insurability y.

No national database identifies the HMOS that

accept self-paying individuals. Because OTA was

not able to ascertain which HMOS accept individual enrollment, the survey questionnaire was

sent to the 50 largest local and national HMOS

to first inquire whether the organization enrolled

individuals other than on a conversion basis and,

if so, to request that the HMO participate in the

ZOHOwever, if an HMO app]icant knowingly misrepresents his or

her state of health, the plan may have grounds to terminate membership.

survey .21

enclosed

fusing or

cations.

Eighty

Endorsement letters from GHAA were

with the survey. Plans providing conincomplete data were called for clarifipercent of the HMOS (40 of 50) responded.23 Sixteen (32 percent) reported that they

met the survey requirements and completed the

questionnaire in time to be included in the analysis; of these, 15 (30 percent) accept nongroup individuals (i.e., on a non-conversion basis), eight

(16 percent) underwrite small group, and 16 (100

percent) and 4 (25 percent) enroll communityrated and experience-rated groups respectively.

(Note that one of the sixteen responding HMOS

does not allow individual enrollment but does underwrite small groups.) The fact that close to onethird of the 50 largest HMOS enrolled nonconversion individuals indicates that HMOS may be

playing a greater role in the individual health insurance market than previously believed.

The 16 plans that completed the survey had a

total of 9.2 million members and one-third of the

nation’s total HMO membership. Membership for

these HMOS ranged from 110,000 to more than

4.9 million; several were national firms that included from 6 to 24 local plans. The 23 HMOS

that responded to OTA’S letter but accepted neither nonconversion individuals nor underwritten

groups had a total of 6.5 million members (147).

Other responding plan characteristics are summarized in table 2-4.

Although the responding HMOS represent a

substantial share of the national HMO membership, these older, established, and very large organizations are not necessarily representative of

younger plans and recent entrants into the marZIT’he Suweyed plans Were selected from “The Interstudy Edge”

report of HMO membership as of Mar. 31, 1987. Note that many

of the so largest HMOS are national firms that may include as many

as 37 local plans.

zz~e WO smey instmment differed from the commercial questionnaire in several ways. Plans were asked if the HMO (1) accepted

self-paying individuals other than on a conversion basis; (2) was

federally qualified or had a nonfederally qualified subsidiary; (3)

offered continuous or noncontinuous open enrollment; and (4) had

individually underwritten groups, community-rated groups, or

experience-rated groups. In addition, some terminology was changed

to reflect HMO practice.

zJHowever, one HMO responded too late to be included in the

analysis for this report.
60

Table 2-4.—Characteristics of the 16 Responding

HMOsa

Number of HMOS

HMO characteristic (n= 16) Percent of HMOS

Federally qualified (FQ) , 9 56%

FO with non-FQ subsidiary 3 19

Model type:

Network . . . . . . . . . . . . . . . . 7 44%

IPA b 

. . . . . . 5 31

Staff . . . . . . . . . . . . . . . . . . 3 19

Group . . . . . . . . 1 6

Membership types accepted:

Self-pay individual s 15 94%

Individually underwritten groups 8 50

Community-rated groups . . 16 100

Experience-rated group 4 25

aAn additional 16 Hf.M)s responded to the survey but were excluded because

they accept neither individuals nor individually underwritten groups.

bln&pendentpractice association.

SOURCE: Office of Technology Assessment, 1988.

ket. Small, young HMOS are less likely to enroll

individuals, be federally qualified, or operate on

a not-for-profit basis (147).

Survey Results

Medical and Other Factors in Risk

Classificationz*

Commercial Insurers.—The outcome of underwriting is risk classification, the final evaluation

ZiThroughout this di~ussion, small group risk classification 5tatistics are provided only when the related survey response was

meaningful. Note also that small group underwriting varies. Some

insurers risk-classify each small group member individually; covof whether the proposed insured will be covered

on a “standard” or “substandard” basis, or not

at all. Insurers were asked to list those conditions

or impairments that they exclude from coverage,

“rate-up” (i. e., require a more costly premium),

or consider uninsurable. In general, the companies take a very similar approach to classifying

risk. However, there are differences; some medical conditions or impairments that make the applicant wholly uninsurable by one insurer may

just be excluded from coverage or rated-up by

another. For example, although some companies

are unwilling to underwrite applicants with any

history of diabetes, others decline only juvenile

diabetics and insure but exclude diabetes for other

diabetic applicants. In some cases, severity of the

condition is key. For example, if hypertension is

controlled and moderate, a rated premium (i. e.,

more expensive) may be offered; if the hypertension is uncontrolled or severe, the applicant may

be denied coverage altogether (table 2-5).

Most applicants for individual health coverage

are classified as standard and can purchase insurance protection without extra premiums or special limitations. Three-quarters of the responding

insurers (46 of 61) provided standard coverage to

at least 60 percent of their individual applicants.

In total, the responding insurers reported selling

ering some members on a standard basis, requiring exclusion waivers

for others, and possibly refusing to cover others. Other insurers look

at the small group as a whole and either underwrite the group entirely or not at all. The statistics reported here reflect the former

practice.

Table 2-5.—Risk Classification by Commercial Health Insurers: Common Conditions Requiring a Higher

Premium, Exclusion Waiver, or Denial

Higher premium Exclusion waiver Denial

Allergies Cataract AIDS

Asthma Gallstones Ulcerative colitis

Back strain Fibroid tumor (uterus) Cirrhosis of liver

Hypertension (controlled) Hernia (hiatal/inguinal) Diabetes mellitus

Arthritis Migraine headaches Leukemia

Gout Pelvic inflammatory disease Schizophrenia

Glaucoma Chronic otitis media (recent) Hypertension (uncontrolled)

Obesity Spine/back disorders Emphysema

Psychoneurosis (mild) Hemorrhoids Stroke

Kidney stones Knee impairment Obesity (severe)

Emphysema (mild to moderate) Asthma Angina (severe)

Alcoholism/drug use Allergies Coronary artery disease

Heart murmur Varicose veins Epilepsy

Peptic ulcer Sinusitis, chronic or severe LUPUS

Colitis Fractures Alcoholism/drug abuse

SOURCE: Office of Technology Assessment, 1988.
61

more than 1.5 million new standard individual Almost two-thirds (24 of 38) of the respondpolicies each year; approximately 73 percent of ents underwriting small groups also cover 60 to

their individual applicants are classified as stand- 100 percent of group members on a standard baard (table 2-6, figure 2-l). sis. Overall, approximately three-quarters of small

Table 2-6.—Underwriting by Commercial Health Insurers: Risk Classification of

Individual and Small Group Applicants

Individuals Small group

Number of Number of

companies Percent of companies Percent of

Percent of applicants (n=61) companies (n=38) companie s

Standard:

Never used . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 190/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20 to 390/0 . . . . . . . . . . . . . . . . . . . . .. ....0.

40 to 590/0 . . . . . . . . . . . . . . . . . . . . .. .0....

60 to 790/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80 to 1000/o . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Substandard:

Exclusion waiver:

Never used . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 190/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20 to 390/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40 to 590/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60 to 790/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80 to 1000/o . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rated premium:

Never used

1 to 190/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2o to 39% . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4o to 59 % . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60 to 79 % . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80 to 100/o . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available.. . . . . . . . . . . . . . . . .. ~......

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exclusion waiver and rated premium:

Never used . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 190/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2o to 39% . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4o to 59% . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60 t0 79% . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80 to 100% . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rejected:

Never used . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 19% . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2o to 39% . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4o to 59% . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60 t0 79% . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80 to 100% . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

o

0

1

7

26

20

7

61

3

35

13

:

o

9

—

—

2Y0

11

43

33

11

100YO

50/0

57

21

2

—

—

15

61

13

35

3

0

0

0

10

100YO

21V0

57

5

—

—

—

16

0

0

1

1

7

17

12

38

14

10

2

0

0

0

12

38

20

5

1

0

0

0

12

—

—

30/0

3

18

45

32

1000/0

370/0

26

5

—

—

—

32

100%

53Y0

13

3

—

—

—

32

61

16

33

1

0

0

0

11

100YO

26Y0

54

2

—

—

—

18

38

22

3

1

0

0

0

12

100%

58Y0

8

3

—

—

—

32

61

5 ;

1

0

0

0

7

61

100YO

2?40

85

2

—

—

—

11

100%

38

0

20

7

0

0

0

11

100%

—

53Y0

18

—

—

—

29

.- 38 1000/0

“perCentageSrn”y not total 100 due to rounding.

SOURCE: Office of Technology Assessment, 1988
62

Figure 2-1 .—Risk Classification in Individual Health Insurance:

Estimated Proportions of Standard, Substandard, and Denied Applicantsa b c

Commercial Insurers

(n=53)

Standard

73%

Standard

83%

--

..-

---- ---- -----

Substandard

20%

-----

------

--

8%

BC/BS

(n=14)

Subs tandal

9%

... -

---- Id .-

---

. .

1 1 Rate r)remlum

5%

Excluslon waiver

13° 0

Waivered & rated up

2%

---

‘d

-..

~nly those respondents reporting complete risk classification data were included.

bpropo~ions were estimated by dividing the respondents’ total number of applicants

cpercentages may not total 100 due to rounding.

SOURCE: Office of Technology Assessment, 1988

Rated premium

3%

Excluslon waiver

6%

group applicants to companies that underwrite

each group member individually are offered standard coverage.

Substandard policies include an exclusion waiver,

a rated premium, or both. About 413,000 individual applicants were offered coverage on this

basis by the responding insurers, or 20 percent

of completed applications. The small group insurers offered substandard coverage to approximately 15 percent of their applicants (figure 2-l).

Exclusion waivers may temporarily or permanently exclude a medical condition from coverage. The exclusion may be for a specific condition, such as gallstones, or for an entire organ

system, such as reproductive disorders. Permanent

waivers usually exclude from coverage chronic

conditions that are moderately costly and without life-threatening implications. Temporary

HMOs

(n=12)

in each risk class by their total number of applications

waivers generally involve acute conditions that

are short-term in nature, such as fractures or some

minor surgery. More than half of the responding

insurers (35 of 61) reported that 1 to 19 percent

of their individual applicants carry an exclusion

waiver. Thirteen (21 percent) required exclusions

for 20 to 39 percent of their applicants (table 2-6).

Thirty-two percent of the small group insurers

(12 of 38) required exclusion waivers for 1 to 39

percent of small group members applying for

coverage.

Thirty-five insurers (57 percent) reported that

the increased risk associated with 1 to 19 percent

of their applicants required a rated premium. The

additional premiums usually range from 25 to 100

percent of the standard premium, although some

insurers will use higher ratings (123). Thirteen

companies (21 percent) never rate-up applicants.
63

Rated conditions do not differ significantly from

those that insurers may exclude; in general, higher

premiums are required for chronic but moderately

severe conditions (e.g., asthma, glaucoma). Whether

a condition is excluded or rated is a matter of company pricing policy and strategy. Sometimes the

insurer does both.

Most of the responding insurers (56 percent)

noted that some policies may require an exclusion and rated premium; 1 to 22 percent of applicants are underwritten this way.

Eight percent of individual applicants were denied coverage by the responding insurers; approximately 164,000 individuals each year. Most companies (54 percent) deny coverage to less than 10

percent of their applicants; 31 percent deny coverage to between 10 and 19 percent. Coverage

may be denied for serious medical reasons or “because an applicant is clearly outside a particular

company’s parameter of acceptable risks for occupational or financial reasons” (123). Most insurers deny any applicant whose probability of

disease exceeds three times the average for his sex

and age.

More than half the small group insurers (20 of

38) deny 1 to 19 percent of small group applicants,

Overall, approximately 10 percent of small group

applicants to companies that underwrite each

group member individually are denied coverage.

Insurability is not just a matter of health status; several factors are key to the underwriter’s

decision to deny an application, to exclude a condition, or to rate up an applicant. The survey results indicate that other factors besides ill health

can seriously hamper access to health coverage

for nongroup individuals and their family members (table 2-7).

When asked to indicate which nonmedical underwriting factors could affect an application’s

acceptance, commercial insurers most commonly

cited dangerous health habits (e. g., drug abuse),

illegal or unethical behavior (e. g., criminal business practices), age, and occupation.

Drug abuse, and other health endangering

habits, perhaps better categorized as significant

predictors of health status, were considered of critical importance by 57 (93 percent) responding

companies; indeed, many emphasized that drug

abusers are uninsurable. Nearly three-quarters (44

of 61) of those responding also considered “illegal

or unethical behavior” incompatible with insurability. This probably reflects the great sensitivity

of the industry to fraud. Age and occupation,

though reported by roughly one-third to be key

to a proposed insured’s acceptance or rejection,

were more often noted to influence coverage limits

or premiums.

Healthy habits, such as non-smoking, were

rated “important” by more than half of the insurers (34 of 61), an indication of the increasingly

common use of premium credits for nonsmokers.

Dangerous avocations, such as race car driving

or hang gliding, were considered either “very important” or “important” to almost 80 percent (48

of 61) of those surveyed. Rather than deny coverage to applicants with risky hobbies, most underwriters choose to limit only the insurer’s responsibility for related accidents.

The survey results also show that financial status plays a key role in health insurance underwriting. Sixteen percent (10 of 61) of those responding said financial factors alone could affect

acceptance of an application; another 43 percent

(26 of 61) considered it “important” to coverage

limits and premium levels. Some insurers may

establish minimum income requirements for certain types of medical expense policies in order to

avoid early lapses caused by the insured’s inability

to afford the premium (123).

Many respondents reported requiring financial

and personal investigations. (See “Sources of Medical Information, ” table 2-12. ) Although 25 percent (15 of 61) of the respondents never require

an investigation, 16 percent (10 of 61) investigate

one-fourth or more of their applicants. Two companies reported that financial or personal checks

are done on every individual applicant. More than

one-third of the small group insurers (13 of 38)

also require similar checks on applicants. One

company requires investigations of all its small

group applicants. Most commonly, these inspections are credit and motor vehicle record checks,

but insurers also rely on inspection agencies to

verify health information reported in the appli-
64

Table 2-7.—individual Underwriting by Commercial Health Insurers: The Importance of Non-Medical Factors

Very important important Unimportant Never used

Underwriting factor (n=61)b Number Percent c Number Percent c Number Percent c Number Percent c

1. Aae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 38% 29 48% 6 10?40 3 5?40

2. T~pe of occupation . . . . . . . . . . . . . . . . . . . . . . . . . . 18 30 29 48 11 18 3 5

3. Avocation (e.g., race car driving) . . . . . . . . . . . . . . . . . . . . . . . . . . 9 15 39 64 9 15 4 7

4. Financial status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 16 26 43 20 33 5 8

5. Health endangering personal habitS(e.9., drug abuse) . . . . . . . . . 57 93 3 5 o – 1 2

6. Health enhancing personal behavior (e.gq non-smoking) . . . . . . 6 10 34 56 9 15 12 20

7. Iilegal or unethical behavior. . . . . . . . . . . . . . . . . . . . . . . . . 44 72 13 21 2 3 2 3

8. Place of residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5 13 21 21 34 24 39

9. Sexual orientation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 4 7 13 21 43 70

aDefiniti~n~: Vef.Y/mP~ffaflt-Critical to underwflting process; Carl affect acceptance/rejection.

/rnporfant-Always considered but will never by itself affect acceptancelrejection. It may, howevec influence coverage limits (e.g. exclusions or waiting

period) andlor premium.

Urrlrnportant-Rarely affects acceptancelrejection, coverage limits, or premium—unless in conjunction with other more important factors.

Never used—Never considered.

b one company did not mspondt ot hisquestion.

CROW percentages may not total 100 due to roundin9.

SOURCE: Office of Technology Assessment, 1988.

cation and even information on sexual orientation (see below).

Although close to 40 percent (24 of 61) of the

commercial insurers never use place of residence

in underwriting, more than one-quarter (16 of 61)

consider it very “important” or “important.”

Another 34 percent (21 of 61) reported that residence may influence underwriting determinations

when considered in conjunction with other more

important risk factors. Several carriers noted that

their concern over place of residence was due to

insurance fraud that was known to occur in certain localities. Others indicated that use of place

of residence in setting premiums is a result of regional variations in health care costs. Among the

31 respondents who tested for exposure to the

AIDS virus, 3 (10 percent) required HIV screening of all applicants residing in areas of high AIDS

prevalence.

Seventy percent (43 of 61) of the respondents

indicated that sexual orientation is never used in

underwriting. However, contrary to the 1987 National Association of Insurance Commissioner

(NAIC) guidelines (212) recommending against

using sexual orientation in underwriting, 5 companies considered it “very important” or “important” (i. e., affecting coverage, premiums, or possibly acceptance), and another 13 ranked it as

“unimportant” (i.e., not affecting insurability unless present with other more important factors).zs 26

In addition, three companies reported requesting

an APS or physical exam based on sexual orientation.

It is unclear how insurers ascertain an applicant’s sexual preference. Most (48 of 61) of the

respondents provided samples of their health insurance applications, none of which included any

questions concerning sexual orientation or lifestyle. One manager of a firm which specializes

in insurance paramedical exams reported seeing

references to an applicant’s homosexuality in attending physician statements. Three insurers, in

conversations with OTA, noted using indirect approaches or inspection agencies to confirm “suspicions of homosexuality” by, for example, interviewing a proposed insured’s neighbors. (The

NAIC guidelines, referred to above, also advise

that “insurance support organizations shall be

directed by insurers not to investigate, directly or

251n July 1987, the NAIC issued a proposed bulletin stating that

“sexual orientation may not be used in the underwriting process or

in the determination of insurability. ” At least nine States (California, Colorado, Delaware, Florida, Iowa, Oregon, South Dakota,

Texas, and Wisconsin) have barred using sexual orientation in underwriting or in the determination of insurability, premiums, terms

of coverage, or renewals (212).

ZbThese 18 companies hold approximately 10 percent of the individual, commercial health insurance market; 5 are among the 25

largest in the country (2o).
65

indirectly, the sexual orientation of an applicant

or beneficiary ”.) (212)

Blue Cross/Blue Shield Plans.—Although BC/

BS plans do not screen for high-risk applicants

as exhaustively as do commercial carriers, the risk

classification that is used once a high-risk applicant is identified varies little from the approach

used by commercial carriers. Medical conditions

that commonly require a rated premium, exclusion waiver, or are wholly uninsurable by commercial insurers are similarly classified by the nonopen, responding plans (see table 2-5).

Open enrollment programs do not classify applicants by risk in the usual sense, although they

typically provide fewer comprehensive benefits

and may require open enrollment subscribers to

pay higher premiums than other applicants for

identical coverage. Open enrollment coverage

usually requires waiting periods before initial benefits may be paid for preexisting conditions and

may exclude preexisting conditions.

Fourteen of fifteen responding plans reported

receiving a total of 401,500 individual applications

annually, 27

Most BC/BS applicants for individual coverage are classified as standard. Thirteen plans (86

percent) provided standard coverage to 60 to 100

percent of their nongroup applicants; the other

two plans classified 40 to 59 percent as standard

(table 2-8). In total, respondents reported selling

approximately 332,000 new nongroup standard

policies each year. Eighty-three percent of their

individual applicants were classified as standard

(figure 2-l).

Sixty to 100 percent of small group applicants

were also accepted as standard by half the plans

(7 of 14) and up to 25 percent were denied.

Each year about 37,000 individual applicants

are offered substandard coverage by the responding plans; 9 percent of those completing applications. Exclusion riders, rather than rated premiums,

are more commonly used in BC/BS individual

policies. Eight plans (53 percent) reported requiring an exclusion for up to 39 percent of their nonZT~e plan did not furnish nongroup application data. Small grouP

application statistics were unavailable from most of the respondents.

group applicants, while only four plans (27 percent) charged higher premiums for less than 20

percent of applicants. One continuous open enrollment plan required exclusion waivers for 27

percent of its applicants.

Only two plans (14 percent) reported ever requiring exclusions or rated premiums for small

group members.

The respondents (open and nonopen enrollment

combined) refused coverage to 8 percent of their

individual applicants. Denial rates range from O

(for open enrollment plans) to 35 percent (table

2-8).

Underwriting by BC/BS plans appears to be

considerably less complex than that done by the

commercials. Not only is medical evaluation of

applicants much less exhaustive, but also far fewer

factors are weighed. The survey questionnaire

asked the plans to try to quantify the effects of

a number of factors on an applicant’s insurability; that is, to estimate the proportion of applicants who are either denied coverage or offered

only limited coverage or an increased premium

because of medical condition, age, poor health

habits, place of residence, etc. (table 2-9).

The responses to these questions indicate that

BC/BS insurability is almost purely a question of

medical condition. All but the four continuous

open enrollment plans reject some applicants in

poor health, with medically-based denial rates

ranging from 7 to 33 percent. Close to half the

plans (7 of 15) also reported denying nongroup

applications because of alcohol or drug abuse histories (table 2-9).28

In many BC/BS plans, regardless of open enrollment policy, any known existing disease or impairment, whether acute or chronic, may not be

covered, or a waiting period may be required.

Nine of the 15 plans (60 percent) used such limits

because of the medical condition of 5 to 27 percent of their applicants.

Nearly three-quarters (11 of 15) of the responding plans never “rate-up” individual premiums because of medical condition. Of the four plans that

z8BcfBs P]ans may Cleny coverage to applicants residing outside

their service area.
66

Table 2-8.—Blue Cross/Blue Shield Plans: Risk Classification of Individual and

Small Group Applicants

Individuals Small groups

Number of Number of

plans Percent of plans Percent of

Percent of applicants (n= 15) plans (n =14) plans

Standard:

Never used . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 190/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20 to 390/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40 to 59’?/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60t079Yo . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80to 100Yo . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Substandard:

Exc/usion waiver

Never used . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 19Y0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2oto39Yo . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4oto 5970 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60t079Yo . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80to100Yo . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rated premium:

Never used . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 1970 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2oto39?40 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4oto59Yo . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60t079?40 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80to 100VO . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rejected:

Never used . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 19?40 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2oto39?40 . . . . . . . . . . . . . . . . . . . !........

4oto 59Y0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60t079V’o . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8oto 100YO . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available.. . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

o

0

0

2

8

5

0

15

7

6

2

0

0

0

0

15

11

4

0

0

0

0

0

15

3

7

5

0

0

0

0

15

1370

53

33

—

100!/0

47?40

40

13

—

—

100YO

73?40

27

—

—

—

—

100YO

20Y0

47

33

—

—

—

10070

0

0

:

1

6

6

—

7Y0

—

7

43

43

14

;

o

0

0

0

5

100%

5070

14

—

—

—

—

36

14

8

0

0

1

0

0

5

14

1

4

3

0

0

0

6

14

100VO

5070

—

—

7

—

—

3 6

100 %

7Y0

2 9

21

—

—

—

4 3

100YO

SOURCE: Officeof Technology Assessment, 1988.

do, 2t019percent of their individual applicants

are affected. All the nongroup premium rates are

age-based by four plans and affectedly place of

residence by two plans (i.e., because of regional

variations in health costs.) More than half the applicants at two other plans are given nonsmoker

discounts.

No BC/BS plan reported using sexual orientation in underwriting. However, one plan did originally report modifying nongroup premiums on

this basis (for3 percent of their applicants). When

questioned by OTAas to how sexual orientation

is identified, the plan underwriter explained that

they had interpreted the term to mean sex (i.e.,

male or female).

Only one respondent requested routine financialor personal investigations, inspecting 10 percent ofits applicants for nongroup coverage (See

“Sources of Medical Information,” table 2-15.)
67

Table 2-9.—individual Undewriting by Blue Cross/Blue Shield Plans: The Importance of Medical and Other Factors

Increase (decrease)

Reject applicant Limit coverage premium rates

(n=15) (n= 15) (n= 15)

Number Percent Number Percent Number Percent

Percent of non-group applicants of plans of plansb

of plans of plansbof plans of plansb

Medical condition:

Never used. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 90/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10 to 190/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20 to 290/o . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3oto39°/o . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not applicable . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Age:

Never used..... . . . . . . . . . . . . . . . . . . . . . . . . .

1000/0 . . . . . . . . . . . . . . . . . . . . . . . . . . ...!.....

Non applicable . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dangerous habits (e.gw drug abuse)

Never used..... . . . . . . . . . . . . . . . . . . . . . . . . .

1 to9% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

loto 19Y0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2oto 290/o . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not applicable . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Place of residence:

Never used.... . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to9% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

90 to 100YO . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not applicable . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Heafthyhabits(e.gw non-smoking)

Never used

50t069Yo

7oto 79%

Not applicable

Total

4

2

4

4

1

0

15

27Y0

13

27

27

7

5

3

4

2

0

1

15

33Y0

20

27

13

—

7

8

2

2

0

0

3

15

530/0

13

13

—

—

20

100%

—

1000/0 100%

930/o

.

7

100YO

8070

—

7

—

13

15

0

0

1000/0

—

14

0

1

8

4

3

15

53Y0

27

20

15 1000/0 15 1000/0

6 730/0

6

0

1

2

400/0

40

12

0

1

0

2

11

0

0

0

4

15

—

.

7

13

—

27

15 1000/0 15 1000/0

930/0 —

—

7

1000/0

13

2

0

0

15

870/o

13

14

0

0

1

10

0

2

3

15

670/o —

13

20

100% 15

—NA—

1000/0 1000/0

10

1

1

3

15

670/o

7

7

20

–NA –

100%

alntewals with no reported frequency are omitted.

b percentage s may not total Ioodue to rounding.

SOURCE: Office of Technology Assessment, 1988

Health Maintenance Organizations. 29—HM0

risk classification often differs from the traditional

commercial and BC/BS insurers’ approaches. Federally qualified plans are restricted to either accepting non-Medicare applicants at acommunity

rate or denying membership altogether. Exclusions, rated premiums, and waiting periods are

prohibited. Some States have similar requirements. However, HMO underwriting does reflect

traditional practice with respect to medically uninsurable conditions. The responding HMOs were

no more willing to underwrite high-risk applicants

than the commercial insurers or BC/BS plans.

When asked which conditions the HMO considered uninsurable, the plans’ responses mirrored

those given by the traditional insurers (see table

2-5).

In total, 12 0f 15 HMOs reported receiving approximately 57,900 self-pay (i.e., individual) applacations each year and enrolling 73 percent on

a standard basis. Standard acceptance rates ranged

from 49 percent at one plan to 100 percent at two

Z~Most of the responding HMOS were unable to provide small

group risk classification data.
68

plans required by State law to hold open enrollment (tables 2-10, figure 2-1).30

Only two HMOS (I3 percent) reported enrolling individual members on a substandard basis;

both required exclusion waivers for 10 to 15 percent of their applicants. (One of these plans was

not federally qualified, the other was but had a

nonfederally qualified subsidiary. )

Rejection rates for the responding HMOS were

high relative to the commercial and BC/BS insurers. Eleven of fifteen HMOS denied membership to 20 to 59 percent of their individual appli30 Statistics for some national plans may represent Only One locale.

Table 2-10.—Health Maintenance Organizations: Risk

Classification of Individual Applicantsa

Number of HMOS Percent of

Percent of applicants (n= 15) HMOs b

Standard:

Never used . . . . . . . . . . . . .

1 to 19!40 . . . . . . . . . . . . . .

20 to 390/0 . . . . . . . . . . . . . .

40 to 590/0 . . . . . . . . . . . . . .

60 to 790/0 . . . . . . . . . . . . . .

80 to 100°\o . . . . . . . . . . . . .

Not available . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . .

Substandard:

Exclusion waiver:

Never used . . . . . . . . . . . . .

1 to 19%0 . . . . . . . . . . . . . .

20 to 390/0 . . . . . . . . . . . . . .

40 to 590/0 . . . . . . . . . . . . . .

60 to 790/0 . . . . . . . . . . . . . .

80 to ~OOO/o . . . . . . . . . . . . .

Not available . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . .

Rated premium:

Never used . . . . . . . . . . . . .

Not available . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . .

Rejected:

Never used . . . . . . . . . . . . .

1 to 190/0 . . . . . . . . . . . . . .

20 to 390/0 . . . . . . . . . . . . . .

40 to 590/0 . . . . . . . . . . . . . .

60 to 790/0 . . . . . . . . . . . . . .

80 to 1000/o . . . . . . . . . . . . .

Not available . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . .

0

0

0

1

6

6

2

70/0

40

40

13

15 1000/0

11

2

0

0

0

0

2

15

13

2

15

2

1

9

1

0

0

2

15

73’?!0

13

—

—

—

13

100’?!0

870/o

13

1000/0

130/0

6 :

7—

—

13

100’?/0

asmall group ctata are omitted due to poor response tO this question.

bpercentages may not total 100 due to rounding.

SOURCE: Office of Technology Assessment, 1988.

cants. In total, 12 responding HMOS refused

membership to approximately 13,700 self-pay applicants annually, 24 percent of their self-pay applicants. In contrast, the commercials and BC/BS

plans both denied 8 percent of self-pay applicants.

It may be that HMOS receive a greater proportion of high-risk applicants because of their comprehensive coverage and community rating practices. In addition, the Federal qualification

requirements and State regulations that restrict

HMO use of exclusions and rated premiums may

limit the ability of the plans to underwrite many

individuals. Clearly, further study is warranted

in order to understand these differences.

Access to HMO self-pay membership is fundamentally a matter of health status. All but three

of the respondents (81 percent) reported that medical conditions can affect either the applicant’s

acceptance, premium rate, or scope of benefits.

The three plans that never consider the applicant’s

health are located in a State that mandates HMOS

to hold an annual 30-day open enrollment period

(without medical screening); due to possible adverse selection, this is the only time these HMOS

are willing to enroll individuals (table 2-11).

Age, type of occupation, health enhancing behavior (e.g., nonsmoking), and sexual orientation

are also considered key to insurability by 19 percent or more of the respondents. It is not clear

how sexual orientation is identified by the four

plans that use it in underwriting. No surveyed

plan reported using personal inspection agencies,

and none of the provided enrollment applications

included any relevant lifestyle questions. The National Association of HMO Regulators (NAHMOR),

which serves a role similar to that of the NAIC,

has not yet taken a position on the appropriateness of using sexual orientation in underwriting

(208). (See previous discussion of the NAIC recommendations. )

Sources of Medical Information

Commercial Insurers. —The underwriter’s objective is to know as much about the applicant’s

health status as the applicant. Any health insurance policy based on medical underwriting requires the applicant (and each family member) to

complete a health history questionnaire. (An ex-
69

Table 2-11 .—Individual Underwriting by Health Maintenance Organizations:

The Importance of Medical and Other Factors

Very important Important Unimportant Never used

Number Percent Number Percent Number Percent Number Percent

Underwriting factor (n= 16)b of HMOS of HMOS

C of HMOS of HMOSC of HMOS of HMOSC of HMOS of HMOSC

1. Medical condition . . . . . . . . . . . . . . . . . . . . 10 63% 2 13% 1 6% 3 19%

2, Age . . . . . . . 1 6 6 38 2 13 7 44

3. Type of occupation o – 3 19 3 19 10 63

4, Avocation (e. g., race car driving)’”” ‘ O – 1 6 3 19 12 75

5. Financial status. . . . . . . . . . . . . . . . . . . 1 6 o“ – 4 25 11 69

6. Health enhancing personal behaviOr (e. g., nOnsm0klng) 2 13 3 19 2 13 9 56

7.111egal or unethical behavior . . . . . . . . . . . . . . . . . . . . . . . . O – 2 13 4 25 10 63

8. Place of residence. . . . . . . . 1 6 1 6 1 6 13 81

9. Sexual orientation . . . . . . . . . . . . . . . 0 – 3 19 1 6 12 75

aDefinitl~n~: Vew jmpo~a”f —critical to underwriting process; call affect acceptance/rejectiC)n,

/rrrporfant-Always considered but will never by itself affect acceptancelrejection. It may, however, influence coverage limits (e g , exclusions or waiting

period) and/or premium.

Unimpofiant-Rarely affects acceptancelrejection, coverage limits, or premium—unless in conjunction with other more important factors

Never used—Never considered.

blncludes one HMO that does not underwrite individuals but accepts individually underwritten groups.

CRow percentages may not total 100 due to rounding.

SOURCE Office of Technology Assessment, 1988.

ample is presented in figure 2-2). As evidenced

by the survey responses, company policies vary

considerably with respect to the proportion of applicants required to provide further evidence of

their health status, either via an attending physician statement, physical exam, blood and urine

tests, and/or financial or personal investigations

(table 2-12).

Attending Physician Statements CAPS). —Individually underwritten health insurance applicants

are always asked to supply the name and address

of their personal physician and their doctor may

be asked to complete a medical history in a standard APS form (although physicians sometimes

send the insurer a photocopy of the applicant’s

medical record instead). The standard APS questionnaire calls for a complete description of the

patient’s complaints, any abnormal findings including laboratory and other test results, treatment or operation, present condition if known,

and other medical information that has a bearing on the applicant’s health, such as smoking or

alcohol use. For children under 6 months of age,

additional information may be requested regarding birth weight and the presence of any disease

or abnormality. (An example of an APS is presented in figure 2-3. )

Beyond the health data provided directly in the

insurance application, the APS is the most common supplemental source of medical underwriting information. Overall, the responding insurers

reported requiring an APS for 20 percent of their

individual applicants, a total of 446,000 physician

statements each year. Members of small and large

groups are often required to provide an APS as

well .31

More than half the responding small group insurers (20 of 38) require an APS for 10 percent

or more of their applicants and 13 of 27 large

group insurers (48 percent) request an APS of 1

to 75 percent of their applicants. Overall, 18 percent of the respondents’ small group applicants

were required to furnish an APS (table 2-12, figure 2-4).

The APS is clearly the insurer’s principal source

of testing data, since it often includes recent test

results as well as x-rays, electrocardiograms, and

pathology reports. Although close to two-thirds

of the respondents (38 of 61) require physician

statements of 20 to 79 percent of their individual

applicants, more than three-quarters (47 of 61) test

only 5 percent or less. Therefore, testing ordered

by the applicant’s personal physician appears to

be as critical insurability as tests initiated by

the insurer (table 2-12, figure 2-4).

JIThe discussion, of large groups throughout this report refers Primarily to employees who are eligible for group health insurance but

choose not to sign up until after the normal enrollment period (i. e.,

late applicants).
70

Figure 2.2.—Typical Health History Questionnaire in a Commercial Health Insurance Application
71

Figure 2-3.—Attending Physician’s Statement Used for Commercial Health Insurance Applicants

ATTENDING PHYSICIAN'S STATEMENT

UNDERWRITING INFORMATION

MEDICAL DIRECTOR

TO:

Code No.

case No.

Date

Name

Address

Date of Birth

Deaf Doctor:

Your Patient named above has applied for voluntary insurance in this Company, and gives a history of having consulted you.

Please complete this form from the information contained in your records. Attached is a release form signed by the applicant. This

information will be processed in a confidential manner.

If you will indicate your usual arid customary fee for completing this statement($ ), a check will be mailed to you

monthly with itemized statements.

Your courtesy in giving us this information will

1) DATES ATTENDED

MONTH YEAR

COMPLAINTS & ABNORMAL

PHYSICAL FINDINGS

appreciated

DURATION

OF ILLNESS

w

(2) Laboratory findings (including x-ray, ECG, Bmr a

DIAGNOSIS

Ports, etc., with dates).

DESCRIBE TREATMENT

OR OPERATION

(3) Present condition, if known?(incfude sequelae and complications of above reported illness).
72

Table 2-12.-Underwriting by Commercial Health Insurers: Health and Other Information Requirements

Individual policies Small group policies Large group policiesa

(n=61) (n =38) (n=27)

Required underwriting information Number of Percent of Number of Percent of Number of Percent of

(percent of applicants) companies companies companies companies companies companies

Attending physician statement (APS):

Never used. ., . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 190!0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2oto 390/o . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4oto59Y’o . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60 to 790/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80to loo~o” . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Physical exam:

Never used..... . . . . . . . . . . . . . . . . . . . . . . .

1 to 19?40 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2oto39?40 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4oto 59’YO . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60t079’Yo . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80to loo~o” . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Blood or urine screens:

Never used..... . . . . . . . . . . . . . . . . . . . . . . .

1 to 19?40 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2oto39?40 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4oto 590/o . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60t079’Yo . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80to 100’Yo . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial or personal investigation:

Never used..... . . . . . . . . . . . . . . . . . . . . . . .

1 to 1970 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2oto39Yo . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4oto 59V0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60to 79!/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80to 100?4o . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

18

25

9

4

1

1

5Y0

30

41

15

7

2

2

5

16

11

1

1

2

2

38

13%

42

29

3

3

5

5

100V’O

12

10

2

0

1

0

2

44Y0

37

7

—

4—

7

61 100YO 27 100%

17

35

5

1

0

2

1

28?40

57

8

2

—

3

2

19

16

1

0

0

0

2

50Y0

42

3

—

—

—

5

19

6

0

0

0

0

2

27

70%

22—

—

—

—

7

61 100VO 38 100?40 100%

23

30

4

0

0

2

2

38Y0

49

16

—

—

3

3

24

11

1

0

0

0

2

63Y0

29

3

—

—

—

5

21

:

o

0

0

2

780/o

15

—

—

7

61 100?AO 38 1000/0 27 100%

15

33

5

1

2

4

1

25Y0

54

8

2

3

7

2

580/o

32

3

—

7

5

22

2

1

0

0

0

2

810/o

7

4

—

7

61 100YO 38 100% 27 100!AO

%nly late applicants to large groupware required to provide heaithand related information to obtain coverage.

b percen t age s may not total lwdue to rounding,

SOURCE: Officeof Technology Assessment, 198S.

There are a number of factors that lead the underwriter to require an APS. These are listed, in

table 2-13, along with the number of survey respondents who use them as routine APS “triggers.’’ The medical history revealed in the insurance application is the most common trigger; it

was cited by every responding company that ever

requires an APS. Seventy percent indicated that

reports from the Medical Information Bureau

(MIB), a databank of underwriting information

shared by commercial insurers,32 routinely trigger APS requests; 65 percent, that inspection

reports (i.e., background checks) triggered a request for an APS; and 78 percent, that a history

JZThe MIB is a non-profit association of more than 700]ife and

health insurers establishedin 1905 to facilitateshariWofundewrit.

ing information. Participating insurers report each applicant’s significant medical findings (including test results)to the MIB and also

routinely consult the MIB database for any relevant underwriting

information on their current applicants.
73

of drug abuse triggered APS requests. Older applicants are commonly required to provide further evidence of good health; 57 percent of the

companies reported that APS requests are ageFigure 2-4.— Commercial Health Insurersa Estimated

Proportion of Applicants Required To Have an APS,

Physical Exam, or BloodAJrine Screen

Proportion of individual applicants (%P

25

20 -

15 -

10 -

5

-

0-

APS Physical exam Blood/urine screenc

Required health information

= Individua l EZZ3 Small group

(n=56) (n=28)

%nly those companies reporting complete data are included.

bThe proportionsWere estlrnatect by dividing the respondents’ tOtd number of

applicants required to have an APS, physical, or bloodlurine screen by their annual volume of applications.

CBIOOdlUrine Screening ctata do not include HIV SCreenln9.

SOURCE” Off Ice of Technology Assessment, 1988.

based. It is not surprising that older applicants

are more closely scrutinized, as they are more

likely to have health problems that are not reported on the application (123). As noted earlier,

three companies reported using sexual orientation

as a basis for requiring an APS.

Other reasons cited for requiring an APS included policy amount, blood transfusion before

1985, height/weight, previous claims history, occupation, and being uninsured for an extensive

period.

Physical Exams.33— Physical examinations of

individual health insurance applicants are much

less common. Overall, only 4 percent were examined each year by the respondents, less than

94,000 nationwide. Seventeen (28 percent) of the

61 responding companies never require physicals

for individual applicants. Howeverf 15 (25 percent) did require at least 1 out of 10 applicants

JJNote that attending physician statements are furnished by the

applicants’ personal physicians while the physical exams described

here are performed by physicians or paramedical professionals employed by the insurer.

Table 2-13.—lndividual Underwriting by Commercial Health Insurers: Reasons for Requiring an Attending

Physician Statement or Physical Exam

Attending physician

statement (APS)a Physical examb

(n =60) (n =47)

Number of Percent of Number of Percent of

Reasons for requiring an APS or physical exam companies companies companies companies

Diagnosis reported on application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 100%0 42 890/o

Attending physician statement (APS). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – — 44 94

Medical Information Bureau report (MI B). . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 70 33 70

Drug abuse history . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 78 25 53

Inspection report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 65 29 62

Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 57 22 47

Late group applicant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 20 4 9

Geographic area. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 7 1 2

Sexual orientation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5 2 4

Sex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 0 0

Other, including: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 27 21 45

Policy amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5 8 17

Heightlweight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 4 9

Blood transfusion before 1985 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2

Claimslmedical history . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

— —

7 5 11

Occupation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 — —

Extensive period of no insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 1 2

No current physical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 1 2

alncludes two Cor-nparlies that Only require an APS for members Of individually underwritten 9rOUPS.

blncludes three companies that Only require physicals on members of individually underwritten 9rouPs.

SOURCE: Office of Technology Assessment, 1988.
74

to be examined by a physician or paramedical

professional. In one company, every applicant

must pass a physical; in another, 80 percent (table 2-12, figure 2-4).

Group insurance physicals are even less common. At least half of the responding group insurers never require a physical for either small or

large group members. The majority of the small

group insurers (14 of 17) that do require physicals examine 5 percent or less of their applicants.

Overall, only 2 percent of the respondents’ small

group applicants were required to undergo a physical exam.

The reasons insurers cite for ordering a physical exam closely mirror those for requiring attending physician statements. In addition, APS findings themselves often lead the underwriter to

request an exam for further clarification of the

proposed insured’s medical condition (table 2-13).

Blood and Urine Screening, —HIV screening

may be the most discussed test, but it is only one

of many tests ordered by commercial underwriters.

Among the responding insurers who do test,

standard panels of blood chemistries and urinalysis are most common. These standard panels of

tests are characteristic of those commonly ordered

by physicians as part of a general physical evaluation. In addition to the panels, many insurers

reported ordering urine screens for drugs of abuse

—such as cocaine and barbiturates—as well as for

nicotine and prescription medications for diabetes,

heart disease, and hypertension. The insurer’s interest in prescription medication is twofold; first,

to “catch” applicants who are less than straightforward in their health history questionnaire and,

second, to determine whether known hypertensive applicants, for example, are conscientiously

following prescribed treatment (table 2-14).

Insurance testing appears to be linked with

physical exams. Close to 90 percent of commercial insurers requiring physicals (41 of 47) sometimes request that the applicant also be tested, and

almost half of these insurers (22 of 47) uniformly

test and examine equivalent proportions of their

applicants. Only five companies reported performing physicals and never testing.

As in the case of physical examinations, routine testing is rare. In the aggregate, responding

insurers reported requiring blood and/or urine

screens from 4 percent of individual applicants,

a total of approximately 83,000 individuals annually. Twenty-three (38 percent) respondents

reported that individual applicants were never

tested. Most companies that do test, do so infrequently; 24 (39 percent) respondents tested only

1 to 5 percent of their individual applicants.

Eleven (18 percent) reported testing at least 1 out

of 10 individual applicants. One company tested

every applicant (table 2-12, figure 2-4).

Testing by the responding group insurers was

especially uncommon; 63 percent of the small

group (24 of 38) and 78 percent (21 of 27) of the

large group carriers never require a blood or urine

screen. The majority of group insurers that do

screen require tests of less than 5 percent of their

applicants. Overall, only 1 percent of the respondents’ small group applicants were tested.

Blue Cross/Blue Shield Plans.—Although BC/

BS plans have faced increasing competition from

HMOS and other alternative insurers in recent

years, the underwriting practices of many plans

still reflect their past tradition of community rating and “taking all comers. ” Today, the majority

of plans (69 percent) do not hold open enrollment

periods (165). Nevertheless, relative to the commercial health insurers, the survey findings indicate that less scrutiny is given a BC/BS versus a

commercial insurance applicant. Most BC/BS

plans make no inquiries beyond the health history portion of the application and an attending

physician statement. It is the rare BC/BS plan that

demands a physical exam, blood chemistry, or

urinalysis.

Health History Questionnaire, —All but one

(i.e., a continuous open enrollment program) of

the respondents require nongroup applicants to

provide some health information prior to enrollment. BC/BS enrollment health history questionnaires vary in their comprehensiveness, but typically ask the applicant (and each family member)

to indicate any history of receiving medical treatment or advice for a long list of diseases and disorders (see figure 2-1).

Attending Physician Statements. —The APS,

along with the health history questionnaire, is the

information foundation of BC/BS nongroup un-
75

Table 2-14.—Tests Commonly Ordered by Commercial Health Insurers

Blood screens Urine screens

Type of test Common diagnostic use Type of test Common diagnostic use

I, Diagnosf/c screens

Gl~~ose

Bun/creatlnlne

Uric acid

Alkallne phosphatase

Blllrubin total

SGOT/SGPT

GGTP

Total protein

Albumln

Immunoglobulin

Cholesterol

Tnglycerldes

HDL

Chol/HDL chol ratio

ELISA/ELISA/Western blot

T-Cell subset

Diabetes

Kidney function

Kidney stones

Lwer function

Gall bladder and Iwer function

Hepatitis (alcoholic), liver function

Liver function

General health

Liver function

Immunodeficiency, infection

Circulatory disorders

Circulatory disorders

Circulatory disorders

Circulatory disorders

HIV infection

HIV infection, immune system

SOURCE Office of Technology Assessment, 1988.

derwriting. Twelve of the fifteen responding plans

(8O percent), including three that offer open enrollment, order an APS for at least 20 percent of

their individual applicants. Four of these plans require physician statements for 40 percent or more

of their applicants. The only two respondents that

never ask nongroup applicants for an APS are

traditional, continuous, open enrollment programs with significant market shares (table 2-15).

Generally, less information is required of group

applicants to BC/BS plans. Six of the fourteen

plans with small group coverage (43 percent)

never request an APS; of the eight that do, 1 to

40 percent of applicants are affected. Only onethird (5 of 15) of the large group plans request

an APS of some applicants.

The physician statements used by the respondents are similar to those used by commercial

health insurers; physicians are asked to describe

the applicant’s recent health history and provide

laboratory findings. Two BC/BS plans sometimes

use diagnosis-specific (e.g., cardiac, hypertension)

physician questionnaires that ask for extensive

clarification of the applicant’s health, including

all relevant test findings (see figure 2-5).

A number of factors can lead a plan to require

a physician statement. All the respondents said

that the applicant’s self-reported medical history

1.

Il.

Ill,

Diagnostic screens

Microscopic analysis:

White blood cell count

Red blood cell count

Casts (granular, hyaline)

Protein

Glucose

Specific gravity

Prescription drug screens

Oral hypoglycemic

Beta-blocker

Thiazide diuretics

Drug abuse screens

Barbiturates

Cocaine

Nicotine

Infection, cancer

Anemia

Kidney disorders

Kidney disorders, hypertension

Diabetes

Kidney function

Diabetes

Hypertension, coronary disease

Hypertension

can “trigger” an APS request. In addition, an APS

is routinely ordered by 12 plans (86 percent) in

cases of drug abuse history; 5 plans (36 percent),

based on claims history; and 4 plans (29 percent),

according to age (table 2-16).

Physical Exams. —Only two plans reported requiring nongroup applicants to undergo a physical exam. One holds continuous open enrollment

and examines close to one-third (3o percent) of

nongroup enrollees. These physicals are done to

evaluate whether the applicant may opt out of the

open enrollment program and enroll in a more

comprehensive plan. The other plan does not accept all applicants and examines, on average, 4

percent.

One plan orders physicals for 1 percent of small

and 2 percent of large group applicants.

Medical history, age, and weight were reported

as reasons for requiring a physical (table 2-16).

Bkxxi and Urine Screening. —Blood and urine

testing is very rare among BC/BS plans. Only one

plan (7 percent) reported doing any screening of

applicants; testing 4 percent of nongroup, 1 percent of small group, and 2 percent of large group

applicants in conjunction with a physical exam.

(A second plan reported intentions to test some
76

Figure 2-5.—Diagnosis.Specific Attending Physician Statement Used by a Blue CrosslBlue Shield Plan

.
77

Figure 2.5.—Diagnosis”Specific Attending Physician Statement Used by a Blue Cross/Blue Shield Plan—Continued

3 .

4 .

50

60

7 .

8m

9 .

Arrhythmias (specify typ8]t

Blood

Dates

~ w

*

Treatment (include medication and dosage

Past

Current

If patient has been hospitalized during past five years give date(s) and

reason(s)for admission(s) :

Future medical/surgical plans: .

Does patient have any other illness or condition? ( ( ) No

If yes, indicate name and address of treating physician:
78

Table 2.15.—Underwriting by BCIBS Plans: Health and Other Information Requirements

Individual policies Small group policies Large group policiesa

(n= 15) (n=14) (n= 15)

Required underwriting information Number of Percent of Number of Percent of Number of Percent of

2

i

2

2

0

0

130!0

7

53

13

13

—

—

6

5

2

1

0

0

0

15

13

1

1

0

0

0

0

15

14

1

0

0

0

0

0

15

14

:

o

0

0

0

15

(percent of applicants) of plans of plansbof plans of plansb

of plans of plansb

Attending physician statement (APS):

Never used. . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 190/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20 to 390/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4oto59%o . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60 to 790/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80to100Vo . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Physical exam:

Never used. . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 19Y0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2oto39?/o . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4oto59?/o . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60t079?40 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80to 1000/o . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Blood or urine screens:

Never Used . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 19Y0 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2oto39Yo . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4oto59’%o . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60t079Yo . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80to loo~o . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial or personal investigation:

Never used. . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 1970 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2oto39Yo . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4oto59% . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60t079Vo . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80to looyo” . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

%nly late applicants to large groupware required to provide health and related information to obtain coverage.

b percentage s may not totai to 100 dueto rounding.

SOURCE: Office of Technology Assessment, 19S8,

100’%0

87Y0

7

7

—

—

—

—

100YO

93Y0

7

—

—

—

—

—

100YO

93Y0

7

—

—

—

—

—

100YO

14

13

1

0

0

0

0

0

14

13

1

0

0

0

0

0

14

13

:

o

0

0

0

14

43%

36

14

7

—

—

—

100YO

93Y0

7

—

—

—

—

—

100CZO

93Y0

7

—

—

—

—

—

100%

93Y0

7

—

—

—

—

—

100?40

10

4

0

1

0

0

0

15

14

1

0

0

0

0

0

15

14

1

0

0

0

0

0

15

14

1

0

0

0

0

0

15

67?A0

27

—

7

—

—

—

100?/0

93Y0

7

—

—

—

—

—

100%

930/0

7

—

—

—

—

—

100VO

93?40

7

—

—

—

—

—

100%

applicants for HIV infection. See below for de- HMO applicant receives less scrutiny than acomtails regarding HIV screening.) mercial insurance applicant. Most HMOS make

Thus, as for the commercial insurers, the APS

no inquiries beyond the health history portion of

the application and an attending physician stateappears to be the principal source of testing information for the BC/BS plans. ment. It is the rare HMO plan that demands a

physical exam, blood chemistry, or urinalysis.

Health Maintenance Organizations.-The prin- None of the respondents reported requiring an

APS, physical, or laboratory test for large group cipal source of health information for the HMO

underwriter is the health history portion of the applicants.

enrollment application. The survey findings in- Health History Questionnaire. —Al lbut l of the

dicate that like BC/BS applicants, the average 15 plans reported that individual applicants must
79

Table 2-16.—lndividual Underwriting by Blue

Cross/Blue Shield Plans: Reasons for Requesting

an Attending Physician Statement

Number of plans

Reasons (n= 14)a Percent of Dlans

Diagnosis reported on

application . . . . . . .

Drug abuse history. . .

Age . . . . . . . . . . . . . . . .

Late group applicants

Sex . . . . . . . . . . . . . . . .

Sexual orientation . . .

Geographic area . . . . .

Inspection report . . . .

Other, including:

Claims history . . . . .

Height/weight . . . . .

14

12

4

1

1

0

0

0

5

2

100%0

86

29

7

7—

—

—

36

14

%lne plan did not answer th!s question.

SOURCE Off Ice of Technology Assessment, 1988

complete a medical history questionnaire, and for

5 HMOS (33 percent) it was the sole evidence of

the applicant’s health.

Attending Physician Statements.– At least half

of the responding HMOS went beyond the enrollment application and requested an APS for 10 to

85 percent of their nongroup applicants and 10

to 20 percent of small group applicants. All the

plans said that the applicant’s self-reported medical history could trigger an APS request. In addition, an APS was ordered routinely by five plans

(33 percent) in cases of drug abuse history; two

plans, because of age, previous prescription drug

use, or claims history; and one plan, for late application to a large group (table 2-17).

HMO physician statements do not differ from

those used by commercial insurers or BC/BS

plans; physicians are asked to describe the applicant’s recent health history and provide laboratory findings.

Physical Exams. —Only 3 of the 15 respondents

accepting individuals reported requiring a physical exam as a condition of enrollment for 2 to 30

percent of self-pay applicants. One of these plans

required 30 percent of its applicants to get a physical at their own expense. No plan reported requiring physicals for small group applicants. Medical history, APS findings, and age were reported

Table 2-17.—HMOS: Health and Other Information Requirements

Individual applicants Small group applicants

Required underwriting information (n= 15) (n =8)

(percent of applicants)a Number Percentb Number Percent

Attending physician statement (APS):

Never used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 330/0 4 500!0

1 to 19%0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 13 3 38

20 to 39?40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7 1 12

40 to 59%0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7 0 —

60 to 790/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 13 0 —

80 to 1000/o . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 13 0 .

Not available . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 13 0 —

Total ... , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 1000!0 8 100 ”/0

Physical exam:

Never used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 670/o 7 880/0

1 to 19’Yo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7 0 —

20 to 390/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 13 0 —

Not available . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 13 1 12

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 1000/0 8 1000/0

Blood or urine screens:

Never used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 800/0 7 880/0

1 to 190/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7 0 —

20 to 390/0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7 0 —

80 to loOO/”” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7 0 —

Not available . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 — 1 12

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 100 ”/0 8 100’YO

alntewals with no reported frequency are omitted.

bpercentages may not total 100 due to rounding.

SOURCE: Office of Technology Assessment, 1988.
80

as reasons for requiring a physical. In addition,

one plan noted an unofficial policy requiring routine examinations of applicants thought to be homosexual (e.g., single men 35 years or older).

Blood and Urine Screening. —HMO screening

is as uncommon as physical exams; only three

plans reported sometimes testing individual applicants. One plan required a complete blood

count and urine check for 20 percent of its individual applicants. Another ordered a complete

blood count, cholesterol check, and urinalysis for

85 percent of their self-pay applicants. The third

plan reported testing very infrequently (i.e., less

than 1 percent) and always in conjunction with

a physical exam. No plan reported requiring blood

or urine screens for small group applicants.

Thus, the APS also is the principal source of

testing data for HMOS.

AIDS Policies and Experience

Commercial Insurers. —The survey asked several questions concerning AIDS underwriting policies and claims experience:

Do Health Insurers Attempt to Identify Applicants Exposed to the AIDS Virus?-Fifty-one (86

percent) responding commercial insurers either

screen or plan to screen individual health insurance applicants for infections with the AIDS virus through some method; of these companies,

41 do it currently and 10 plan to do so (figure 2-6).

Efforts to identify high-risk group applicants

are also common. Twenty-seven small group (77

percent) and 11 large group insurers (58 percent)

either screen or plan to screen through some

method (figure 2-6).

How Do Insurers Screen for AIDS Exposure?—

Not every company interested in identifying a

proposed insured’s HIV status, or risk for AIDS,

tests applicants. Many rely on the application’s

health history questionnaire and attending physician statements to evaluate the risk for AIDS.

Medical Information Bureau reports also play an

important role and may serve as a catalyst for testing an applicant or scrutinizing more carefully an

applicant’s health history (figure 2-7).34

340n May 14, 1987, the MIB announced that, in response to confidentiality concerns expressed by gay rights advocates, it “will no

Figure 2-6.-Commercial Health Insurers

Attempting To Identify Applicants

Exposed to the AIDS Virus

Percent of companiesa

Yes No, but plan to No, and no plans to

m Indivldualc

IZZZ Small group m Large group

(n=59) (n=35) (n=19)

a percen tage s may not total 100 due to rounding.

bRepresents the number of responding c0mPanie9.

cData were unavailable for two individual, three small group, and eight lar9e 9rouP

insurers.

SOURCE: Office of Technology Assessment, 198S.

Figure 2-7.-Commercial Health Insurers:

Methods Used To Identify AIDS Exposure

Percent of companies

80 -

60 -

4 0

-

2 0

-

0 -

Question on APS ELISA and T-cell subset

appl i cat ion Western blot study

= Individual b~ Small group

b n Large groupb c

(n=51) (n=27) (n=ll)

a ReDre se n ts the number of res~onding COmPanieS.

bon’ly those respondents gcrwning or_intending to screen for AIDS exPosure

are included. Data were unavailable for one small and one large group insurer.

Conly l,late applicants” to large groups are screened.

SOURCE: Office of Technology Assessment, 1988.

longer keep records that show an applicant for insurance has tested

positive for the AIDS virus antibodies” (2). MIB reports now use

a more general code that indicates an “abnormal” blood count (without identifying the test) while continuing to report other high-risk

indicators including symptoms of AIDS, history of sexually transmitted disease, drug abuse, etc.
81

The most common approach to screening potential insureds for AIDS is by incorporating a

question in the health history portion of the application. All but seven of the companies (86 percent) who screen individual applicants use an

AIDS question. Ninety-three percent (25 of 27)

of small group insurers and 82 percent (9 of 11)

of large group insurers who screen also use this

method.

It is important to realize that including an AIDS

question on the application is not only an effective screen but also a tool for contesting preexisting condition claims. If an applicant knowingly

misrepresents his or her health condition (e.g., recognized symptoms of AIDS, or fully diagnosed

AIDS or ARC), the insurer may have grounds for

subsequently denying reimbursement for the condition or rescinding coverage altogether. (See discussion below concerning insurers’ reported experience with preexisting condition claims for

AIDS. )

AIDS-directed questions vary; some ask about

test results, others detail symptoms or inquire

whether the applicant has been diagnosed or

treated for AIDS or an AIDS-related condition.

An admission of AIDS, ARC, or HIV seropositivity results in immediate refusal of the application. The survey did not clarify whether applicants with a history of sexually transmitted disease

or AIDS symptoms are also automatically rejected. These are some typical examples of questions appearing in policy applications:

●

●

●

●

●

Ever had Acquired Immune Deficiency Syndrome (AIDS), “AIDS” Related Complex

(ARC), or tested positive for antibodies to

the “AIDS” HTLV-111 Virus?

Social or venereal disease of any type?

Recurrent fever, fatigue, or night sweats?

Had a fever of more than three weeks’ duration, weight loss of more than 1S pounds in

two months, diarrhea of more than one

month’s duration, persistent skin rash or oral

lesions (infections or sores of the mouth)?

During the past ten years, has any person to

be insured consulted a physician or practitioner for, been treated for, had, or been informed that he or she had, Acquired Immune

Deficiency Syndrome (AIDS), AIDS Related

Complex (ARC), or other immune deficiency?

Underwriters frequently order an APS to help

evaluate an applicant’s risk for AIDS; 82 percent

or more of those screening individuals (42 of s1)

for AIDS exposure require applicants’ physicians

to submit an APS describing their recent health

history and laboratory and other diagnostic test

results (figure 2-7). Eighty-one percent of small

group (22 of 27) and 64 percent (7 of 11) of large

group insurers also order an APS. In addition to

possibly revealing AIDS symptoms or other risk

factors, the APS may report the applicant’s HIV

status. If a photocopied medical record is submitted in lieu of the standard APS (a common

practice among physicians), the applicant’s sexual preference may be indicated as well.

HIV testing is also quite common. This is particularly true for individual health insurance,

where 61 percent of those insurers that screen (and

more than half of all respondents) require applicants to pass the ELISA-ELISA-Western blot series. One-third of those that screen individuals (17

of 51) also use the T-cell subset test, presumably

in States where HIV testing is prohibited. No company reported using the ELISA test without Western blot confirmation.

Substitution of the T-cell test can be problematic

even for the healthy insurance applicant. In California, where HIV testing is prohibited and T-cell

testing is common, the Department of Insurance

has received complaints from HIV-negative individuals who were unable to obtain insurance because of positive T-cell test findings (11s).

HIV testing is less common among the responding group insurers; only nine of the small group

(33 percent) and three of the large group insurers

(27 percent) require an ELISA and Western blot

for some applicants. T-cell subset studies are also

ordered in States where HIV testing is prohibited

by six small group (22 percent) and 3 large group

insurers (27 percent).

No insurer reported using any blood test alternative other than the T-cell subset study.

Who 1s Required To Have an AIDS Test?—

Thirty-one (51 percent) of the respondents routinely tested individual health insurance applicants

for HIV antibodies; of these, 7 test all applicants,

14 test only those considered to be “high-risk,”

and 10 test according to various criteria (e.g.,
82

State of residence, medical history, policy amount,

etc.). Nine small group insurers routinely HIVtest; one tests all applicants, five test “high-risk”

applicants, and three test according to other criteria. Three large group insurers test only those

applicants thought to be at risk (table 2-18).

“High-risk” is defined differently by each company; history of sexually transmitted disease was

the most commonly reported criteria, although

those with a history of drug abuse, receiving

blood transfusions, and hemophiliacs are also frequently tested. Many companies, however, reported that hemophiliacs and known drug abusers

are automatically denied coverage. Three companies noted that for residents in areas of high

AIDS prevalence, particularly New York and

California, 100 percent of their applicants are

HIV-tested. Applicants in California, where HIV

antibody testing is prohibited, undergo the T-cell

test (table 2-18).

How Many Individuals Have Insurers Reimbursed for AIDS-Related Claims ?—Almost threequarters of the individual insurers (45 of 61) responding to the survey had reimbursed at least

one policyholder (or dependent) for AIDS-related

care. In total, 1,010 AIDS cases were reported

and, on average, each insurer financed the care

of 22 AIDS-related cases. The range of the AIDS

“burden” on each insurer, however, varied widely.

For individual health insurance, for example, payments for AIDS-related services ranged from no

cases (6 companies) up to 269 (1 company). More

than half of the companies (34 of 61) reported 10

reimbursable AIDS cases or fewer, while only 4

have reimbursed so or more individuals for AIDSrelated care (figure 2-8).

Of the 20 insurers providing AIDS case data

for their small group policies, 6 reported no AIDSrelated cases and 14 had from 1 to 50, totalling

146. Twenty-two large group insurers reported

Table 2-18.—Commercial Health Insurers: HIV Testing Practices and Criteria for High.Risk Individual,

Small Group, and Large Group Applicants

Individual applicants Small group applicants Large group applicants

(n=61) (n =38) (n =27)

Surveyed companies requiring HIV test . . . . . . . . . 31 (51 “/0) 9 3

Who do they test?b

All applicants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1 0

High-risk applicants only . . . . . . . . . . . . . . . . . . . . 14 5 2

Other, including: . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3 1

High incidence areas-ail; elsewhere based

on medical history ., . . . . . . . . . . . . . . . . . . . 2 1 0

New York and California-all; elswhere based

on medical history . . . . . . . . . . . . . . . . . . . . . 1 0 0

Anyone whose blood is drawn . . . . . . . . . . . . . 1 0 0

Policy amounts more than $100,000 . . . . . . . . 1 0 0

If medical history warrants it . . . . . . . . . . . . . . 2 1 1

Criteria care under review . . . . . . . . . . . . . . . . . 0 1 0

Who is considered high-risk?

All males. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 0

History of sexually transmitted disease . . . . . . . 15 7 3

Hemophiliacs c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5 3

History of receiving blood transfusions . . . . . . . 8 5 3

Drug abusersc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 6 3

Other, including:

AIDS symptoms present . . . . . . . . . . . . . . . . . . 4 0 0

History of hepatitis . . . . . . . . . . . . . . . . . . . . . . . 1 0 0

Individual consideration . . . . . . . . . . . . . . . . . . . 1 0 0

Medical history . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1

%Xly “late applicants’ to large groups are tested.

bThree Of the thifly-one individual insurers that HIV test did not answer this question

cNumerous carriers noted that they do not underwrite hemophiliacs or drug abusers under any conditions.

SOURCE: Office of Technology Assessment, 1988.
83

Figure 2-8.-Commercial Health Insurers:

Number of AIDS-Related Cases

Percent of compan[esa

60

50

40

30

20

10

0

CJn 19

None 1-1o 11-49 50-100 Over 100

Number of AIDS-related cases

= lndlwdua l

c

~ Small grou p

c m Large group ’

(n=51) (n=20) (n=22)

ap~rC~ntageS may not total 100 due to rounding.

bRepre~ents the number of responding companies,

CData were unavailable for lfj individual, 18 small group, and 27 large group insurers.

SOURCE Office of Technology Assessment, 1988.

613 AIDS-related cases; 3 had no cases, 12 had

1 to 10, and 6 had 11 to 100, and 1 company

alone, 350.

It is important to note here that surveillance of

AIDS-related cases and of costs to insurers is

sketchy at best. Sixteen percent (10 of 61) of the

individual and 47 percent (18 of 38) of the small

group health insurers noted that case data were

unknown or unavailable, and the majority of

those responding reported collecting AIDS-related

case data only since 1986. Cost projections for

AIDS cases were not provided by two-thirds of

the individual and 82 percent of the small group

insurers. Many commented to OTA that identifying AIDS-related cases is often difficult and, if

data collection systems do exist, cases and costs

are probably undercounted. Moreover, it is not

standard practice among most insurers to project

annual costs or claims by diagnosis.

Poor reporting of AIDS-related data may be,

in part, a reflection of the minimal impact of the

disease in many locales around the country. An

official of 1 of the 5 largest individual health insurers, despite reporting 269 AIDS-related cases

and historical costs of more than $3.2 million,

commented to OTA that AIDS “is just a drop in

the bucket. ”

What Costs Do Insurers Project for AIDS-Related Claims for 1987?—Twenty-one companies

provided projections of AIDS-related claims costs

for 1987, forecasting total claims of $11.04 million for individual health policies, an average of

$0.53 million per individual insurer. Projections

ranged tremendously; two companies did not expect any AIDS cases this year (both specialize in

insurance for seniors), while four projected costs

of $1.3 to $2.3 million for individual health policies (figure 2-9). (As noted above, one carrier reported more than $3,2 million in AIDS-related

claims to date. )

Seven small group insurers forecast a total of

$1.5 million AIDS-related costs for 1987, ranging from none at one firm up to $618,000 at

another. Seven large group insurers projected a

total $488,600; an additional company reported

that it expected 1987 AIDS-related group claims

to total $5 to $10 million.

What Proportion of Insureds With AIDS Have

Been Found To Have a Preexisting Condition for

AZDS?—Preexisting condition clauses are used

universally by health insurers and significantly restrict reimbursement for medical conditions that

existed before the effective date of coverage. Two

Figure 2-9.-Commercial Health Insurers:

Range of 1987 AIDS-Related Cost

Projections for Individual Subscribers

Projected AIDS-related costs

(n=21)c

Over $1 milliona

$35(-)007 -1,000,000

$100,001-350,000

$10,000-100,000

$0

7

I 1 I 1 1 I I 1 !

O 5 10 15 20 25 30 35 40

Percent of companies

~ne respondent was unable to project 1987 costs but reported historical costs

of $3.22 million for 289 individual subscribers

b Represents the number of responding cOmPanies.

CFORY individual insurers (almost two.thirds of the respondents) Were unable tO

provide AIDS-related cost data

SOURCE: Office of Technology Assessment, 1988.
84

key time periods set limits on the insurer’s financial responsibility for such conditions: the length

of time before and the length of time after the policy goes into effect. The NAIC has issued several

relevant model regulations. Regulations to implement their Individual Accident and Sickness Insurance Minimum Standards Act define a preexisting condition as “. . . the existence of symptoms

which would cause an ordinarily prudent person

to seek diagnosis, care or treatment” or “a condition for which medical advice or treatment was

recommended by a physician or received from a

physician within a S-year period preceding the effective date of the coverage of the insured person” (emphasis added) (213). 35 In addition, no

claim for losses incurred after a 2-year waiting

period starting on the policy date should be denied on the ground that the disease or physical

condition was preexisting (213).

Though most experts agree that HIV seropositivity does not meet the NAIC definition of a preexisting condition, the head underwriter of a top10 company told OTA of denying reimbursement

on that basis. At present, there are several court

cases pending relating to what comprises a preexisting condition for AIDS and the alleged refusal by insurer(s) to pay for AIDS-related claims

based on a policy’s preexisting condition provision.

Almost half (21 of 44) of the individual health

insurers who had received at least one AIDS-related claim reported finding no preexisting AIDSrelated cases. Eleven found 1 to 9 percent of cases

to be preexisting; 10 companies discovered 10 to

50 percent. Two companies reported more than

50 percent (figure 2-10).

Seven small group insurers found no AIDSrelated claims to be linked with a preexisting condition; another seven reported 1 to 9 percent; one

reported 10 to 50 percent; and two, more than

50 percent.

Six of the large group insurers reporting AIDSrelated claims identified none as preexisting, 11

found 1 to 9 percent, and 2 found 10 to sO percent.

JSAS of October 1987, the regulation had been adopted by 20

States (16).

Figure 2-10.—Commercial Health Insurers:

Percent of AIDS Cases Determined

To Be Preexistinga

Percent of companies

60

50

40

30

20

10

0

o% 1-9% 10-50% Over 50%

Proportion of AIDS cases with a preexisting condition

= Indivldual d

IZZ Small group D Large groupd

(n=44) (n=17) (n=19)

%nly those respondents providing AIDS case data are included.

b percen tage s may not total 100 due to rounding.

cRepresents the number of responding comPanies.

dDa

ta were unavailable for one individual and 22 large group insurers rePoflin9

AIDS cases.

SOURCE: Office of Technology Assessment, 1988.

What Plans Have Companies Made in Response

to the Financial Impact of AIDS?—Beyond the actions already taken by many insurers, and reported above, many companies have additional

plans in the works. The most common are plans

to reduce company exposure in the individual and

small group health insurance markets (e.g., by introducing tighter underwriting guidelines) and to

expand HIV or other testing. One-third of those

responding (20 of 61) plan one or both of these

measures. Nine companies intend to add an AIDS

question to the health history portion of their application forms. Five reported plans to exclude

AIDS and/or sexually transmitted diseases from

individual health coverage. Other planned measures include placing a dollar limit on AIDS coverage in new policies and establishing a waiting

period for AIDS benefits (table 2-19).

No insurer cited plans to withdraw from the

individual health market; however, one of the

largest surveyed insurers noted its withdrawal

from the Washington, DC, area. (The District of

Columbia has the nation’s most stringent prohibitions regarding AIDS testing and underwriting.)

Nonetheless, it is difficult to assess whether AIDS

has reduced the availability of nongroup health

coverage; insurers, for example, can effectively
85

Table 2-19.—Response to the AIDS Epidemic: Reported Plans by Commercial Health Insurers,

BCIBS Plans, and HMOS

Commercial insurers BC/BS plans HMOS

(n=61) (n= 15) (n= 16)

Reported plans Number Percent Number Percent Number Percent

Withdraw from the individual health market altogethe~ .

Exclude AIDS and/or sexually transmitted diseases from

individual health coverage . . . . . . . . . . . . . . . . . . . . . . . . .

Reduce company exposure in the individual and small

group health markets (e.g., by introducing more restrictive underwriting guidelines) . . . . . . . . . . . . . . . . . . . .

Expand HIV or other testing of applicants . . . . . . . . . . . . .

Terminate open enrollment . . . . . . . . . . . . . . . . . . . . . . . . . .

Other:

Considering one or more of the above . . . . . . . . . . . . . .

Would consider any of the above policies if they were

adopted by competing HMOS . . . . . . . . . . . . . . . . . . . .

Add an AIDS question to application ... , . . . . . . . . . . . .

Include a dollar limit for AIDS care in new policies . . .

Establish a 12-24 month waiting period for AIDS. . . . . .

Deny applicants with a history of sexually transmitted

disease and expand waiting period for hepatitis,

lymph disease, and mononucleosis . . . . . . . . . . . . . . .

Expand education role . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policies currently under review . . . . . . . . . . . . . . . . . . . . .

Considering HIV testing . . . . . . . . . . . . . . . . . . . . . . . . . . .

No actions planned or reported . . . . . . . . . . . . . . . . . . . . . .

0

5

— o

80/0 1

21

20

N A

b

3

NA

9

2

1

0

0

0

0

10

34

33

—

5

—

15

3

2

o

NA

2

0

0

— 1

— 2

— 2

— o

16 2

7“/0

“ 40

7

13

—

—

7

7

13

13

1

0

5

2

0

0

1

0

0

0

0

0

2

1

7

60/0

—

31

13

—

—

6

—

13

6

44

%ne commercial insurer reported withdrawing from the Washington, D.C. market

bNA = Not applicable.

SOURCE Office of Technology Assessment, 1988.

eliminate their role in the market by pricing nongroup policies so high that no one will buy them

(218).

Blue Cross/Blue Shield Plans. —The survey

asked several questions concerning AIDS underwriting policies and claims experience:

Do Blue Cross/Blue Shield Plans Attempt To

Identify Applicants Exposed to the AIDS Virus?—

Eleven or 73 percent of the respondents either

screen or plan to screen nongroup applicants for

AIDS exposure by one method or another; of

these, eight currently screen nongroup applicants

and three plan to. One additional plan noted that

its AIDS policies are under review (figure 2-11).

BC/BS efforts to identify high-risk group applicants are also common. Ten small group (77

percent) and 7 large group plans (54 percent) either screen or plan to screen through some method

(figure 2-11).

How Do Blue Cross/Blue Shield Plans Screen

for AIDS Exposure?–The plans’ approach to

screening for AIDS very much mirrors their general approach to underwriting. The health history

questionnaire along with an attending physician

statement are the principal means for assessing an

applicant’s health. Testing is very rare (figure

2-12).

All the plans that try to identify applicants exposed to the AIDS virus use an AIDS-related

question in applications for nongroup, small

group, and large group coverage. The BC/BS approach to asking about AIDS differs from many

commercial earners. Rather than ask about AIDSrelated symptoms or test results, the plans have

simply added AIDS and/or ARC to their health

history diagnoses lists. Venereal disease is also included by five plans. One plan asks a more general question concerning “positive test results for

immune disorders” because it is prohibited, by

State regulations, from asking directly about

AIDS. Interestingly, a continuous, open enrollment plan that does not screen for AIDS exposure

specifically instructs the applicant not to indicate

need for medical advice or treatment ‘because you

have had a positive result on an AIDS test—

HTLV-111.”

84-750 - 88 - 3 : u 3
86

An admission of AIDS, ARC, or HIV seropositivity results in immediate refusal of the application except in open enrollment plans. As in the

case of commercial insurers, BC/BS plans include

Figure 2-11. -BC/BS Plans

Attempting To Identify Applicants

Exposed to AIDS

Yes No, but plan to No, and no plans to

_ Individual IZZl Small group n Large group

(n=15)b

(n=13)c

(n=13)c

aRe~resents the number of responding companies.

bNot shown wove are one pl~ that WSS r@eWlng its AIDS policies and another

plan that attempts to identify AIDS exposure for less than 0.5% of individual

applicants.

cData were unavailable for one smali group and two large group pianS.

SOURCE: Office of Technology Assessment, 1988.

Figure 2-12. -BC/BS Plans:

Methods Used To Identify AIDS Exposurea

Question on APS ELlSA and

application Western blot

= Individua l n Small grou p a Lary;=;;;u p

(n=ll) (n=lO)

%nly those respondents screening or intending to screen for AIDS exposure

are included.

b Represents the number of responding COmpanieS.

Coniy ILlate applicants” to large groups are screened.

SOURCE: Office of Technology Assessment, 1988.

an AIDS question on the application not only for

screening purposes but also as a tool for contesting preexisting condition claims. If an applicant

knowingly misrepresents his or her health condition, the plan may have grounds for denying reimbursement for the condition or rescinding coverage altogether. (See discussion below concerning

BC/BS reported experience with preexisting condition claims for AIDS.)

Nine plans (82 percent) may ask for an APS

to help evaluate a nongroup applicant’s risk for

AIDS. Seventy percent of small group (7 of 10)

and S4 percent (7 of 11) of large group plans (4

of 7) also order an APS for some applicants. The

APS may indicate AIDS symptoms, other risk factors, HIV status, and even sexual preference.

Only one plan intends to test some applicants

for HIV infection (using the ELISA-ELISA-Western

blot series). No plan reported using the T-cell subset test.

Who Is Required To Have an AIDS Test?—As

noted above, only one plan expects to test some

nongroup and small group applicants for HIV infection. Anyone considered to be “high-risk” will

be required to undergo the ELISA-ELISA-Western

blot series. The plan’s criteria for “high-risk” include: 1) all males, 2) history of sexually transmitted disease, 3) hemophiliacs, 4) history of receiving blood transfusions, and 5) drug abusers.

How Many Blue Cross/Blue Shield Subscribers

Have Been Reimbursed for AIDS-Related Claims?—

BC/BS surveillance of AIDS-related cases and

costs seems sketchy at best. One-third of the plans

noted that case data were unknown or unavailable, and the majority reported collecting AIDSrelated data only since summer 1985. Several

plans indicated that they are just now developing systems for better identifying subscribers diagnosed with AIDS-related illnesses; furthermore,

current caseload data are probably underestimated. Ten of the fifteen respondents were not

able to provide projections of AIDS-related claims

costs for 1987 (table 2-20). Most of the plans that

provided relevant data were unable to identify

AIDS-related cases or costs by type of coverage

(i.e., individual vs. group). Consequently, aggregate data is presented here reflecting both individual and group policy experience.
87

Table 2-20.—Blue CrosslBlue Shield Plans: Number of Subscribers Reimbursed for AIDS-Related Claims

No open enrollment Open enrollment All Dlans

(n =10) (n =5) a

(n ~ 15)

Total number of subscribers reimbursed for AIDS-related

claims b

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453 3,480 3,933’

Number of plans reporting AIDS-related claims . . . . . . . . . . . . . 7 (70”/0) 3 (60°/0) 10 (670/o)

Average number of AIDS-related cases per plan . . . . . . . . . . . . 65 1,160 393

“one of the five plans holds “ I irnited open enrollment period; the others are cfJntinuOUS.

bAIDS.related claims data reflect both individual and group pOiiCy experience

cone plan “lone repofied 3,000 subscribers with AIDS; the other plans had an average AIDS-related caseload of 104.

SOURCE: Off Ice of Technology Assessment, 1988.

Ten plans reported reimbursing 3,933 subscribers for AIDS-related care, an average of 393

subscribers per plan. The range in caseload was

tremendous, from only 1 to 3,000 subscribers.

Along with the obvious effect of location on

regionally based insurers such as BC/BS plans,

market share and open enrollment seem to critically determine a plan’s AIDS “burden. ”

Open enrollment plans with a large share of the

health insurance market appear to be particularly

vulnerable if also located in a State that is seriously burdened by the epidemic. The seven plans

that never hold an open enrollment period reported a total of 453 AIDS-related cases, an average of 65 subscribers per plan. Three of these plans

are located in areas of high AIDS prevalence, and

only one has historically held a significant market share (i.e., cIose to 40 percent) (84). In stark

contrast, the three plans that are continuously

open reported reimbursing 3,480 subscribers for

AIDS-related care, an average of 1,160 cases per

plan. Two of these plans are in areas of high AIDS

prevalence, one plan alone accounts for 3,000

cases. All three have historically held large market shares ranging from 60 to 75 percent (table

2-20).

What Costs Do the BC/BS Plans Project for

AIDS-Related Claims for 1987?—Only five plans

provided 1987 claims projections. Three non-open

enrollment plans forecast a total of $29.6 million

in AIDS-related claims for 1987 ($20 million was

for one plan alone). Two of these plans are located in high-risk regions. Claims totaling $27 million were projected by two open enrollment plans,

$23 million for one plan and and $4 million for

the other (table 2-21).

What Proportion of Subscribers With AIDS

Were Found To Have a Preexisting Condition for

AIDS?—Six of the 10 plans that have identified

at least one subscriber with AIDS reported finding that 1 to more than 50 percent of these subscribers had a preexisting condition for AIDS.

Two of these plans, both in areas of high AIDS

prevalence, linked more than half of their AIDS

cases with a preexisting condition (table 2-22).

This may be evidence of adverse selection and the

effort of AIDS sufferers to obtain insurance protection after an AIDS-related diagnosis had been

made or seriously suspected.

What Plans Have BC/BS Plans Made in Response to the Financial Impact of AIDS ?—A1l but

two of the respondents report some action in response to the AIDS epidemic. Six plans (4o percent) noted intentions to reduce their exposure in

the individual and small group health markets.

One cited intentions to expand HIV or other testing of applicants while also excluding AIDS and/

or sexually transmitted diseases from individual

health coverage. Others reported intentions to add

an AIDS question to enrollment applications,

deny applicants with a history of sexually transmitted disease, and lengthen the waiting period

for new subscribers with a history of hepatitis,

lymph disease, and mononucleosis. Two plans

(one holds continuous open enrollment) intended

to expand their AIDS education efforts, and two

others are currently reviewing their AIDS-related

policies (table 2-19).

Health Maintenance Organizations .—The survey asked several questions concerning AIDS underwriting policies and claims experience:
88

Table 2-21 - Blue Cross/Blue Shield Plans: Projected AIDS-Related Claims Cost for 1987

No open enrollment Open enrollment All plans

(n= 10) (n =5)a

(n= 15)

Total projected AIDS-related claims cost for 1967b

. . . . . . . . . . . $29.6 million $27.0 million ‘$56.6 million

Number of companies reporting projections . . . . . . . . . . . . . . . . 3 (30”/0) 2 (40”/0) 5 (33”/0)

Average projected cost for 1967 . . . . . . . . . . . . . . . . . . . . . . . . . . . $9.9 million $13.5 million $11.3 million

Range . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2”6 to $20 million $4t0$23 million $2.6 to$23 million

%ne of the five plans holds a limited open enrollment period; the others are continuous.

bAIDS.related cost projections include individual and group pOliCieS,

SOURCE: Office of Technology Assessment, 19S8.

Table 2-22.—BC/BS Plans Reporting AIDS Cases: Prevaiance of Cases With

Preexisting Condition for AIDS

Individual and group policies

Proportion of AIDS cases with a Number of plans

preexisting condition for AIDSa

(n=9) Percent of plans

0 percent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3b 30 ”/0

1 to 9 percent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 20

10 to 50 percent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

C

20

Greater than 50 percent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 20

@nly those nine plans that reported AIDS-related cases and preexisting condition data are included. A tenth plan reported

230 cases but the related preexisting condition data were unavailable. bone of these plans ~ep~~ that while no Srnali Or large group cases were preexisting, 1 to g Percent Of its indiVl@al AIDsreiated cases were linked with a preexisting condition.

cone of these plans repo~~ tflat while 10 to 50 percent of its smali and group cases were Preexisting, more than half of

its individual AI DS-reiated cases were linked with a preexisting condition.

SOURCE: Office of Technology Assessment, 19S8.

Does the HMO Attempt To Identify Applicants

Exposed to the AIDS Virus?- Half or more of the

respondents screen or plan to screen individual

(8 of 15) and small group applicants (4 of 8) for

exposure to the AIDS virus by one method or

another. Three of the plans that do not try to identify individual applicants exposed to AIDS are

prohibited from doing any medical screening by

State law. One plan noted that it is currently formulating its AIDS policies (table 2-23).

How Does the HMO Screen for AIDS Exposure?

—The responding HMOS rely primarily on the

enrollment application and the attending physician statement to identify applicants exposed to

the AIDS virus. HIV testing is done by only two

plans and is being considered by a third (table

2-24).

Each of the eight plans that screen for HIV infection ask an AIDS-directed question in the

health history portion of their enrollment form.

Some of the respondents have simply added AIDS

and/or ARC to the application’s health history

list of diagnoses, while one plan asks: “Had any

blood tests including any screening for the presence of viral antibodies?”

An admission of AIDS, ARC, or HIV seropositivity results in immediate declination of the application. Like the commercial insurers and

BC/BS plans, the HMOS include an AIDS question on the application not only for screening purposes but also as a tool for contesting preexisting

conditions. If an applicant knowingly misrepresents his or her health condition, the plan may

have grounds for terminating HMO membership.

Six plans (75 percent) reported that they request

an APS to help determine an individual applicant’s risk for AIDS; two (50 percent) similarly

screen small group applicants. As noted earlier,

the APS may report AIDS symptoms, other risk

factors, HIV status, and even sexual preference.

Only two plans (25 percent) require individual

applicants to be tested. Both use the ELISA-ELISA-
89

Table 2-23.—HMOS Attempting To Identify Individual and Small Group Applicants Exposed to the AIDS Virus

Attempt to identify applicants Individual applicants Small group applicants

exposed to the AIDS virus Number of HMOS Number of HMOS

(n=l) Percent of HMOS (n=7) Percent of HMOS

Yes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 53”!0 57”!0

No, but plans to . . . . . . . . . . . . . . . . . . . . . . . . . 0 — :

No, and no plans. . . . . . . . . . . . . . . . . . . . . . . . .

—

6 40 2 29

Other, including:

—AIDS policies under review . . . . . . . . . . . . 1 7 1 14

%ne HMO that accepts small group applicants did not answer this question,

SOURCE: Office of Technology Assessment, 1988.

Table 2-24.—HMOS: Methods Used To Screen Individual and Small Group Applicants for Exposure to the AIDS Virus

Individual applicants Small group applicants

Method(s) used to identify AIDS exposurea Number of HMO S Number of HMOS

(n =8) Percent of HMOS (n=8) Percent of HMOS

Question on application . . . . . . . . . . . . . . . . . . 8 100 ”/0 4 500/0

Attending physician statement. . . . . . . . . . . . . 6 75 2 25

ELISA and Western blot . . . . . . . . . . . . . . . . . . 2 25 0

T-Cell subset study. . . . . . . . . . . . . . . . . . . . . . .

—

o 0 0

Other, including:

—

physical exam if high risk . . . . . . . . . . . . . . . 1 13 0 —

aData include only those HM(3s that screen or intend to SCEEm for AIDS.

bTwo HMOS that screen for AIDS among small group applicants did not K3POrt their methods.

SOURCE: Office of Technology Assessment, 1988.

Western blot series. Another plan reported that

it is considering plans to introduce HIV testing

of applicants. No plan reported testing group applicants or using the T-cell subset test (table 2-

24). One plan that is located in a State where HIV

testing is prohibited requests a physical exam of

all high-risk applicants.

Who Is Required To Have an AIDS Test ?—As

noted above, only two HMOS reported that they

test some self-pay applicants for HIV infection.

At both plans, anyone considered to be “highrisk” will be required to undergo ELISA-ELISAWestern blot testing. At one plan “high-risk” is

defined as a history of sexually transmitted disease or drug abuse. (This plan requires applicants

to be tested at their own expense. ) The other plan

requires test results for HIV exposure for individual/family applicants with any one of twelve conditions, including: acute onset of severe seborrheic

dermatitis, history of three or more episodes of

any sexually transmitted disease, or Kaposi’s sarcoma (figure 2-13).

How Many Members With AIDS/ARC Have

the HMOS had?—The responding HMOS’ AIDS/

ARC case data seem to be just as sketchy as the

statistics provided by the commercial and BC/BS

plans. One HMO identified AIDS cases as early

as 1981, some plans reported patients in 1983,

while others cited cases as of only this year. As

for the BC/BS plans, the HMOS were unable to

identify AIDS-related cases or costs by type of

coverage (i.e., individual vs. group). Consequently, aggregate data is presented here reflecting both individual and group membership experience. In total, twelve plans reported caring for

1,468 members with AIDS or ARC, an average

of 122 members per HMO. The range in cases varied from none at two HMOS to 940 patients at

one HMO (figure 2-14).

What Costs Do the HMOS Project for AIDSRelated Care in 1987?—Only two HMOS pro

vialed projections of AIDS-related costs for 1987.

One plan that had identified 10 cases during the

first 10 months of 1987 forecast total costs of
Figure 2-13.– One HMO’s Guidelines for Health

Evaluation: AIDS and Exposure to the AIDS Virus

These guidelines define circumstances under which

will require submission of test results for HIV (AIDS virus) exposure prior to consideration of

an application for the Individual/Family Plan. These have been

developed using criteria suggested by the AIDS Task Force,

the Legal Department, and the Eligibility Committee at

Submission of recent test results (performed 12 months

ago or less) for HIV exposure shall be required (using “Western

Blot” or other test of equal or greater accuracy) under the

following circumstances:

1.

2.

3.

4,

5.

6.

7.

8.

9.

10.

11.

12.

Acute onset of severe seborrheic dermatitis in an adult.

Generalized adenopathy or unexplained adenopathy.

History of illicit IV drug usage which occurred after

1978.

Weight loss of more than 10 pounds in the prior 2 years,

which is not clearly related to dieting, increased activity, or an acute medical problem.

History of 3 or more episodes of any sexually transmitted disease (e.g. chlamydial infections of the sexual organs, gonorrhea, syphilis, condyloma) or 2 episodes of such diseases and an occurance of Hepatitis

B which have occurred after 1978.

Oral candidiasis in an adult or esophagal, bronchial, or

pulmonary candidiasis.

Cryptococcosis or isosporiasis.

Cryptosporidiosis; pneumocystis carinii pneumonia;

strongyloidosis causing infection beyond the GI tract;

toxoplasmosis causing infections in organs other than

the liver, spleen, or lymph nodes; disseminated histoplasmosis.

Mycobacterium infections other than TB, brucellosis,

or leprosy.

Cytomegalovirus causing infection in internal organs

other than liver, spleen, or lymph nodes; herpes simplex causing infection for longer than 1 month, or infections other than mucocutaneous; progressive multifocal Ieukoencephalopathy.

Chronic Iymphoid interstitial pneumonitis.

Kaposi’s sarcoma or non-Hodgkin’s Iymphoma.

SOURCE: Office of Technology Assessment, 1966.

$750,000 for the year; the other had 11 cases from

September 1986 through September 1987 and

forecast total costs of $700,000 for 1987. At both

plans, no cases occurred among nongroup members. (An additional HMO that had reported caring for 940 AIDS-related cases since 1981 did not

project 1987 costs, but estimated average lifetime

costs of approximately $35,000.)36

What Proportion of HMO Members With

AIDS or ARC Were Found To Have a Preexist36Average ]ifetime cost is the tota] cost from time of diagnosis

until death.

Figure 2-14.-Health Maintenance Organizations:

Number of AIDS/ARC Casesa

Percent of HMOsb

‘ “ ~ 1 40 -

30 - 4

20 -

2

C

10 “

n

u

None 1-1o 11-49 50-100 Over IOOd

Number of AIDS/ARC cases

~n = 16) AI D!YARC cases include individual and group members, Data were not

avaUable for two plans. bperCentageS may not total 100 due to mundlw.

cRepresents the number of responding comPanies.

done HMO alone reported 940 AIDS cases.

SOURCE: Office of Technology Assessment, 1988.

ing Condition for AIDS?—One non-federally

qualified HMO reported that more than half of

its individual members with AIDS or ARC were

found to have a preexisting condition. According to State law and in contrast to the other insurers, this plan was obligated to provide services for preexisting conditions (without a waiting

period) unless the applicant had deliberately misrepresented his or her health before joining the

HMO (200). (Federally qualified HMOS my have

grounds to disenroll members who misrepresent

their health, but the HMO is obligated to provide

medically necessary health services until membership is terminated. )

What Plans Have the HMOS Made in Response

to the Financial Impact of the AIDS Epidemic?—

Half of the respondents (8 of 16) reported no new

plans in response to the AIDS epidemic. However,

5 of the 16 HMOS (31 percent) reported intentions

to reduce their exposure in the individual and

small group health markets (e.g., by introducing

more restrictive underwriting guidelines) while

two plans intend to expand HIV or other testing,

two others are currently considering their AIDSrelated policies, and one is withdrawing from the

individual health market altogether (table 2-19).
91

Top 10 Most Costly Conditions:

AIDS v. Other Major Illnesses

Commercial Insurers. —Individual and small

group (i.e., individually underwritten) coverage

is perhaps the health insurance sector most vulnerable to financial loss in the wake of an unanticipated AIDS epidemic. In an effort to put the

costs of AIDS into context and evaluate its impact, OTA asked insurers to identify which 10 of

22 major diagnostic categories (including AIDS

and related conditions) absorbed the greatest share

of claims dollars for individually underwritten

policies. Thirty-six (58 percent) of the 62 respondents were able to provide these data.

Six of 36 companies (17 percent) reported that

AIDS was among the 10 diagnoses that accounted

for the largest proportion of individually underwritten claims. Overall, AIDS and related conditions ranked sixteenth for commercial insurers.

The complete list of diagnoses in order of the frequency with which they were ranked as top 10

are presented in table 2-25.

Blue Cross/Blue Shield Plans.—BC/BS plans

were also asked which 10 of 22 major diagnostic

categories (including AIDS and related conditions)

absorbed the greatest share of claims dollars for

individually underwritten policies. Eight of the fifteen respondents (53 percent) were able to provide these data.

Only two of eight plans (25 percent) reported

that AIDS was among the 10 diagnoses that accounted for the largest proportion of individually

Table 2-25.—Commercial Health Insurers: AIDS v. Other Major Illnesses

The surveyed insurers were provided a list of 22 major diagnostic categories, including AIDS and related conditions, and asked

to rank the ten diagnoses that account for the largest proportion of their total individually underwritten claims costs (see app.

D, auestion III-D).

Number of times diagnosis was ranked

Diagnostic category in the top ten (n= 36)a

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

Circulatory disorders, including: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Heart disease

Essential hypertension

Cerebrovascular disease

Other circulatory disorders

Neoplasms, including:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Malignant neoplasm of trachea, bronchus and lung .

Malignant neoplasm of breast

Other neoplasms

Respiratory disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Digestive disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diseases of the female reproductive system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Injury, poisoning and toxic effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

MusculoskeletaUconnective tissue diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Kidney/urinary tract diseases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mental disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t . . . . . . . . . . . . . . . . .

Nervous system diseases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liver, gallbladder, pancreatic disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pregnancy, childbirth, and the puerperium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diabetes mellitus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Congenital abnormalities/perinatal conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Substance use/induced organic disorders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

AIDS AND RELATED CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ear, nose, and throat diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Eye diseases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diseases of the skin, subcutaneous tissue and breast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Male reproductive system diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

!nfectious and parasitic diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other endocrine and metabolic diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59b

51

27

25

25

24

21

15

15

14

14

12

10

9

8

6

4

4

4

4

1

1

%nly 36 of the 62 responding insurers (58°/0) were able to answer to this question

bsome of the responding insurers ranked specific diseases (e.g., heart disease, malignant neoplasm of the breast) within the general cate90rie.S of “circulatory disorders” and “neoplasm”; others were unable to report their claims experience at this level of detail. As a result, circulatory disorders and neoplasms appear in the

top ten more than 36 times.

SOURCE: Office of Technology Assessment, 1988
92

underwritten claims. Both are located in areas of in order of the frequency with which they were

high AIDS prevalence; one plan reported that ranked as top ten are presented in table 2-26.

AIDS and related conditions absorbed 9 percent

of claims dollars, the other, 4 percent. Overall, Health Maintenance Organizations.—The reAIDS and related conditions ranked fourteenth spending HMOS did not provide sufficient inforfor BC/BS plans. The complete list of diagnoses mation to analyze their response.

Table 2.26.—Blue Cross/Blue Shield Plans: AIDS v. Other Major Illnesses

The surveyed plans were provided a list of 22 major diagnostic categories, including AIDS and related conditions, and asked

to rank the ten diagnoses that account for the largest proportion of their total individually underwritten claims costs (see app.

D, question III-D).

Number of times diagnosis was ranked

Diagnostic category in the top ten (n =8)a

1.

2.

3.

4,

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

Circulatory disorders, including: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Heart disease

Essential hypertension

Cerebrovascular disease

Other circulatory disorders

Respiratory disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . .

Digestive system disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Musculoskeletal/connective tissue diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Neoplasms, including:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Malignant neoplasm of trachea, bronchus and lung

Malignant neoplasm of breast

Other neoplasms

Pregnancy, childbirth, and the puerperium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mental disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Injury, poisoning, and toxic effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Congenital abnormalitieslperinatal conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liver, gallbladder, pancreatic disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Kidney/urinary tract diseases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nervous system diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diseases of the female reproductive system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

AIDS AND RELATED CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Infectious and parasitic diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Blood diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ear, nose, and throat diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

8

8

8

6

6

6

5

5

4

3

3

3

2

1

1

1

Eye diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

%nly80f the 15 responding plans (53%) were able to answer to this question.

bsomeof the res p on ding plans ranked spe~ific diseases (e,gqhearf disease) within the general category of ”circulato~ disorders’~ others were unable to report their

claims experience at this level of detail. As a result, circulatory disorders appears in the top ten more than eight times.

SOURCE: Officeof Technology Assessment, 19S8.
Chapter 3

Employment Testing
CONTENTS

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . ...................................... 95

Limits on Employment-Based Testing . . . . . . . . . . 95

Constitutional and Related Remedies . . . .

95~

Statutory Remedies. . . . . . . . . . . . . . . . . ..96

Other Employee Remedies . . . . . . . . . . . . . ~~~~Ù ~~• 100

Tort Law . . . . . . . . . . . . . . . . . . . . . . . . .101

The Extent of Medical Testing by Employers . . . 101

Medical Examinations . . . . . . . . . . . . . . . 101

Genetic Testing . . . . . . . . . . . . . . . 102

Drug Testing . . . . . . . . . . . . . . . . . . . . ` 103

AIDS Antibody Testing. . . . . . . . . . . . . . . . 105

Employer-Provided Health Benefits . . . . . . . . .

107

Information on Employee Health Care Benefits 108

Self-Insured Employee Health Benefit plans. . . 113

Employment “Wellness’’P rograms.. . . . . . . . 110

Conclusions on Employer-Provided Health Benefit Plans 117

Boxes

Box page

3-A. U.S. Office of Personnel Management Policy on lnsurance and AIDS 1 0 7

3-B. National Survey of Worksite Health Promotion Programs, 1985 117

Tables

Table page

3-1. State Legislationvon AIDS . . . . . . . . . . . . . 97

3-2. 1987 state Legislative Activities on Urine Drug Testing 98
Chapter 3

Employment Testing

INTRODUCTION

The focus of this assessment in the employment

area is the use of diagnostic and predictive tests

to screen for medical and health-related conditions

among prospective employees in order to hold

down health care costs. However, them are other

reasons why employers might want to screen prospective as well as current employees.

First, screening may be used as part of a pre-employment evaluation to disqualify applicants (e.g.,

testing for use of illegal drugs such as marijuana

and cocaine, or AIDS antibody testing) or to determine if the applicant can physically perform the

intended work (e.g., examinations for firefighters

and police). Second, after a person is hired, screening may be used to determine whether there is any

health condition that may require special precautionary care because of known workplace exposures. Third, screening tests may be used to

monitor workers exposed to known or suspected

environmental hazards, including preplacement

testing to establish a baseline that can be used for

comparison with future worksite monitoring results. These examinations may be periodic (e.g.,

conducted on a yearly basis), episodic (e.g., conducted after an unusuaI exposure, such as an accidental spill of a hazardous substance), or conducted after returning to work following an illness

or injury. Lastly, screening increasingly has been

incorporated into workplace wellness programs to

identify risk factors associated with disease so that

risk factors can be reduced through health education.

By identifying applicants at risk for disease,

especially chronic diseases, and not hiring them,

employers would forego the expense of decreased

productivity and of time lost from work (including the costs to hire and train workers to temporarily fill in for the absent employee). Employers who provide health insurance to their

employees would also have reduced costs. These

incentives to screen applicants may be much more

significant for some employers than for others.

For example, employers with low turnover and

high training costs may be especially interested

in preemployment screening. Similarly, employers

with generous health care and disability benefits

may be more inclined to screen than employers

with limited benefits. Employers with high employee turnover may not have incentives to test

for disease susceptibilities if new employees are

young and likely to be employed elsewhere when

these diseases become manifest. On the other

hand, there might be greater incentives to test for

illegal drug use if prospective and/or new employees are young, because of greater use of illegal

drugs among the younger workforce.

In this chapter, information and issues concerning employment-based testing are first presented,

followed by a similar analysis of the health benefits that are available through the workplace.

LIMITS ON EMPLOYMENT-BASED TESTING

A wide variety of legal restraints is potentially

applicable to employment-based screening, although much remains unsettled in this area. Distinctions must also be made as to whether the employer is in the public or private sector (i.e.,

whether governmental action is involved), and

whether a cause of action by a prospective employee who objects to testing is grounded in an

existing statute or in case law as developed over

the years by the courts. Additionally, States differ in their approaches and available legal remedies, so the State in which a cause of action is

brought may also have a substantial bearing on

the success or failure of challenges to preemployment testing.

Constitutional and Related Remedies

Resistance to screening based on constitutional

restrictions is limited to public sector employees

95
96

and government mandated testing of private contractors because of the requirement that State action must be involved before the constitutional

remedies apply. The principal constitutional remedies are the Fourth Amendment limitations on

search and seizure, Fifth Amendment prohibitions

against self-incrimination, requirement of a “rational basis” for testing under the Fourteenth

Amendment, and a general constitutional right

to privacy.

Most of the litigation concerning these constitutional principles has involved the Fourth Amendment and urine drug screening programs. While

requiring urine specimens is a search and seizure,

it does not require a warrant and probable cause,

but does require reasonable suspicion based on

objective facts (179), or urine drug testing must

be conducted only in narrow, specifically delineated circumstances (216).

A right to privacy may result in prohibiting testing when no particular basis exists for testing (41),

but this may not be the case in closely regulated

industries, such as horse racing, where testing

without individual suspicion has been found to

be reasonable (269). Some State constitutions may

also contain a right to privacy (e.g., California,

Illinois, Louisiana, Florida), and may be enforced

even against private employers (105).

Some States have also enacted laws directed

against specific testing programs. For example,

California, Florida, Hawaii, Massachusetts, Texas

and Wisconsin have limited use of AIDS antibody

testing or information on antibody status in determining employability (168). In the case of urine

drug testing, no State has prohibited its use, but

several States have enacted laws determining

when and under what circumstances such testing

can be conducted. Connecticut, Iowa, Minnesota,

Montana, Rhode Island, and Vermont have all

enacted laws that require either probable cause

or reasonable suspicion before testing can be conducted. Utah, on the other hand, enacted a law

that seems to encourage drug testing as long as

it is “fair and equitable” because it “is in the best

interest of all parties. ” (See table 3-1 for State laws

on AIDS, and table 3-2 for a summary of 1987

State legislative activities on urine drug testing.)

Statutory Remedies

The principal statutory remedy available to persons objecting to employment-based screening is

the Vocational Rehabilitation Act of 1973 (29

U.S.C. sections 701-796), which applies to Federal employment and employers receiving Federal

funds. Over 40 States and the District of Columbia also have legislation prohibiting handicap discrimination in private sector employment, and

while the definitions and judicial interpretations

of what constitutes a handicap vary by State,

about one-third follow the Federal law. Thirtyfour States include AIDS patients in their definition of handicapped, while Georgia and Kentucky

expressly exclude persons with communicable diseases (260).

Handicapped persons must be hired or continue

to be employed if they can be reasonably accommodated and can perform their work without endangering the health and safety of other workers

(29 C.F.R. section 1613.702(f)). In March 1987,

the U.S. Supreme Court ruled that a person with

tuberculosis was a handicapped person within the

meaning of the law and that contagiousness did

not automatically remove the person from the

Act’s protection, but also expressly stated that the

Court was not ruling whether a person infected

with the AIDS virus (i.e., an AIDS antibodypositive person without disease) would come under the Act’s protection (259).

As for drug testing under the Vocational Rehabilitation Act, alcoholics or drug abusers may

be considered handicapped within the meaning

of the Act only if their abuse does not affect job

performance or pose a direct threat to the property or safety of others. An applicant or employee

who merely tests positive on a drug screening test

probably is not protected by the Act, because a

“physical or mental disability” is required (29

U.S.C. section 706(7)(A)), and drug use has not

limited a major life activity. For example, in

McLeod v. City of Detroit (180), the court found

that a recreational user of marijuana was not

handicapped, but that persons with a history of

drug abuse were intended by Congress to be protected by the Act.
97

Table 3-1 .—State Legislation on AIDSa

Antibody Informed Prison

State testing Blood Confidentiality Employment Housing consent Insurance Marriage population Reporting

Alabama

Alaska

Arizona

Arkansas

California CA CA CA CA CA CA CA CA CA

Colorado co co co co

Connecticut CT

Delaware DE DE

DC DC

Florida FL FL FL FL FL FL FL

Georqla GA GA

Hawall HI HI HI HI

Idaho ID ID

Illinois IL IL IL IL IL

Indiana IN IN

Iowa 1A 1A 1A

Kansas

Kentucky KY KY

Loulslana LA LA

Maine ME ME

Maryland MD MD

Massachusetts MA MA MA

Michigan Ml

Minnesota

Mississippi MS

Mlssourl

Montana

Nebraska

Nevada NV NV

New Hampshire

New Jersey

New Mextco

New York NY

North Carolina NC

North Dakota ND

Ohio

Oklahoma OK OK

Oreaon OR OR OR

Pennsylvania PA PA

Rhode Island RI RI RI

South Carolina

South Dakota SD

Tennessee TN TN TN

Texas TX TX TX TX

Utah UT

Vermont

Virgmla VA VA

Washington

West Virqirua w

Wlsconsm WI WI WI WI WI WI

Wvomma

aThe information ~~ntained in th, ~ chart ~efer~ ~nly to l~~i~l~ti~n ~nd not to administrative regulations, AIDS indicates acquired immunodeficiency syndrome,

SOURCE H.E Lewis, c’Acquired Immunodeficiency Syndrome: State Legislative Activity,” J. A.M.A 256(170):2410-2414, NOV. 6, 1987.
Table 3-2.—1987 State Legislative Activities on Urine Drug Testing

Probable cause Discipline/ Probable cause Discipline/

or reasonable Confirmatory dismissal Employee or reasonable Confwmatory dismissal Employee None

Enacted suspicion Rebuttal test Confidential restricted remedies Proposed suspicion Rebuttal test Confidential restricted remedies Other introduced

Alabama AL

Alaska AK AK AK AK AK

Arizona Az

Arkansas AR

California CA CA CA CA CA CA

Colorado co co

Connecticut CT CT CT CT CT CT

Delaware DE

Florida FL

Georgia GA GA

Hawaii HI

Idaho ID

Illinois IL IL IL IL IL IL liIndiana IN IN

Iowa 1A 1A 1A 1A 1A 1A 1A

Kansas KS

Kentucky KY

Louisiana LA

Maine ME ME ME ME ME ME

Maryland MD MD

Massachusetts MA MA MA MA MA

Mlchlgan Ml

Minnesota MN MN MN MN MN MN MN

Mississippi MS

Mlssour] MO

Montana MT MT MT MT MT MT
Table 3.2.—1987 State Legislative Activities on Urine Drug Testing—Continued

Probable cause Dlsclplme/ Probable cause Dlsclpline/

or reasonable Confirmatory dlsmlssal Employee or reasonable Confirmatory

Enacted

dlsmlssal Employee None

suspicion Rebuttal test Confidential restricted remedies Proposed susplclon Rebuttal test Confldentlal restricted remedies Other introduced

Nebraska NE NE NE NE NE

Nevada NV NV

New Hampshwe NH

New Jersey NJ NJ NJ NJ NJ

New Mexico NM

New York NY NY NY NY NY

North Carolina NC NC

North Dakota ND

Ohio OH

Oklahoma OK

Oregon OR OR OR OR OR

Pennsylvama PA PA PA PA PA

Rhode Island RI RI RI RI RI

South Carollna Sc

South Dakota SD

Tennessee TN TN

Texas TX TX

Utah UT UT UT

Vermont VT VT VT VT VT VT VT

Virginia VA

Washington WA WA WA WA WA WA WA

West Virginia w

Wisconsin WI WI

Wyoming WY WY

Total 7 6 6 6 5 5 6 23 11 4 11 9 9 6 10 20

SOURCE: SM. Bannister, “State Statutes Regulating Drug Testing of Private Employ ees, ” paper presented at Continuing Legal Education with the University of Kansas on “Drug Testing: Facts, Fears, and

Policy Perspectives, ” Lawrence, KS, Nov 5, 1987
100

Title VII of the Civil Rights Act of 1964 (29

U.S.C. section 2000e et seq.), which prohibits discrimination on the basis of race, sex, national origin, and religion, might also apply in limited circumstances, as when testing has a “disparate

impact” on members of a protected group. Testing would have to have a “manifest relation to

the employment in question” (71), and there must

not be available a less discriminatory method that

the employer could use (114). The U.S. Supreme

Court has ruled in one case that might have found

the Civil Rights Act to be applicable, but found

that it was not. The New York City Transit Authority disqualified all driver applicants who were

on methadone maintenance for heroin addiction.

Despite the fact that 81 percent of applicants were

either black or Hispanic, the Supreme Court upheld the constitutionality of the Transit Authority’s decision (221).

Other Employee Remedies

Most of the following discussion is limited to

employees who are represented by unions—that

is, these remedies are not available to job applicants and nonunionized employees— with employee rights based on: 1) a duty to bargain with

the union before implementing testing programs,

and 2) a just cause determination before termination of employment based on positive testing

results.

The National Labor Relations Act makes it an

unfair labor practice for employers to refuse to

bargain with employee representatives over terms

and conditions of employment (Sections 8(a)(5)

and 8(d)), and issues concerning worker safety are

a mandatory subject of collective bargaining

(286). However, a union might be found to have

waived its bargaining rights by express language

in its contract, by the history of bargaining between the union and the employer, and/or past

practice, and courts and arbitrators have been inconsistent in litigation over this issue (105).

Termination of employment will be upheld

when it is called for in the contract and when drug

testing is conducted under a negotiated program.

Moreover, termination has generally been upheld

when: 1) the test was conducted when an employee was involved in an accident, 2) when there

was a reasonable basis to believe the employee

was under the influence, or 3) when the employee

had a known substance abuse problem (105)–

that is, when the drug testing program was not

on a random basis. In addition, arbitrators have

tended to require a greater burden of proof for

drug-related discharges, then in discharge cases

generally, because of the stigmatization of drug

use and resulting difficulty in finding other employment (17). For example, some arbitrators

have used the standards of “clear and convincing evidence” or “beyond a reasonable doubt” instead of the more easily met standard of “preponderance of the evidence” (19,176). In “mixed

motive” cases—for example, when the employer

claims that an employee was fired because of a

positive drug test when the real reason might be

that the employee was actively engaged in union

activities—the employer must prove that the action would have occurred regardless of the protected activities (17,150).

Generally, the following steps must be taken

if employees are to be discharged for drug (and

alcohol) use (250):

1.

2.

3.

4.

the employee must have had notice of the

prohibition and the corresponding penalty,

the rules must have been applied fairly,

management must have investigated the

charges and given the employee a reasonable

chance to answer them, and

the punishment must fit the crime.

Absent some non-union-based recourse (e.g.,

drug use as a handicap), nonunionized employees can be terminated at will by their employers

when their drug tests are positive. There may be

a small possibility, however, that the court may

find an employer liable for wrongful termination

when such drug-testing-based termination is

against “public policy. ” While no cases have been

litigated on this theory for drug testing, two State

courts have reached opposite conclusions when

polygraph testing was at issue. An Illinois court

saw no clearly expressed Illinois public policy

against polygraph testing (48) while a West Virginia court did, despite each employee’s written

consent to take the test (52).
101

Tort Law

Some tort law remedies might be available to

prospective and current employees. These potential remedies are most applicable to drug testing

and are generally applicable only when employers

engaged in outrageous practices.

Similar to, but distinct from the general constitutional right of privacy, is invasion of privacy.

A successful claim would have to show intentional

intrusion on the private affairs of the plaintiff in

a manner that would be highly offensive to a reasonable person (231). Consenting to the intrusion,

or when the employer has a legitimate interest in

testing and acted reasonably, would defeat a claim

based on invasion of privacy.

Tort challenges may be avoided through the following procedures (105):

1.

2.

3.

4.

5.

publishing the employer’s reasons why testing is necessary,

providing advance notification before implementing a testing program,

obtaining written consent from employees

subject to testing,

limiting disclosure of test results only to

those who need to know, and

making testing a; least intrusive as possible.

THE EXTENT OF MEDICAL TESTING BY EMPLOYERS

Medical Examinations

Perhaps the most prevalent type of medical

screening required by employers is the general

physical examination, including routine medical

tests. This requirement is not new, but the National Institute for Occupational Safety and

Health (NIOSH) has reported that the percent of

employers who require job applicants to pass

medical screening examinations increased from

38.5 percent of employers in the early 1970s to

49 percent in the early 1980s. The percent of employers requiring periodic medical exams of their

employees also increased over the decade from

14.4 percent to 30.1 percent, and about one-third

of collective bargaining agreements include provisions for employee medical examinations and

testing (249).

Among private businesses, company size and

industrial sector are associated with employee

medical examination policies. According to

NIOSH’S National Occupational Hazard Survey

data from 1972-74, 83 percent of companies with

more than 500 employees used a pre-employment

medical examination, compared with 49 percent

of companies with 250 to 500 employees, and 19

percent of companies with fewer than 250 employees (248). In all plant size categories, employers

were more likely to require pre-employment or

pre-placement screening rather than periodic monitoring. For example, in large companies (more

than 500 employees), where an estimated 83 percent of employees went through pre-employment

screening, 65.4 percent were subjected to periodic

monitoring (238). A second survey conducted by

NIOSH from 1981 through 1983 (the National Occupational Exposure Survey), indicated that the

percent of employees who were subjected to preemployment examinations and periodic monitoring had not changed substantially since the 1972-

74 period (238). Companies with industrial hygiene and safety programs, and/or unionized

companies, were more likely to provide medical

screening than other companies (238).

Variations in the prevalence of medical testing

by industry also were relatively consistent in the

two surveys. In both surveys, employees in transportation and public utility industries were most

likely to have pre-employment examinations; an

estimated 82 percent of these employees in 1972-

74 and 73 percent in 1981-83. In 1972-74, the manufacturing industry ranked second in pre-employment screening (67 percent of employees screened),

followed by the services industry (41 percent

screened). In 1981-83, the services industry was second (69 percent of employees screened), followed

by the manufacturing industry (62 percent

screened).

The two NIOSH surveys included about 4,500

workplaces throughout the United States that

were selected to represent a range of plant sizes
102

and industry types; but they excluded mining,

agriculture, Federal and State governments, and

businesses not covered by the Occupational Safety

and Health Act. Therefore these surveys, which

provide the only representative national sample

data on medical screening in the workplace, are

limited in themselves and do not specifically address the types of diagnostic and predictive medical testing that are the focus of this assessment.

The surveys did determine the frequency of blood

and urine testing in workplace screenings, although they did not identify the specific types of

blood and urine testing that was conducted.

The frequency of laboratory testing in employee

screening examinations also varied with company

size and industry. An estimated 14.7 percent of

all workers who had periodic medical examinations in 1972-74 had blood tests, but in the primary metal industries, the figure was 55.4 percent. Urine testing was included in medical

screening for 14.4 percent of all workers and up

to 46.7 percent in petroleum and coal product

workers in the early 1970s (238, 248). The use of

both blood and urine tests in periodic medical

screenings increased substantially from 1972-74

to 1981-83. In 1981-83, it was estimated that 36

percent of all workers had blood tests and 35 percent had urine tests. In plants employing more

than 500 workers, periodic medical screening in

1981-83 included blood and urine testing for 69

and 66 percent of all workers, respectively. Blood

testing was most prevalent in the service industries, where an estimated 60 percent of the workers were screened (238).

In order to examine current levels of preemployment and periodic medical screening in

greater detail, data on testing practices by private

and government employers as reported in the literature and in recent surveys are summarized below for genetic testing, drug testing, and AIDS

antibody testing.

Genetic Testing

One in four workers has been estimated to be

exposed to federally regulated hazardous substances in the workplace (12). If this is true, it

would appear that biological screening and monitoring could be clearly beneficial to employees

in some work settings. However, views about the

value of genetic testing depend on whether the

tests are used in pre-employment screening, in

which case test results could be used to discriminate against job applicants, or in periodic

monitoring, which may be extremely costly to employers.

Genetic testing to screen individuals for hypersusceptibility to hazardous materials has been controversial in the past, because genetic traits frequently are associated with particular racial or

ethnic backgrounds. The Dupont corporation’s

routine screening of all black job applicants for

sickle cell anemia trait, initiated in 1972, drew so

much criticism as a discriminatory practice when

it was reported in 1980 that it was discontinued

(12,163). Florida, Louisiana, and North Carolina

specifically prohibit sickle cell testing; and New

Jersey prohibits testing for sickle cell and other

genetic traits (e.g., Louisiana Rev. Stat. Ann., Section 23:1OO2(A)(1) West Supp., 1984-85).

A 1982 study by the Office of Technology Assessment (OTA) on the extent of genetic testing

in the 500 largest U.S. industrial companies, 50

of the largest private utilities, and 11 large labor

unions, found that of the 366 (65.2 percent) organizations responding, 6 (1.6 percent) were currently conducting genetic testing, 17 (4.6 percent)

used some of the tests in the past 12 years, 4 (1.1

percent) anticipated using the tests in the next 5

years, and 55 (15 percent) stated they would possibly use the tests in the next 5 years (290). Most

of the respondents in the OTA survey were large

companies in the manufacturing, mining, or

chemicals industries, or in utilities, as noted

above. Response to this survey was voluntary,

and therefore does not represent the extent of

genetic testing by employers nationally.

In 1986, OTA completed a survey of biotechnology companies that were developing or were

likely to develop genetic tests for commercial use

based on recombinant DNA methods. A questionnaire was mailed to 120 biotechnology companies,

and 85 of them responded (291). Twenty companies indicated they were developing such tests, and

16 completed a second, more detailed questionnaire. Of these, 12 were developing or planning
103

to develop tests (4 had changed their plans since

the first survey).

When asked to rate the sites where they expected use of genetic tests to be most important

in 1990, the 14 companies rated the following sites

in descending order of importance: genetic clinics,

health department clinics, health department

screening programs, prepaid health groups, private primary care practices, sites such as reference and DNA labs, insurance companies, the military, places of employment, private nongenetic

specialty practices, correctional institutions, public schools, and homes. Five of the twelve companies thought it likely by the year 2000 that insurance companies would be using genetic tests

on applicants. Other sources predict that by the

year 2000, most people will be getting genetic profiles, possibly through their place of employment,

and one company is reported to be testing an employee “wellness” evaluation program that involves computer analysis of family histories and

32 different blood tests for susceptibility to a range

of diseases (311).

There was disagreement among respondents to

the 1986 OTA survey over whether genetic testing should be mandated under certain circumstances. Seven of twelve companies that were developing tests disagreed with the statement that

genetic tests should be required for marriage

licenses; but a majority of them (8 of 12) believed

mandatory genetic testing may be likely by the

year 2000. Although most respondents did not

rate places of employment as an important site

for genetic testing in 1990,5 of 12 thought it likely

that employers would be using genetic tests to

screen job applicants by the year 2000. Seven of

twelve agreed that the health risks identified by

genetic testing could be used appropriately to exclude susceptible workers from hazardous jobs;

9 of 12 thought this use likely by 2000.

In November 1985, the Harris organization conducted a survey on genetic testing by employers

and posed the question: Should an employer have

the right to force a job applicant to undergo testing for a genetic disorder that would not become

symptomatic for 20 years? Of 1,254 adults surveyed, only 11 percent answered “yes” to that

question. Only 15 percent of the respondents felt

an employer’s knowledge of a job applicant’s future serious disease was acceptable grounds for

that candidate to be denied work. On the other

hand, if testing was oriented to diagnosing and

curing disease rather than to employment or insurance decisions, about 50 percent of the respondents were willing to be tested for incurable

and fatal diseases they would develop later in life

(38).

Drug Testing

Various surveys have documented the increasing tendency of both private and public sector employers to screen applicants and to test employees for use of illegal drugs and prescription drugs

that are commonly abused. Based on these surveys, perhaps half or more of employers, especially large employers, now test or plan to test

for drug use.

The percent of Fortune 500 companies requiring urine drug testing for job applicants and/or

current employees increased from about 10 percent in 1982, to approximately 25 percent in 1985,

to an expected 50 percent in 1987 (249).

In a 1986 survey by the College Placement

Council of its member employers who recruit on

college campuses, a clear trend was found in the

past 2 to 3 years to implement drug screening programs for job applicants. Of 497 respondents, 140

(28.2 percent) screened applicants, and an additional 97 (19.5 percent) employers planned to implement screening within the next 6 to 24 months

(266).

In descending order, the most common reasons

given for drug testing among these 140 companies were concerns over workplace safety (by far

the most important reason); security; quality/

reliability of products; quality of service; increased productivity; control of medical costs; and

law, government, or noncompany regulations.

The types of employers most likely to test applicants were utilities (37.1 percent); chemicals,

drugs, and allied products (9.3 percent); aerosPace

(8.6 percent); and petroleum and allied products

(7.9 percent). Nearly all (131 of 140) screened all

applicants, whether for management, clerical, or

technical positions, and most screened applicants
104

whether they were seeking full-time, part-time,

or temporary positions.

Eighty of the 140 companies used only a screening test, while 53 also performed confirmatory

testing before informing applicants that they had

tested positive for drug use. Nearly all (124 of 140)

used a positive test to exclude applicants, although

105 allowed those who failed the test to reapply

at a later time.

In a 1987 survey of more than 2,000 employers

(91 percent in the private sector) (37), among employers with more than 500 employees, 23 percent tested applicants, and 17 percent tested employees. Among companies with 100 to 500

employees, 14 percent tested applicants, and 7

percent tested employees. Among the large employers, 47 percent in the transportation industry tested, as did 17 percent of those in manufacturing. More than half of those not currently

testing were considering it. These trends were

found despite the fact that less than 1 percent of

employers identified drug abuse as the most serious problem in the workplace. As in other studies,

however, larger employers—22 percent in this

survey-considered drug abuse as a serious problem in the workplace.

Indirect evidence was also found in this survey

that supported the finding in the 1986 College

Placement Council survey that most employers

were using only screening tests—and not confirming tentative positive results with more specific

methods such as gas chromatography/mass spectrometry-before concluding that the applicant

was a drug user. Costs of testing job applicants

ranged from $10 to $29 per urine specimen for

more than half of the employers, while only 2 5

percent of employers had costs of $70 or more

per specimen.

Numerous efforts are also being made at various levels of government to implement or expand

drug testing programs, particularly among employees involved in public safety (e.g., police, firefighters), public transportation (e.g., airline pilots, air traffic controllers, bus drivers), and public

health (e.g., public health physicians and nurses).

Many of these efforts are under legal challenges

by employees, labor unions, and the American

Civil Lb-ties Union (ACLU). opponents generally have not challenged probable cause testing,

but have objected to:

● mandatory and/or random testing;

● inclusion of the entire work force or broad

classes of workers in testing programs; and

● unilateral decisions by public agencies to implement testing without negotiating with unions on whether testing should be initiated,

the details of the testing program, and the

effects on employees who test positive (e.g.,

what sanctions should be imposed, and what

rehabilitative services will be offered).

At the Federal level, a June 1986 report by the

U.S. House of Representatives’ Subcommittee on

Civil Service, Committee on Post Office and Civil

Service, reported that drug testing was already

being conducted by the Army, Air Force, Navy,

Federal Aviation Administration (in the Department of Transportation), Secret Service (in the

Department of the Treasury), and Customs Service (288).

In September 1986, President Reagan issued an

Executive Order (310) directing all Federal agencies

●

●

●

●

●

to institute:

random urine drug testing programs for employees in sensitive positions,

reasonable suspicion testing,

incident-based testing,

testing as a followup to rehabilitation, and

job applicant testing.

Subsequently, the Office of Personnel Management issued advisory Federal Personnel Manual

Letters in November 1986 (312) and again in

March 1987 (313) to assist Federal agencies in implementing the President’s order. The Department

of Health and Human Services issued Scientific

and Technical Guidelines to Federal agencies in

February 1987, and published a revised version

of these guidelines as proposed regulations in August 1987 (307), with final publication expected

by December 31, 1987.

The Department of Transportation (DOT), because it already had drug testing programs for

some of its branches (e.g., the Federal Aviation

Administration), implemented random testing in

September 1987 for all DOT employees with security clearances of top secret or higher, as well as
105

for air traffic controllers, flight test pilots, electronic technicians, firefighters, civil aviation security specialists, aviation safety inspectors, railroad

safety inspectors, Coast Guard drug enforcement

personnel, vessel traffic controllers, and motor vehicle operators.

An attempt to win a temporary restraining order by the American Federation of Government

Employees was denied by a Federal judge (201).

Similar attempts by the National Treasury Employees Union to prohibit implementation of the

President’s Executive Order until the merits of the

issue could be decided by the courts were denied

(216).

However, in March 1988, a U.S. District judge

in the District of Columbia ruled that the U.S.

Army’s mandatory random drug testing of civilian employees was unconstitutional, ruling that

urinalysis cannot show actual impairment and

that the Army’s “nonsafety” interests in ensuring

a drug-free work force did not warrant overriding Fourth Amendment protections against unreasonable searches (316). The judge’s decision

was based on the U.S. Court of Appeals for the

District of Columbia’s ruling a few months earlier

that, while drug testing of DC school transportation employees to determine if workers were impaired by drugs was not unconstitutional, urinalysis could not measure impairment. Two days

earlier, the U.S. Supreme Court had agreed to

consider the National Treasury Employees Union

suit that attacked the constitutionality of the Executive Order (215), and which the 5th U.S. Circuit Court of Appeals had upheld (216). Thus,

conflicting rulings among different circuits of the

U.S. Court of Appeals will now be resolved by

the U.S. Supreme Court.

AIDS Antibody Testing

The U.S. Supreme Court decision in March

1987 on the Arline case indicates that full-blown

AIDS will be considered a disability under Federal anti-discrimination statutes and thus will not

be acceptable grounds for discrimination in employment, (The Supreme Court decision also runs

directly counter to a Justice Department opinion

issued just prior to the Arline decision that concluded that even unfounded fears by other workers would be legitimate grounds for employers to

discharge employees with infectious diseases. ) It

is not clear how this decision affects those who

are infected with the AIDS virus but do not have

the disease. Other issues that American corporations will have to deal with in relation to AIDS

in the workplace include the following (16):

●

●

●

●

●

●

●

confidentiality of employees’ health data,

which is protected in most States;

the right of AIDS victims to work, as long

as they want to work and are able to work,

because, in addition to the Arline decision,

almost all States prohibit discrimination

against individuals with physical handicaps

and disabilities, including AIDS;

employer-provided benefits and insurance,

which provide essential access to medical care

for AIDS patients;

AIDS antibody testing policies;

fears of contagion among co-workers and the

employer’s obligation to provide a safe

workplace;

the needs of companies to avoid financial and

legal exposure; and

the effects of AIDS on worker productivity.

Current Policies on AIDS in the Workplace

According to the Centers for Disease Control

(CDC), there is no justification for excluding

AIDS or antibody-positive individuals from the

workplace on the grounds of risks to coworkers,

and CDC also recommends against routine testing in the workplace (204). These conclusions

have been supported by the American Medical

Association (AMA) (9). On October 30, 1987, the

U.S. Departments of Labor and of Health and Human Services issued a joint advisory notice to

health-care employers on procedures to be followed on “Protection Against Occupational Exposure to Hepatitis B Virus (HBV) and Human

Immunodeficiency Virus (HIV)” (307).

In the Federal Government, mandatory AIDS

testing has been instituted for all military service

applicants and active duty personnel (since October 1985), foreign service employees of the State

Department since November 1986, and participants in the Job Corps since December 1986. Additionally, in the summer of 1987, the Public

Health Service (PHS) classified AIDS as a “dan-
106

gerous contagious disease” for immigration and

naturalization actions, and the U.S. Senate unanimously passed a requirement for negative AIDS

antibody status for immigrants seeking admission

to the United States.

Numerous surveys have been conducted on the

experience of private employers with AIDS among

their workers and on their response to AIDS.

These surveys reveal that employers are increasingly encountering AIDS among their workforce.

For example, in a January 1986 survey, 18 of 238

employers (8 percent) had known cases of AIDS

among their employees (8 of these 238 employers

had tested their employees for AIDS antibodies,

while 2 had tested job applicants) (46). Another

survey reported at the same time showed that 34

of 154 large companies (22 percent) had workers

with AIDS (46). In a March 1987 survey, 29 percent of 600 companies had known AIDS cases

among their employees (119). In another survey

conducted in summer 1987 among 151 Fortune

500 companies, 33 percent of the companies had

employees with AIDS, and another 50 percent expected to encounter AIDS in the near future (169).

Generally, companies have rejected AIDS antibody testing for job applicants and employees,

but a significant percent of senior management

support testing. In a 1985 survey of 861 large private firms, 2 percent of surveyed employers stated

that they screened job applicants for AIDS, while

another 10 percent were considering it. Those who

screened or were considering it were more concentrated in the southeastern United States (120).

In a March 1987 survey of 600 companies (see

above), 87 percent of the personnel and benefits

administrators stated that they had considered

AIDS antibody testing for job applicants, while

9 percent had actually conducted testing. Sixtytwo percent of the respondents felt that management would oppose testing for all job applicants,

and 15 percent were not sure; but 23 percent felt

that management would favor pre-employment

testing (119).

Similar results were obtained in another survey conducted in late 1987 (152). Among 101

companies employing between 1,000 to 10,000

people, two-thirds of the companies did not believe that testing would stem the spread of AIDS

in the workplace or help control benefit costs.

Support of testing also seemed to be inversely related to knowledge of AIDS. Only about one in

five (19 percent) of companies that claimed they

were extremely or very knowledgeable about

AIDS supported testing; 37 percent of companies

who reported being somewhat knowledgeable

supported testing; and half of companies not very

knowledgeable about AIDS supported testing.

Employers generally support education as the

best way to deal with AIDS among their employees. However, there is a substantial gap between

what employers think should be done versus actually developing educational strategies and programs for their employees. For example, in a survey of Fortune 1000 companies by National Gay

Rights Advocates during the winter of 1986-87,

of the 164 personnel directors responding (a total of 995 companies were asked to participate),

only 30 (18 percent) had written policies on AIDS,

and 8 more companies were developing AIDS policies (214). In the March 1987 survey of 600 companies (see above), only 15 percent had an AIDS

education program in place (119). In the summer

1987 survey of 151 Fortune 500 companies (see

above) in which 33 percent already had AIDS

among its workforce and another so percent expected to encounter AIDS in the near future, only

40 percent of the surveyed companies had instituted AIDS information programs for their employees, and fewer than 20 percent had developed

policies to help their employees with AIDS (169).

In the late 1987 survey of 101 companies (see

above), 82 percent strongly believed that companies should be educating their employees about

AIDS, but only 28 percent were informing their

employees about AIDS or what the company had

done to deal with AIDS (152).

Employers also generally have treated AIDS

among their employees as they have treated other

illnesses. For example, this is the policy of the U.S.

Office of Personnel Management (OPM). (See box

3-A for OPM’S position on health and life insurance. )

Many employers who find they have employees with AIDS try to accommodate those individuals so that they can continue to work as long

as possible and keep their health benefits cover-
107

Box 3-A.—U.S. Office of Personnel

Management Policy on Insurance and AIDS

HIV-infected employees can continue their

coverages under the Federal Employees Health

Benefits (FEHB) Program and/or the Federal Employees’ Group Life Insurance (FEGLI) Program

in the same manner as other employees. Their

continued participation in either or both of these

programs would not be jeopardized solely because of their medical condition. The health

benefit plans cannot exclude coverage for medically necessary health care services based on an

individual’s health status or a pre-existing condition. Similarly, the death benefits payable under the FEGLI Program are not cancelable solely

because of the individual’s current health status.

However, any employee who is in a leavewithout-pay (LWOP) status for 12 continuous

months faces the statutory loss of FEHB and

FEGLI coverage but has the privilege of conversion to a private policy without having to undergo a physical examination. Employees who

are seeking to cancel previous declinations

and/or obtain additional levels of FEGLI coverage must prove to the satisfaction of the Office

of Federal Employees’ Group Life Insurance that

they are in reasonable good health. Any employee exhibiting symptoms of any serious and

life-threatening illness would necessarily be denied the request for additional coverage.

sOURCE C Homer, Dwector, U.S. Office of Personnel Management,

Memorandum on “Acquired Immune Deficiency Syndrome (AIDS)

in the Workplace Guidelines for AIDS Information and Education

and for Personnel Management Issues, ” Washington, DC, March 19&?8,

age through the company’s plan (152,169,214).

In one survey, if a coworker objected to working with an employee with AIDS, 8 percent of respondents said they would move the employee

with AIDS; 14 percent would move the coworker;

29 percent would insist that the situation continue

unchanged; and 3 percent would take none of

these actions. Forty-six percent were not sure what

they would do (119).

Finally, there are indications that AIDS-related

health care (and disability and life insurance) costs

may be increasing for some employers as more

of their employees develop AIDS. In a 1985 survey, the costs of treating AIDS patients, while

quite high for the individual patient, did not appear to be a major issue for employer health plans

(120). However, in a survey in late 1987, companies with AIDS cases reported an increase in expenditures for health care from AIDS of 4.5 percent, with expenditures for AIDS expected to

increase an additional 16 percent by 1990 (152).

The highest percentage increases among these

companies were for life insurance costs, up nearly

28 percent from AIDS, but employers expected

to gain more control over these costs so that increases in life insurance costs would be limited

7 percent by 1990.

Further information on employer responses

AIDS are summarized in the next section.

to

to

EMPLOYER-PROVIDED HEALTH BENEFITS

The single most important source of health insurance for Americans is private coverage offered

to workers and their dependents by employerbased health benefit plans. In addition to health

insurance, employee benefits include life insurance, disability insurance, and paid time off for

sick leave and vacations that represent nonwage

(and hence, non-taxable) income for workers.

For a substantial share of workers with employer-provided health benefits, the employer still

pays the insurance premiums for a comprehensive package of inpatient and outpatient services

(or full costs, if the company is self-insured), often

including mental health services, dental care, and

vision care. With the high rates of health care cost

inflation since the mid-197&, however, and the

increased health insurance premiums that have accompanied these rates, employers increasingly

have sought ways to shift more of the costs to

their employees. This trend has been pronounced

since 1980, to the extent that health care cost con-
108

tainment is now a major objective of most companies that provide health care benefits for their

employees.

In this cost containment environment, questions

have been raised over how employers might respond to the ability to identify and exclude workers and prospective workers who may or would

be likely to have exceptionally high health care

costs, such as drug or alcohol abusers, or individuals with AIDS, ARC, or HIV infections.

Employee drug testing, and especially pre-employment screening for drug use, have become relatively common, particularly among large businesses. How employers will deal with AIDSrelated illnesses in the future is not yet clear (see

above).

Information on Employee

Health Care Benefits

Data sources on employer-provided health benefits do not specifically address the issue of testing for genetic conditions, drug use, or HIV infections. The few questions relating to services for

these conditions deal primarily with availability

of drug and alcohol therapies and mental health

services in employee assistance programs. Other

sources suggest, however, that case management

approaches such as are being applied to a variety of high-cost cases are being considered for

AIDS patients, who would also benefit from expanded nursing home, hospice, and home health

care services.

The only surveys of employee benefits in the

private sector, including health benefits, that is

based on a selected, nationally representative sample that has been repeated consistently in order

to detect trends, are the surveys conducted by the

U.S. Department of Labor’s Bureau of Labor Statistics. This survey was initiated in 1979 and conducted annually since then. The survey was designed to provide data to the U.S. Office of

Personnel Management on employee benefits in

the private sector, as part of a new approach to

evaluating the pay and benefits of Federal employees. The survey covers approximately 1,500

medium and large private sector firms that paid

for employee benefit plans wholly or in part. The

survey excludes firms that do not offer health and

other employee benefits. The minimum size for

included firms is 50, 100, or 250 employees, depending on the industry, and only full-time employees are counted. Thus, the surveys focus on

large firms: 61 percent were companies with 1,000

or more employees, and 6 percent of the company

plans covered at least 25,000 workers. Union and

nonunion firms are included. The industries were

grouped as follows: 1) mining; 2) construction;

3) manufacturing; 4) transportation, communications, electric, gas, and sanitary workers; 5)

wholesale trade; 6) retail trade; 7) finance, insurance, and real estate; and 8) selected services.

An analysis of a sub-sample of the 1979 and

1984 surveys, based on data from 209 employee

health plans in 173 companies that participated

in both surveys, found that most employers had

(98): 1) increased employee shares of costs, 2)

modified plans to encourage use of less costly

services, and/or 3) improved some benefits (e.g.,

more than half of the 209 plans increased the maximum lifetime payments under major medical

plans).

In the 5 years between the 1979 and 1984 surveys, all but 11 of the 209 health benefit plans

changed at least one feature. Plans were frequently

redesigned to reduce basic coverage. More than

one-fifth increased the deductible (the amount

paid out-of-pocket by employees) in major medical policies, after which the plans typically paid

80 percent of covered charges, leaving 20 percent

copayment by the employee. Twenty-eight plans

eliminated first dollar coverage for surgery by

1984, and 91 plans (44 percent) required second

opinions before elective surgery. Some plans provided more coverage for alternatives to costly inpatient care; for example, 34 plans increased coverage for extended care facilities (non-custodial

care in a nursing home), and 62 plans introduced

home health care benefits. Eleven of the 209 plans

offered the option of coverage through health

maintenance organizations (HMOS) in both 1979

and 1984.

In both 1979 and 1984, the majority of employers paid all of the health insurance premiums

for their employees. However, for those plans requiring employee cost-sharing, employee contributions nearly doubled in the 5-year period. Finally, employers sought to contain health care
109

costs not only by modifying their plans, but also

by changing their methods of funding. Although

commercial insurers (and Blue Cross/Blue Shield

(BC/BS)) continued to be the most common method of funding benefits, the number of self-insured

major medical plans more than doubled between

1979 and 1984, from 27 to 65.

In the most recent Bureau of Labor Statistics

(BLS) survey conducted in 1986 (309), large and

medium sized firms, which traditionally have been

the most generous in providing employee benefits, offered health insurance benefits to 95 percent of their employees. Virtually all employees

with health insurance (99 percent) were covered

for hospital care, physician care, diagnostic laboratory and x-ray studies, prescription drugs, and

private duty nursing. Only 54 percent of employees were covered entirely at their employers’ expense, compared with 61 percent in 1985. The percent of employees with fully paid coverage for

their families declined from 42 percent in 1985 to

35 percent in 1986. In 1986, employee contributions averaged $13 and $41 per month for individual and family coverage, respectively, an increase of 6 and 8 percent, respectively, from 1985.

In contrast, modest increases in the percent of employees covered for alcoholism treatment (from

68 to 70 percent) and for drug abuse treatment

(from 61 to 66 percent) occurred between 1985

and 1986.

The trend to less expensive nonhospital care

continued in 1986. The availability of home health

care increased from 56 to 66 percent of plan participants between 1985 and 1986; hospice care

coverage rose from 23 to 31 percent. Enrollment

in HMOS and preferred provider organizations

(PPO) increased; enrollment in such programs

were 5 percent in 1984, 7 percent in 1985, and 13

percent in 1986. Coverage by commercial insurers

and BC/BS declined from about 80 percent of employees in 1980 to 50 percent or less in 1986. Selfinsured plans for major medical plan participants

increased from 38 percent in 1985 to 45 percent

in 1986.

The Bureau of Labor Statistics has noted that

the Consolidated Omnibus Budget Reconciliation

Act of 1985 (COBRA) could affect many employer-provided health insurance plans. (COBRA

requires extension of health plan coverage for at

least 18 months for terminated or laid-off workers, who would pay up to 102 percent of premium

costs. ) BLS noted that its 1986 survey was conducted immediately prior to the enactment of COBRA. In the 1986 survey, 46 percent of participants were in firms which either discontinued

insurance immediately upon layoff, or which had

no established policy. Thirty-four percent were

eligible for coverage paid at least in part by employers, and most of the remaining participants

could continue coverage at their own cost. However, regardless of financing, continuation periods

were usually 6 months or less, and only 4 percent were in plans that extended health insurance

coverage indefinitely (308). (Group health insurance coverage continued after retirement for 72

percent of employees. )

Because factors such as employer size, location,

and industry can affect the types and extent of

health benefits offered, and because of business

concerns over health care cost inflation, a number of private surveys of employer-provided

health benefits have been conducted. Many of

these surveys have focused on benefit costs and

the prevalence of cost-containment activities. The

results of these surveys are generally similar to

the BLS surveys.

A January 1986 survey of 861 large private

companies (also summarized above for their AIDS

policies (120)), based on 1985 data, found that

most companies had shifted more costs to employees through increased cost-sharing and incentives

to use less expensive services and settings. Fiftysix percent of the surveyed companies offered at

least one HMO/PPO option.

Surveys were conducted from 1979 through

1984 on 250 major private employers, 68 percent

in the Fortune 100 companies, and 32 percent in

the Fortune 500 companies, and covered medical

and other benefit plans for salaried employees

only (132). The report did not specifically address

AIDS, pre-employment screening, or self-insurance (although given the large size of the firms

surveyed, it is likely that the majority did selfinsure), but focused on health care cost containment efforts in the private sector. Major findings
110

on trends in employer-provided health benefits

were as follows:

1.

2.

3.

4.

5.

there was significantly more employee sharing of hospital and surgery costs in 1984—

the percent of plans with 100 percent reimbursement for hospital care declined from 89

percent in 1979 to 50 percent in 1984;

there were significant increases in front-end

deductibles-52 percent of the plans required

them in 1984, compared with 17 percent in

1979;

there were dramatic increases in annual deductible amounts, with maximum deductibles set per family;

the use of maximum employee out-of-pocket

limits increased to the point that in 1984,86

percent of the plans had such limits; and

by 1984, more plans included incentives for

employees to make less costly health service choices.

Similar surveys in 1985 and 1986 (133) showed

continued trends in cost containment. In the 1986

survey, which included 812 major U.S. employers, 64 percent of the companies required frontend deductibles for medical expenses, up from 54

percent in 1985. The most common deductible

was $100 per employee per year (in 32 percent

of companies), but the trend was to higher deductibles; for example, $150 and $200 per year.

Among the most common cost containment strategies were incentives for outpatient surgery (54

percent of plans), second surgical opinions (57 percent of plans), and outpatient tests prior to hospital admission (49 percent of plans).

A 1986 survey included nearly 1,500 employers

in 36 States that responded voluntarily to a questionnaire mailed through local business coalitions

(151). The companies employed about 4.4 million

employees. The survey asked about overall health

care costs per employee, self-insurance by size of

company, and health maintenance organization

costs compared with insured plans.

The survey found that employee health benefits cost employers an average of nearly $1,900

per employee per year, which was an increase of

7.7 percent over 1985. Costs per employee were

highest in the Pacific region ($2,147), but had increased most significantly in New England (by 9.9

percent). Average annual employee costs increased with company size. Costs were highest in

the utilities industry (followed, in order of importance, by diversified companies, mining/construction, and consumer products) and lowest in

wholesale/retail trade. Employers with 50 percent

or more of their employees under collective bargaining agreements had an average annual cost

per worker of $2,255, compared with an average

of $1,764 for employers with fewer than 50 percent unionized employees.

Employee contributions to the cost of health

plan premiums were required by 41 percent of the

companies for individual coverage and by 70 percent of the companies for family coverage. Fourteen percent of the companies required employees to pay the total costs of health coverage.

Employee health plans in 91 percent of the companies required a deductible, and in 40 percent

of the plans that required a deductible, the amount

was $150 or more. Forty percent of the employers

had built-in incentives to obtain second opinions

for surgery, while 59 percent imposed penalties

for not doing so. However, 74 percent of the employers with second opinion surgical programs did

not know if the program had produced savings.

Forty-six percent of respondents were self-funded

for employee health benefits. An additional 18 percent of the respondents used minimum-premium

insurance arrangements, and 26 percent purchased

experience-rated health insurance. The percent of

companies that self-funded employee health benefits increased in direct proportion to company

size. Only 31 percent of employers with fewer than

500 employees (the smallest size category in this

survey) were self-insured. Firms in all size groups

of 1,000 employees or more exceeded the selffunded average of 46 percent. Seventy-five percent

of the largest firms (30,000 employees or more)

were self-insured. Commercial insurers and BC/BS

continued to administer benefits for most selfinsured plans (49 and 30 percent, respectively), but

21 percent of the survey respondents used third

party administrators for some or all of their claims,

and 11 percent of the companies self-administered

at least part of their plan.

Fifteen percent of responding employers offered

a PPO option, which they claimed reduced total
111

benefit plan hospital costs by an average of 11.4

percent. Fifty-four percent of all respondents

offered at least one HMO option (smaller companies, fewer than 500 employees in this survey,

were less likely to offer HMO options), but 68

percent of those that did, reported that HMO rates

were as high or higher than their indemnity rates.

Only 42 percent of the employers agreed that

HMOS were effective in controlling costs.

In terms of health benefit plan design, 86 percent of the plans covered outpatient surgery, 79

percent covered home health care, and 64 percent

covered hospice programs. Sixty-two percent of

respondents offered retiree health plan coverage.

The survey asked two questions specifically

about AIDS: how many employers were measuring the cost impact of AIDS and ARC cases on

their health plans; and how many employers were

modifying their health plan design (whether by

expanding or limiting services was not specified)

to deal with AIDS? Among all respondents, 3 percent of the employers reported measuring the cost

impact of AIDS, and 2 percent indicated they were

modifying their health plan designs. Percentages

of employers measuring the cost impact of AIDS,

by geographic region, were as follows: 5 percent

in the south central and south Atlantic States; 2

percent in the mid-Atlantic and Pacific regions;

and 1 percent in mountain, north central, and

New England areas. Companies in the midAtlantic and south Atlantic regions (3 percent)

were more likely to be modifying their health

plans than other regions.

By industry, 11 percent of companies in communications were measuring the impact of AIDS,

but none were modifying their health plans. Seven

percent of employers in the education field measured cost impact, and 10 percent were modifying their health plans. Employers in the utilities,

transportation, and insurance industries also were

more likely than average (6 percent of companies

in each industry) to measure the costs of AIDS

and ARC. Companies in the 10,000 to 20,000 employee size group were most likely to measure

AIDS cost impacts (10 percent), followed by companies in the 5,000 to 10,000 employee group (8

percent). There was less variation in the percentages of companies by size group that were modifying their health plans, however, with all sizes

ranging from 1 to 3 percent on this question.

A 1986 Group Benefits Survey examined health,

disability, death, and retirement benefits offered

by 1,418 employers in 50 States (323). The companies surveyed covered more than 6 million salaried employees (about 10 percent of the U.S.

workforce). This survey is the most useful of the

private surveys because it is the largest, and its

sample was selected to represent the location, size,

and industry distributions of all U.S. employers.

More small businesses were included in this sample than in the other surveys (a quarter of the sample was firms with 10 to 249 employees, and an

addtional one-third of surveyed firms had 250 to

1,000 employees), including the BLS surveys,

which focus on medium and large firms.

In addition, since 1974 these Group Benefits

Surveys have been conducted every 2 years to

provide trend data for a core group of employers.

The 1986 survey, for example, presents trend data

for 263 employers studied in 1982, 1984, and 1986,

and included the following findings:

1.

2.

3.

55 percent of comprehensive health plans required employees to pay deductibles higher

than $100, an increase from 9 percent in

1982;

the number of major medical and comprehensive health plans requiring employee contributions increased by 19 and 26 percent,

respectively, since 1982;

60 percent of employers self-insured their

plans in 1986, compared with 40 percent in

1982.

Benefits in self-insured health plans most often

were administered by insurance carriers.

In 1986, 70 percent of the employers provided

comprehensive medical plans, and more than 60

percent offered an HMO/PPO option. Fifty-one

percent of the employers provided medical and

death benefits for retired workers, although 10

percent of employers were considering reducing

those benefits.

The main focus of the 1986 survey was on employer health cost containment strategies. Health

costs averaged $1,460 per employee, and represented 8 percent of the total covered payroll (all
112

group benefits combined represented an average

16 percent of payroll). Health costs per employee

were higher than average for the smallest firms

(1 to 99 employees, which averaged $1,554 per

employee) and for those with more than 5,000 employees (average costs, $1,522). This survey

found, as did the other surveys, that employers

are shifting a growing share of health care expenditures to their employees, and at the same time

are taking steps to encourage the use of fewer and

less costly medical services. Ninety-seven percent

of employers applied at least one approach to

health cost containment (e.g., outpatient treatment, preadmission testing), and more than a

third applied 10 or more specific methods. Eightyeight percent of the companies reported achieving a reduction in plan costs (averaging 13 percent) since implementing cost controls.

The most commonly used cost containment

methods in 1982 and 1986 (for the core group of

263 emp]oyers) were use of ambulatory surgical

facilities, preadmission testing, extended care facilities, and second opinion surgery programs. The

greatest increases in use of specific methods from

1982 to 1986 were in home health care (offered

by 7 percent of plans in 1982, 75 percent in 1986)

and hospice care (an increase from 15 percent to

55 percent). In 1986, 26 percent of all 1,418 plans

offered employee assistance programs; 67 percent

covered alcohol abuse treatment; 63 percent covered drug abuse treatment; and 6 percent offered

health risk screening.

There was also a clear trend toward selfinsurance of employee health benefits. The breakdown of group health plan funding and administration was as follows: self-funded, carrier administered, 27 percent; minimum premium, carrier

administered, 22 percent; fully-insured, carrier

administered, 21 percent; self-funded, self-administered, 8 percent; and other, 2 percent. The percent of employee health plans provided through

commercial insurance carriers declined from 57

percent in 1978, to 42 percent in 1982, 33 percent

in 1984, and 22 percent in 1986. over the same

period, self-insured medical plans increased from

23 percent to 49 percent of all plans.

In the view of staff involved with the surveys,

most businesses have not yet taken action to monitor employees with AIDS because most have not

had experience with such employees. At this

point, most intend to treat AIDS and ARC in the

same manner that other catastrophic conditions

are treated; that is, in most firms, such services

will be covered by the group health plan. The

question that has not yet been answered, is the

effect AIDS may have on the costs of catastrophic

insurance and on the costs of stop-loss policies

that are especially important to self-insured firms

(194).

A final source of information is the Health Care

Financing Administration (HCFA), which surveys

employers to develop data for its estimates of national health care expenditures. One of its surveys

focuses on independent health plans, which are

either fully or partially self-insured, or operate on

a prepaid basis. The most recent analysis of independent health plans, surveyed in 1984 and reported in 1986, found that 8 percent of all

employment-related health plans were self-insured, representing about 175,000 self-insured

plans and covering more than so percent of all

employees with health benefits. Among employers

that self-insured, 23 percent self-administered their

plans and the remaining 77 percent used a commercial carrier, BC/BS plan, or third party administrator (TPA) (178).

The striking difference between the 8 percent

prevalence of self-insurance found in the HCFA

survey and estimates in the area of so percent reported by the Bureau of Labor Statistics and private consulting firm surveys can be explained by

the size of the firms included in the different surveys. The HCFA survey sample represented the

more than 90 percent of employers that have

fewer than 100 employees and therefore rarely

self-insure; in the HCFA study, only 6 percent of

emp]oyers with fewer than 100 employees selfinsured (178). HCFA in fact compared its findings with those of other surveys and found that

the findings were consistent, because the other surveys were weighted toward the larger companies.

Companies included in the BLS surveys, for example, must have at least 100 or 250 employees,

depending on the industry. The HCFA survey

found that in 1984, one-third of employers with

more than 100 employees, more than one-half of

employers with 250 and more employees, three-
113

fourths of employers with 1,000 or more employees, and four-fifths of those with 5,000 or more

employees were partially or fully self-insured

(178).

In the HCFA survey, private businesses and unions were more likely to self-insure than other

organizations, such as religious organizations,

governmental units, and post-secondary schools.

Seventy-four percent of all businesses with 1,000

employees or more, and 83 percent of unions with

1,000 or more employees self-insured their health

benefits. All organizations that self-insured were

more likely to self-insure hospital and medical

benefits than dental or vision care.

In 1984, 23 percent of self-insured organizations

also self-administered their benefit plans, while

51 percent used a TPA, 6 percent contracted with

BC/BS, and 20 percent used the administrative

services of a commercial insurer. TPAs were the

preferred administrator for smaller self-insured

firms, and small business is the area where the

greatest future growth in self-insurance is expected. TPA administration may be less expensive, according to a study noted by HCFA, which

found that TPAs spent about $1.75 per month per

employee on claims processing and $1.75 per

month on corporate overhead, while commercial

carriers spent $4.75 per month on claims processing and $1.25 per month on corporate overhead. The HCFA survey also found that businesses (24 percent) and unions (35 percent) were

more likely to self-administer their benefits than

other types of organizations.

The likelihood that an employer-provided

health plan will offer a HMO/PPO option increased with employer size, ranging form 3 percent of plans for fewer than 100 employees offering the option to 87 percent of plans of 50,000

and more. HMO/PPO options were offered by

4 percent of all organizations (including 4 percent

of businesses), but by 15 percent of unions, 14

percent of religious organizations, 35 percent of

post-secondary schools, and 10 percent of governmental units.

HCFA found that preliminary data and anecdotal evidence suggested that employees covered

by self-insured health plans have less generous

medical, surgical, and other benefits (178). The

HCFA Division of National Cost Estimates plans

further work to study the extent to which the benefits provided by self-insured health plans differ

from those of private insurance plans, which must

comply with State-mandated benefits requirements (177).

The HCFA report added that the Employee

Benefits Research Institute “found that employer

contributions in 1984 for health care—which includes premiums paid to insurers and medical

claims payments by self-insured employer —

equaled 2.57 percent of the gross national product, down from 2.63 percent in 1983, ” although

the decline might be attributable to other factors.

Self-Insured Employee Health

Benefit Plans

Self-insured employers assume full responsibility for their employees’ actual health care expenses, or limit their liability with “stop-loss” insurance against high-cost cases. Self-insurance has

other implications for AIDS patients; because selfinsured plans are exempt from State insurance regulations, including State mandated benefits, they

may be able to selectively limit plan coverage, for

example, excluding services for AIDS patients.

State mandated benefit laws are intended to protect workers from arbitrary benefits exclusions in

their employer-provided health plans and to encourage more comprehensive health coverage.

Some employers already have tried to fire employees with AIDS or to exclude AIDS coverage from

their insurance policies. Most employers, however, have stated that AIDS would be treated no

differently from other diseases, while other employers have not determined what their policies

toward AIDS employees will be.

The rapid growth of self-insurance does raise

special concerns related to medical testing in the

workplace. Medical conditions such as AIDS and

ARC could affect self-insured employers differently than employers with conventional insurance, and self-insured employers have different

means of responding to the problems of high-cost

employee health benefit claims.

While turning to self-funding, however, the

majority of employers continue to contract with

commercial carriers and BC/BS plans for claims

processing and administrative services. A large
114

share of self-insured employers also purchase stop10SS insurance to limit the amount of their liability for medical claims. Administrative services

contracts have expanded from 5 percent of private insurance before 1975 to 25 percent by 1980

and nearly 50 percent by 1984, and 1983 data indicate that 60 percent of the business of the 10

largest commercial carriers came primarily from

administrative services and minimum premium

plan arrangements (83).

.

Growth of self-insurance, and especially its

rapid advances since about 1980, can be attributed

largely to two factors: 1) the continued high health

care cost inflation that has increased health insurance premiums by as much as 30 percent per

year; and 2) the exemption of self-insured plans

from State insurance regulation (including State

insurance premium taxes) and State mandated

health benefits (159,251). The extent of selffunding among businesses of various sizes and industries as determined by several of the private

employee health benefit plan surveys (described

above) are in the range of so percent, with larger

firms much more likely to self-insure than smaller

companies (fewer than 100 to 250 employees). For

example, in one survey, 70 percent of employers

with 10,000 to 20,000 employees self-insured

(151). Other estimates of the percent of companies that self-fund fall between 50 and 60 percent,

with expectations that by the 1990s, the value of

self-insured plans will exceed the combined value

of all commercial plans and will approximate that

of the combined Blue Cross plans (251).

As a result of this trend to self-insurance, new

types of service companies are emerging as competitors of traditional insurers for the business of

administering employer plans. For example, one

type of company may specialize in reinsurance,

the stop-loss coverage that many self-insured employers need. The TPA industry has grown along

with self-insurance to provide claims processing

services. In 1984, TPAs served about 6,700 selfinsured employers with more than 5 million employees (83). TPAs have become such an important factor in self-insured plan administration that

large insurance companies are beginning to buy

them up. Other firms are specializing in automated data processing services.

Small businesses, in particular, are likely to turn

to TPAs when setting up self-insurance health

benefit plans. Perhaps half of all businesses with

fewer than 500 employees rely on TPAs for benefits administration (172).

The range of services provided by a TPA can

be negotiated according to employer needs, but

most employer-TPA contracts provide for medical claims processing; cost control programs, including utilization and charges review; selection

of appropriate stop-loss insurance; monitoring of

Federal and State regulations, and other administrative functions, such as data processing and

reporting. TPAs may also work directly with the

employer to design the benefits package.

The term “third party administrator” was originally used in the Taft-Hartley legislation of 1947

to designate an entity that is neither union nor

management, but that administers joint labormanagement welfare and pension funds. There

were relatively few TPAs performing this function until the late 1970s, when administrative services for self-insured benefit plans began to develop

as a market. There are approximately 1,500 TPA

firms operating today, although relatively few of

them are qualified, full-service TPAs (172).

The exemption of self-insured health benefit

plans from State insurance regulations and mandated benefits as a consequence of judicial interpretation of the ERISA (Employee Retirement and

Income Security Law) law of 1974 does not mean

that self-insured plans are entirely unregulated.

Exemption from State regulation means that selfinsured plans are subjected to Federal regulation

through the Department of Labor and the Internal Revenue Service. Federal regulation to date,

however, has been slight, and for that reason, the

need to amend ERISA to eliminate the self-insured

plan exemption (and to make them subject to contributions to State high-risk insurance pools) has

been debated for several years. TPAs that administer self-insured employee benefit plans are regulated in 23 States in much the same way that insurance companies are regulated, with emphasis

on ensuring plan solvency (in these States, TPAs

must be bonded and pass financial stability requirements) (54,172).
115

In 1984, ERISA was amended to allow States

to regulate multiple employer trusts (METs), but

Congress has not taken action to further amend

ERISA to clarify or eliminate the distinction between insured and self-insured health plans. In the

1985 COBRA legislation that required employers

to provide continuation coverage for laid-off and

terminated employees, however, self-insured

health plans were required to participate along

with other insured plans.

A company may take a variety of approaches

in self-funding its employee health benefits. While

assuming liability for employee health expenses,

a company may contract with a commercial insurer for an administrative services only (ASO)

contract, including claims processing and overall administration. Or a company may contract

on a similar basis with a TPA. A company may

also decide to both self-fund and self-administer

its plan, but this option is selected primarily by

very large corporations. The most common approach is for the company to establish a health

benefits fund and then take bids for the desired

administrative services. The company may or

may not purchase stop-loss insurance for protection against catastrophic risk, but the smaller the

company, the more necessary stop-loss insurance

will be; without stop-loss insurance, size would

limit the companies that could exercise the selfinsurance option.

The choice of using a minimum premium plan

depends on where the employer does business, because some States consider these plans as insurance, and regulate them. Minimum premium plans

provide for employers and insurers to share the

cost risk, with a limit on employer liability, and

with payments to the insurers for administrative

costs and risk sharing much like insurance

premiums (251).

The advantages to the employer of self-funding

include the following:

●

●

●

exemption from State insurance premium

taxes (usually 2 percent of premiums);

no payment for carrier overhead, including

marketing, sales, and profit (administrative

costs of a self-insured plan are lower than the

retention charges of an insured plan);

ability to earn interest on the health benefit

●

●

●

fund and regulate cash flow to the employer’s

advantage (the employer may fund the paid

claims on an ongoing basis rather than paying a year’s insurance premium in advance);

savings may accrue from employer management and utilization review of medical

claims, and self-insured employers only negotiate administrative costs with their carriers or TPAs, not premium rates and claim

projections;

health plan savings due to exemption from

compliance with State mandated benefits

(most State insurance laws and regulations

apply to insurance contracts and not to selfinsured benefit plans); and

exemption from contributions to State highrisk pools, where they exist.

Disadvantages include:

●

●

●

the self-insuring employer may be exposed

to greater financial risk in the form of aggregate claims in a bad year or a few catastrophic cases;

by contracting for administrative services

only, the employer gets less expertise than

he would get as a fully insured client, or

would require more staff with specialized

health benefits expertise; and

the employer loses the insurance compan -y. yv

as a buffer between the employer and employees in disagreements over claims coverage (327).

The most significant of the employer’s disadvantages in self-funding is the assumption of

risk, which is why stop-loss insurance is an attractive added protection for many self-insured

firms. Stop-loss insurance is most often purchased

for medium-sized health plans of 200 to 1,000 employees (327). Among companies with 500 or

fewer employees, 25 percent self-insure with stoplOSS coverage, while only 6 percent assumed full

risk (151). Thirty-five percent of companies with

500 to 1,000 employees self-insure with stop-loss,

and 7 percent went without stop-loss coverage;

while 41 percent of companies with 1,000 to 2,500

employees self-insure with stop-loss, and 15 percent go without it (99).

The two types of stop-loss insurance are: 1) specific stop-loss, which reimburses the employer for
116

claims for any individual employee that exceed

a specified amount; and 2) aggregate stop-loss insurance, which reimburses the policyholder if total

claims paid for all employees exceed a predetermined deductible, for example, 125 percent of expected claims. Both forms of stop-loss are written with high deductibles to keep the stop-loss

premium relatively low. The cost of stop-loss insurance can vary substantially from one policy

to another, depending on such factors as plan design (level of deductible and maximum benefit)

and competition among stop-loss insurers, who

may evaluate risk differently based on medical

costs by geographic area, inflation factors, the

range of benefits in the employer’s primary plan,

the employees’ age distribution, and the employer’s recent experience (327).

Employment "Wellness” Programs

In a 1985 telephone survey of 1,358 worksites

with 50 employees or more (306), 65 percent of

worksites had at least one health promotion activity. Thirty-six percent had smoking control activities; 27 percent, stress management programs; 22

percent, physical fitness activities; 17 percent, nutrition activities; and 15 percent, weight control

activities (box 3-B).

Such employment-based “wellness” programs

often include health risk appraisals (HRAs) in efforts to reduce the costs associated with preventable chronic illnesses (109). Over 200 organizations now offer HRAs to employees, patients of

medical care organizations, students, and to the

general public. An HRA is a health promotion

technique that involves three procedures:

1.

2.

3.

measurement of risk factors of the individual through the use of a personal inventory

of health habits and, in many cases, a number of clinical measurements (e.g., blood

pressure, serum cholesterol, height, weight,

etc.);

estimation of the individual’s expected risk

of death from specific causes or diseases

based on his or her personal risk factors, epidemiologic data, and national mortality statistics using actuarial techniques; and

presentation of these risk estimates to the individual, with a discussion of how selected

changes in personal lifestyle and health

habits could possible affect health risks (128).

For example, one company (70) is pilot-testing

a program in which information from a health history questionnaire and a number of predictive

tests are used to tailor health risk information to

individuals. As part of the pilot study, the company is offering voluntary, confidential testing to

members of an employee group. Predictive tests

are being validated for a number of disorders, including cardiovascular disease, diabetes, cancer

of the breast and colon/rectum, and periodontitis. When the program is implemented, information from the computer-analyzed family and personal medical history will be used to select

appropriate tests for each employee. Information

from the tests and the health history will be used

to provide individualized health education to participants. This company has expressed an interest in future use of genetic and biologic markers

for chronic disease (e.g., genetic markers for heart

disease) but will limit testing to diseases in which

some form of primary or secondary intervention

is possible.

Criticisms of HRA techniques include:

●

●

●

●

information is provided regarding risk of

death but not risk of disease;

epidemiologic bases of risk estimation do not

exist for groups other than white, primarily

middle-class individuals;

self-reported behaviors and risk factors used

in the assessments may not be reliable; and

there is insufficient evidence that changes in

specific risk factors actually reduce the risks

of developing certain diseases or of death

from specific causes (300).

There is, however, evidence that self-reported

risk factors and behaviors are predictive of an individual’s future health care costs. One actuarial

firm has related health risk and health behavior

information (i. e., exercise, weight, smoking,

hypertension, alcohol use, cholesterol level, and

seat belt use) collected from employees participating in a health promotion program to their medical claims co;ts and hospital inpatient days. Age

and sex were controlled for in the analyses, and

cost data were adjusted for geographic variation.

In many cases, significant differences were noted
117

Box 3-B.—National Survey of Worksite Health Promotion Programs, 1985

In 1985, the U.S. Department of Health and Human Services (DHHS) conducted a National Survey

of Worksite Health Promotion Activities: 1) to determine the nature and extent of worksite health promotion activities in worksites of .50 or more employees; 2) to determine what employers perceive as the direct

and indirect benefits of their efforts to prevent disease and promote employee health; and 3) to monitor

progress toward the worksite health promotion goals set forth in DHHS’S 1990 Health Objectives for the

Nation.

DHHS concluded that: 1) many employers have recognized the benefits of instituting health promotion activities for their employees; 2) employers also acknowledged that these activities also enhanced company image and improved employee morale and performance; and 3) few negative effects resulted from

instituting these activities.

Major findings of the survey included:

● Over 85 percent of surveyed worksites with health promotion activities indicated that all employees

at the site were eligible to participate. Approximately 30 percent also made the activities available

to dependents, and the same percent offered activities to retirees;

● 65 percent of worksites surveyed had at least one health promotion activity; smaller worksites were

less likely to have health promotion activities;

 36 percent of all worksites surveyed had smoking control activities;

● 27 percent of all worksites surveyed offered stress management activities;

● 22 percent of all worksites surveyed had some form of physical fitness or exercise activity;

● Fewer of the worksites surveyed offered activities related to nutrition (17 percent) or weight control

(1.5 percent), even though 43 percent of these worksites had a cafeteria with an onsite cafeteria manager.

● An overwhelming majority of respondents indicated that benefits of their activities outweighed or

equaled the costs. Only a small percentage said that costs outweighed benefits or had other negative

comments; and

● Over 81 percent of respondents said they were extremely or moderately concerned with health care

cost management.

SOURCE U S Department of Health and Human Services, Publlc Health Serwce, Office of Dwease Prevention and Health Promotion, Natlona/ Survey of Work.ite Health

I

Promot,on ActI\I/Jes (Silver Spring MD ODPHP, 1987)

between high- and low-risk employees’ medical (about half of the plans) at no cost to the emcosts. For example, those reporting systolic blood

pressure of 159 mmHg or higher and a diastolic

pressure of 94 mmHg or higher were 68 percent

more likely to have annual claims of more than

$5,000 than those reporting normal blood pressure. (High blood pressure is defined as a systolic

pressure greater than or equal to 140 mmHg

and/or a diastolic pressure greater than or equal

to 90 mmHg. ) The largest difference in hospital

utilization was associated with seat belt use; highrisk employees in this category used 54 percent

more hospital days per thousand than those regularly using seat belts (199).

Conclusions on Employer-Provided

Health Benefit Plans

The majority of employers provide comprehensive health benefits for their employees, often

ployee. The range of services covered under group

health plans has grown to include more outpatient

and employee support services. These additions

have been made at least in part to encourage employees to use outpatient services, which are less

costly than similar services provided on an inpatient basis.

The trend to shift part of the costs of employee

health benefits to employees has been strong since

about 1980. One or more cost containment methods have been incorporated into almost all health

plans. One of the most important steps employers

have taken for cost containment is the decision

to switch from commercial or BC/BS insurance

to self-insurance, often with stop-loss coverage

against catastrophic claims. The share of commercial carriers in the employee health benefits market has declined substantially, even though insur-
118

ance companies continue to administer the

majority of self-insured plans. The generosity of

employee health benefits and the preferred

funding-administrative approach vary somewhat

with company location, size, and industrial sector. Company size (i.e., number of employees),

however, is a particularly important factor, and

it is emphasized by the predominance of small

businesses in the relatively volatile service and retail sectors of the economy.

“Wellness” programs and health risk appraisals

are also becoming relatively common at the worksite. While there is as yet insufficient evidence that

changes in specific risk factors actually reduce the

risk of developing certain diseases or of death

from specific causes, there is evidence that selfreported risk factors and behaviors are predictive

of an individual’s future health care costs. Employers who provide health care coverage to their

employees are concerned with managing their

health care costs, and at least some of the risk factors (e.g., high blood pressure, seat belt use) leading to higher health care costs are preventable.
Chapter 4

Tests To Diagnose or

Predict Disease
CONTENTS

Page

Introduction . . . . . . . . . . . . . . . . . . . . . ......121

Tests Currently Used by Health Insurers ..122

Tests for HIV..... . ....................12 5

The ELISA and Competitive EIA Screening

Tests . . . . . . . . . . . ...................125

Confirmatory Tests for HIV Antibodies:

The Western Blot . .................12 5

Other Confirmatory Tests for HIV

Antibodies. . . . . ...................126

Tests To Detect the Presence of HIV. ...l27

Indirect Methods To Test for Possible HIV

Infection . . . . . . . . . . . . . . . . . . . . .. ....127

Accuracy and Reliability of Commercially

Available HIV Screening Tests . ......128

Advances in HIV Screening

Technology. . . . . . . . . . . . . . . . . . . . . ...130

HIV Self-Tests . . . . . . . . . . . . . . . . . . . . ...131

Genetic Tests . .........................13 2

Introduction . . . . . . . . . . . . . . . . . . . . .. ...132

Limitations of Genetic Tests . ..........139

Tests of Potential Interest to Insurers Because

of Disease Prevalence . . . . . . . . . . . . . .141

Testing for Cancer . ..................141

Testing for Heart Disease . . . . . . . . . .. ...147

Testing for Alcoholism . ...............153

Self-Testing/Home Diagnostic Products ...154

The Availability of Home Diagnostic

Products . .........................15 4

Boxes

Box Page

4-A. Screening Tests for Some Common

Cancers< . . . . . . . . ..................142

4-B. CAGE Alcoholism Questionnaire ....153

Figures

Figure

4-1.

4-2.

4-3.

4-4

4-5

Page

Flow Diagram for a Mass Screening

Test . . . . . . . . . . . . . . . . . . . . . . . .. ....122

Results of Screening Test Illustrating

Sensitivity and Specificity . .........128

Predictive Value Calculation for

Prevalence of 10 Percent; Test

Sensitivity = 100%, Specificity =

99.8% . ..........................12 9

Organizational Hierarchy of DNA,

the Carrier of Genetic Information in

Human Cells . . . . . . . . . . . ..........135

A Schematic Diagram of the DNA

Double Helix . ....................13 5

Figure

4-6.

4-7.

4-8.

4-9.

4-1o.

4-11.

4-12.

4-13.

4-14.

4-15.

Page

Restriction Fragment Length

Polymorphism (RFLP) . ............136

Genetic Linkage . ..................136

Linkage Analysis for Huntington’s

Disease . . . . . . . . ...................136

Southern Blotting . ................137

Electropheresis Preparation of a

Southern Blot . . . . . . . . . . . . . ........137

Distribution of New Cases of Cancer

by Site and Sex—1988 Estimates ....141

Fecal Occult Blood Screening . ......145

Estimated Number of Persons With

Coronary Heart Disease, 1985 .. ....147

Hypertension Prevalence by Sex and

Race, U.S. Adults Age 18-74 .. ....148

The Danger of Heart Attack

Increases With the Number of Risk

Factors Present . . . . . . . . . . ..........151

Tables

Table

4-1.

4-2.

4-3.

4-4.

4-5.

4-6.

4-7.

4-8.

4-9.

4-1o.

4-11.

4-12.

Page

The Probability That a Healthy

Person Will Have at Least One

Abnormal Result in a Biochemical

Profile . ..........................12 3

Age-Specific HORL HIV Antibody

Test Statistics for 1986 . . . . . . . .. ....124

Age-Specific HORL T-cell Test

Statistics for1986 . ................12 4

Commercially Available (U.S.) HIV

Screening Test Kits . ...............125

Relationship Between Predictive

Value and Prevalence of the Index

Condition in the Population Being

Screened . ........................12 9

HIV Diagnostic Products Under

Development in Spring 1988.. .. ...131

DNA Probe Test for Inherited

Diseases . . . . . . . . ..................132

Genetic Test Market Projections. ....l33

Common Genetic Disorders . .......134

Available Genetic Tests by Type

of Test . . . . . . . . . . . . . . . . . . . . . . . . .138

Serum Cholesterol and Lipid

Concentrations in 83 Subjects by

RFLP Genotype . ................,.15 2

Summary of Market Research

Reports on Home Testing Products ..155
Chapter 4

Tests To Diagnose or Predict Disease

INTRODUCTION

Medical tests that provide information on the

present or future development of disease maybe

useful adjuncts to the health insurance underwriting process. In general, two types of tests can be

distinguished—diagnostic and predictive tests.

Diagnostic tests are used to identify the cause of

abnormal physical signs or symptoms. In contrast, predictive tests are generally applied to

asymptomatic individuals and are used to provide

information regarding the future occurrence of

disease.

Diagnostic and predictive tests may be used in

a medical screening program to identify latent disease or disease predisposition (i.e., it maybe diagnostic or predictive in intent). In general, a screening program involves administering a screening

test to an asymptomatic population to sort out

apparently well persons who probably have disease (or who have an increased likelihood to develop a disease) from those who probably do not

have disease (or probably will not develop disease) (figure 4-1). More definitive tests are then

administered to those identified by the screening

test as being at risk. Some screening programs employ “non-medical” tests to detect behaviors associated with disability or disease. Examples include

tests for drug or alcohol use and nicotine tests to

identify current smokers.

According to one insurance company’s position

paper on the use of genetic tests and tests for disease predisposition, several conditions should be

met before a medical test is adopted by insurers

(45).

●

●

●

The test must supply information in addition

to information otherwise available from

other sources (e.g., from the medical history

questionnaire).

The disease tested for must have serious morbidity and/or mortality implications.

The disease must be common enough to ensure that the test is predictive and that the

cost can be justified.

●

●

●

●

●

The test must be predictive of disease (or absence of disease) and reliable.

The test must be understood, accepted, and

used by the medical profession.

Laboratories must be able to readily perform

the test.

The test must be affordable and able to provide results quickly.

The test must be risk-free.

Public health officials, who are principally concerned with establishing screening programs to

prevent disease or ameliorate the consequences

of disease, consider additional criteria. They are

especially concerned with: 1) whether there is a

recognizable latent or early symptomatic stage

during which therapeutic interventions may be

successful, 2) whether there is an accepted treatment for patients with recognized disease, and 3)

whether facilities for diagnosis and treatment are

available. Clearly, insurers are mindful of these

considerations as well, as they would have little

interest in testing for a condition that could be

inexpensively and effectively treated. Insurers also

consider disease latency; there would be little

value in a test that predicted the occurrence of

a disease with a late onset (e.g., age 65 or older).

Instead, insurers are more interested in tests for

diseases that afflict younger persons and that have

no effective treatment or are very costly to treat.

For persons applying for individual or small

group health coverage, insurers often refuse to insure or offer insurance on a substandard basis to

those with evidence of significant disease, including heart disease (e. g., history of angina pectoris,

arteriosclerosis) and insulin-dependent diabetes.

If predictive tests are developed for diseases that

are currently the basis of exclusion or substandard coverage, how likely are they to be used to

test healthy applicants? The answer, in part, will

depend on the availability of preventive interventions. If interventions are unavailable, predictive

tests may only be of interest to insurers if they

121
122

Figure 4.1.— Flow Diagram for a Mass Screening Test

are very accurate. If inaccurate, many applicants

not destined to become ill would be excluded or

subjected to expensive follow-up testing.

Predictive testing may also be used to establish preventive health plans. For example, the

availability of such tests and concerns regarding

health cost containment may foster the establishment of employee “wellness” programs. If a predictive test for heart disease is developed and an

effective intervention is available, an employee

may be tested and encouraged to comply with preventive measures.

At the present time, tests conducted on applicants at the request of commercial health insurers

are largely limited to biochemical profiles, tests

for Human Immunodeficiency Virus (HIV) infection, and specific drug tests.

TESTS CURRENTLY USED BY HEALTH INSURERS

Most of the blood tests used by health insurers blood sample as part of a large-volume, autoare those biochemical profiles used frequently by mated-testing program. Although it is recomclinicians. Such profiles are generally a battery mended that medical tests be administered on the

of twelve or more tests that are performed on each basis of clinical findings, the ease with which a
123

large number of tests can be conducted at relatively low cost has led in part to the routine use

of biochemical profiles. For example, biochemical profiles have been used to screen asymptomatic patients in ambulatory clinics and as part

of routine hospital preadmission workups.

Table 1-1 in chapter 1 identifies the blood and

urine tests conducted at a major laboratory that

serves commercial insurers and the conditions the

tests may detect. The sensitivity of these tests, or

the ability of the tests to correctly identify those

with the corresponding conditions, depends on

the particular tests. For example, the total serum

protein level is not very sensitive for any of the

conditions with which it is associated. In contrast,

increased levels of high glucose (sugar) are almost

always detected in those with diabetes mellitus.

An abnormal result is usually defined by setting a cutoff value, beyond which values are

deemed abnormally high (or low). In general, a

result that deviates markedly from the mean value

for a given population is more predictive of disease than one that deviates only slightly. However, when the cutoff value is established by using

certain statistical criteria (such as the mean value

for the test in a population of presumably nondiseased persons, plus or minus two standard deviations), as the number of tests administered increases, the likelihood that an individual will, by

chance, have at least one abnormal test result also

increases (table 4-1).

If the test is positive, how likely is it that the

person tested has the condition in question; and

Table 4-1.—The Probability That a Healthy Person

Will Have at Least One Abnormal Result in a

Biochemical Profile

Probability that at least

one test will be abnormal

Number of tests (percent)

5“!0

: 26

12 46

20 64

100 99

SOURCE: Adapted from RD. Cebul, and JR. Beck, “Biochemical Profiles: Applications in Ambulatory Screening and Preadmission Testing of

Adults, ” Common Diagnostic Tests: Use and Interpretation, H.C. Sex,

Jr. (cd.) (Philadelphia, PA: American College of Physicians, 1987).

if the test is negative, how likely is it that the person is disease-free? Stated another way, what is

the test’s predictive value, or the probability that

a positive test correctly identifies the presence or

the future development of the indicated condition

or disease?

In one study of 8,651 patients who were tested

as part of a multiphasic health checkup, use of

a biochemical profile consisting of 8 tests resulted

in 26 percent of patients having at least 1 test abnormality. In the case of serum glucose, although

6 percent of adults had elevated levels, less than

30 percent of them had elevations when the test

was repeated. Furthermore, disease was confirmed

in less than 17 percent of those with repeatedly

abnormal test results (96). Similarly, approximately 3 to 4 percent of asymptomatic adults will

have abnormal serum creatinine and blood urea

nitrogen levels, but few will have actual kidney

disease (44).

The predictive values of biochemical profile test

results among patients about to be admitted to

the hospital are comparable to those cited above.

Experience from such programs indicates that 40

percent of such patients will have abnormal tests

but that these results will lead to new diagnoses

in only approximately 4 to 10 percent of patients

(44).

The Blue Cross and Blue Shield Association has

published guidelines on the use of biochemical

profiles in both ambulatory settings and hospital

preadmission testing programs (these guidelines

were written with the cooperation of the American College of Physicians, the American College

of Radiology, and the American College of Surgeons). The guidelines state that biochemical profiles are not routinely indicated for screening

asymptomatic adults or those without risk factors, nor are they indicated prior to elective admission to the hospital (207). However, the guidelines state that selected components of biochemical

profiles may be indicated for screening asymptomatic adults; specifically, serum glucose (to identify diabetes mellitus), serum cholesterol (to identify hypercholesterolemia), and serum creatinine,

with or without blood urea nitrogen (BUN) (to

identify kidney dysfunction).
124

Insurers usually selectively test those with medical histories indicative of disease or risk of disease. If a relatively high-risk group of individuals

is tested, the predictive value of the tests would

be expected to be higher than in unselected testing. There is evidence that insurance applicants

are being selectively tested. For example, according to 1986 insurance testing data from the Home

Office Reference Laboratory, Inc. (HORL) which

conducts tests for more than 80 percent of life and

health insurance companies in the United States

and Canada, 15 percent of applicants between the

ages of 20 to 59 who were tested had abnormal

blood glucose levels (246). In contrast, in a study

performed by others of unselected adult patients

tested as part of a multiphasic health checkup,

only 6 percent had abnormal blood glucose levels

(96).

While controversy surrounds the use of tests for

HIV infection by insurers, insurers are selectively

testing life and health insurance applicants when

permitted to do so. HORL, the lab that does most

of the testing for the insurance industry, uses stateof-the-art technology in the operation of a highvolume, largely automated laboratory. When applicant blood specimens are sent from locales in

which HIV antibody testing is permitted, HORL

uses the recommended two-stage testing protocol.

First, an enzyme-linked immunosorbent assay

(ELISA) is used to test serum or plasma for the

presence of antibodies to HIV. These tests are very

sensitive and therefore detect nearly all of those

who have produced antibodies to HIV. However,

they falsely identify as positive some that have not

been infected. To more accurately identify noninfected individuals, a confirmatory test (sometimes

called a supplemental test), the Western blot, is

used. In 1986, 128,129 HIV antibody tests were

performed by HORL (for a total of 213,193 life

or health insurance applicants). Of those tested,

385 (0.3 percent) were Western blot-confirmed as

positive. Among the 13,7s9 applicants in the 20-

to-29 year-old group, 8,312 were tested for the

presence of antibodies to HIV and of these, 85 (1

percent) were confirmed as HIV infected (246). Table 4-2 summarizes HORL testing for HIV antibodies by age groups for 1986.

When HIV antibody testing is prohibited (e.g.,

in California), insurers test applicants by using a

surrogate test, the T-lymphocyte (or T-cell helperTable 4-2.—Age-Specific HORL HIV Antibody Test

Statistics for 1986

Number of Number of Percent of

Age group tests positive tests positive tests

1-19 . . . . . . . . . 395 1 0.250/o

20-29 . . . . . . . . . 8,312 85 1.02

30-39 . . . . . . . . . 35,417 173 0.49

40-49 . . . . . . . . . 38,831 75 0.19

50-59 . . . . . . . . . 31,226 46 0.15

60-up . . . . . . . . . 13,948 5 0.04

Total . . . . . . . 128,129 385 0.30 ”/0

SOURCE: Home Office Reference Laboratory, Inc. (HORL), unpublished data,

Shawnee Mission, KS, 1986.

suppressor ratio) test. This test of immune function is much less accurate than the antibody test

in identifying HIV-infected individuals. According to a study conducted by HORL, the T-cell test

failed to detect 18 percent of 234 specimens that

had tested positive for HIV antibodies (113). (Furthermore, a study of 65 asymptomatic HIV antibody-positive blood donors done elsewhere revealed that none had abnormal T4/T8 cell ratios

(161).) To determine the predictive value of the

T4/T8 ratio, HORL tested 209 specimens with

T4/T8 ratios less than 1.0 for HIV antibodies.

Only 8 percent of specimens were confirmed positive for antibodies. The predictive value increased

somewhat as the T4/T8 ratio decreased (113).

The T-cell test may be abnormal when there is

no HIV infection, because it is a general test of immune function. HORL’S 1986 testing data indicate

that 1 percent of the 25,611 T-cell tests conducted

(for a total of 213,193 life and health insurance applicants) were positive. Table 4-3 summarizes

HORL T-cell testing by age groups for 1986. Note

the relatively high percent of positive tests in the

older age groups, who would be least expected to

be HIV antibody-positive.

Table 4-3.—Age-Specific HORL T.cell Test

Statistics for 1986

Number of Number of Percent of

Age group tests positive tests positive tests

1-19 . . . . . . . . . 48 0 0.00”!0

20-29 . . . . . . . . . 1,379 24 1.74

30-39 . . . . . . . . . 6,377 86 1.35

40-49 . . . . . . . . . 8,504 76 0.89

50-59 . . . . . . . . . 6,291 1.17

60-up . . . . . . . . . 3,012 ; ; 1.00

Total . . . . . . . 25,611 290 1 .13 ”/0

SOURCE: Home Office Reference Laboratory, Inc. (HORL), unpublished data,

Shawnee Mission, KS, 1986.
125

While some insurers are prohibited from performing HIV antibody tests they are not explicitly

prohibited from using HIV antigen tests. Several

commercial products are available for research use

(at present, none are FDA-approved for diagnostic purposes). Such tests have been useful in deTESTS FOR HIV

The ELlSA and Competitive EIA

Screening Tests

Several manufacturers have been licensed by

FDA to market HIV screening test kits. Most of

the test kits are enzyme immunoassay (EIA) that

identify IgG antibodies (one of several classes of

antibodies) made in response to HIV infection. The

EIA tests (ELISA tests area type of EIA) were initially designed to screen blood products, and

according to data submitted to FDA by the manufacturers, most kits can detect virtually all individuals with AIDS (table 4-4). However, the tests

will not identify recently infected individuals who

have not yet produced antibodies to the virus. Furthermore, during the early stages of infection, some

individuals (e.g., newborns) make antibodies (IgM)

that are not detected by the available tests. HowTable 4-4.–Commercially Available (U.S.) HIV

Screening Test Kitsa

Manufacturer and test name Sensitivityb Specificityc

Abbott Laboratories

Abbott HTLV Ill EIA , , , 1 00% 99.85%

Cellular Products, Inc.

Retro-Te k

TM HIV ELlSA ... ... 100 99.85

El. du Pent de Nemours & Co., Inc.

Du Pent HTLV-111 ELlSA ., 99.30 99.70

Electro-Nucleonics, Inc.

VIRG O

TM HTLV-111 ELlS A 100 99.68

Genetic Systems

Genetic System LAV EI A

T M 100 99.80

Organon Teknika, Corp.

Bio-EnzaBead TM HTLV-111 ELlSA 100 99.97

Ortho Diagnostics Systems, Inc.

ORTH O

TM HTLV-111 ELlS A 99.30 99.70

aAvallable ~~ of early 1988, Several other HIV screening test kits Wiii be available pending FDA approval (e.g , Hoffman. La Roche, Cambridge Bioscience)

bsen~itivity is computed as percentage of AIDS patients testing positive assumI ng 100°/0 prevalence of HIV antibody in AIDS patients

cspecificity is computed as percentage of random blood donors testin9 ne9ative assuming zero prevalence of HIV antibody in random blood and plasma

donors.

SOURCE Office of Technology Assessment, 1988

tecting early infections at a time before HIV antibodies are detectable. However, once antibodies

are produced, the antigen test may be negative.

Therefore, such a test would not be as useful as

the antibody tests, and there is no evidence that

insurers are using such tests.

ever, almost all infected individuals will test positive 1 to 4 months after infection (60).

False-positive tests may occur, because the tests

use disrupted whole-virus preparations derived

from cell cultures as the antigen (viral components

capable of eliciting an antibody response). Although made from purified virus, they are contaminated with cellular matter that can produce

false-positive results. The cutoff levels above which

a test will be interpreted as positive are set low

in order to detect as many positive specimens as

possible, but this also increases the chances that

a specimen labeled as positive at these low levels

might in fact be negative. Therefore, a specimen

is not reported as positive until appropriate followup tests are conducted. This includes a repeat of

the initially positive screening test. In fact, the

repeated ELISA is done in duplicate. Only if one

of the two repeat tests is positive will the serum

specimen be reported as ELISA positive (or repeatedly reactive), and a confirmatory test subsequently performed. The problem of false positives

attributable to contamination will be reduced when

“second generation” test kits become commercially

available. Instead of disrupted whole virus, these

kits will use synthetic viral antigens made by using

recombinant DNA techniques, thereby avoiding

the problem of contamination.

Confirmatory Tests for HIV Antibodies:

The Western Blot

To confirm a positive ELISA screening test, a

technique called the Western blot is used. Here,

purified HIV antigens are separated electrophoretically on a gel and then blotted onto special paper. A sample of blood is applied to the paper,

and, if antibodies are present, they will bind to

the viral antigens and appear as distinctive bands
126

on the blot. The location of each band indicates

reaction with a specific viral protein. There are

three types of HIV proteins: 1) proteins that provide the virus’s internal, or “core” structure; 2) proteins that provide the external or “envelope” structure; and 3) proteins that are the enzymes (for

example, reverse transcriptase) that the AIDS virus uses to regulate interactions with its host cell.

The core proteins include p24/25 and p55, which

are shorthand designations for proteins with

molecular weights in the thousands (or “kilodaltons”). Thus, p24/25 refers to a protein with a

molecular weight of 24 or 25 thousand. The envelope proteins are gp41, gpl10/120, and gp160,

where “gp” stands for “glycoprotein” (envelope

proteins have non-protein elements—glycogen—

incorporated in them), and p17/18 (previously

thought to be a core protein). The regulatory enzyme proteins are p31/32, p51/53, and p65/66.

Early in the AIDS epidemic a Western blot was

interpreted as positive even when antibodies to

only one of the proteins (the core protein, p24/25)

of the AIDS virus was present, but it soon became

evident that the blood of noninfected persons could

contain similar antibodies. Reactivity to core antigens exclusively may represent infection with

another retrovirus (e.g., HTLV-1, which may cause

a particular type of leukemia) or reactions with

other substances. In such cases, a second confirmatory test is conducted in 4 to 6 months, by

which time the subject should have produced antibodies to other antigens if HIV infection is indeed present.

The Western blot is visually interpreted, and a

weakly reactive band may be read as positive or

negative, depending on the technician. Most laboratories limit positive readings to those blots that

have reactions with at least two bands, at least one

of which must bean envelope antigen. A 1986 National Institutes of Health Consensus Development

Conference concluded that the presence of antibodies to two HIV proteins, p24/25 (a core protein) plus gp41 (an envelope protein), constituted

an “unequivocally positive” Western blot (30s).

However, this conclusion is under dispute, and

different laboratories currently have different

standards. For example, at the beginning of 1988,

the American Red Cross required antibodies to at

least one protein from each of the three types to

be present before donors are notified that they have

tested positive (85). (The Red Cross nevertheless

discards all repeatedly positive ELISA blood donations. ) The only commercially licensed Western

blot test as of early 1988 (Biotech/duPont HIV

Western Blot, Biotech Research Laboratories, Inc.)

is interpreted as positive when antibodies to p24/25

(a core protein), p31/32 (a regulatory enzyme protein), and either gp41 or gp120 (both envelope proteins) are present (72). The Department of Defense

(35) has adopted the definition established by the

Association of State and Territorial Health Officers

(ASTHO) (positive if any two of p24/25, gp41,

or gpl10/120-gp160 bands are present) (104).

Given the subjective nature of Western blot interpretation and variations in the definition of a positive result, the establishment of a national standard for Western blot interpretation has been

recommended (196).

Other Confirmatory Tests for

HIV Antibodies

When Western blot confirmatory tests are

equivocal, the radioimmunoprecipitation assay

(RIPA), a research procedure, maybe used. However, it is expensive, uses radioisotopes, and requires considerable technical expertise. One State

Health Department (California) is using the indirect

immunofluorescence assay (IFA) as a confirmatory

test at HIV counseling and testing sites. This test

relies on the reaction of serum HIV antibodies to

HIV virus present in laboratory cultured HIVinfected cells. When serum is added to the infected

cells, any antibody that is present binds to the viral antigens. Fluorescein-labeled goat antihuman

globulin is then used to detect the presence of intracellular HIV antibodies. Results are read with

a fluorescent microscope (253). A commercial indirect immunofluorescence assay was being evaluated by the Food and Drug Administration (FDA)

as a confirmatory test as of early 1988 (IND application submitted to the FDA) (184).

An alternative to the usual Western blot confirmatory test is now available, using six recombinant DNA-derived HIV antigens (3 are proteins

derived from gp120 and gp41; 2 are portions of

core proteins p24 and p55; and one is a peptide

derived from polymerase proteins). The test, called
127

Hivagen, is available as a laboratory service

through SmithKline Beckman. Advantages over

the usual Western blot include reduced false positive and indeterminant results and an ELISA format, which allows for automated testing and objective interpretation of results (242). Reactivity to

envelope antigen plus either core or polymerase

(enzyme) antigen constitutes a Hivagen-positive

test (190).

Tests To Detect the Presence of HIV

There are methods available to detect the presence of HIV itself instead of antibodies to HIV.

Direct observation of the virus or signs of viral

activity can be made following successful culturing of HIV. However, culturing peripheral blood

mononuclear cells may take 2 weeks or longer and

is expensive and technically difficult to perform.

However, one company has established a commercial laboratory dedicated solely to AIDS testing

and eventually plans to use a semi-automated culturing technique. At present the laboratory uses

a manual process that provides results in 6 to 14

days (188).

h situ hybridization involves the use of radioactively labeled probes to identify HIV-produced

RNA or DNA. These genetic probes, produced

through recombinant DNA technology, are complementary to the virally produced genetic material and therefore align to and hybridize with it.

The method was previously of limited utility,

because very few circulating white blood cells are

infected with HIV. However, Cetus Corporation

has recently developed a method for greatly

amplifying the number of infected cells from a few

infected cells (82). In situ hybridization has been

used to diagnose HIV infection in newborns. (As

mentioned previously, difficulties arise in

diagnosing infants of HIV-infected mothers, because the mother’s antibodies to the virus are

transferred to the infant during pregnancy. Assays for IgM antibodies, which might be used to

differentiate the infant’s antibodies from its

mothers (i. e., IgG antibodies) are also under development to assist in the diagnosis of HIV infection in the newborn.

Indirect Methods To Test for

Possible HIV Infection

Before HIV antibody tests were available, some

blood banks screened donors using a test for antibodies against the hepatitis B core antigen following reports that as many as 80 percent of AIDS

patients had evidence of previous hepatitis infection. At least one blood bank determined T4/T8

lymphocyte ratios to identify possibly immunosuppressed donors. As previously described, some

insurance applicants are being tested for T-cell abnormalities. T-cells have characteristic surface

markers (antigens). T4 cells (helper-cells) carry the

CD4 antigens, and T8 cells (suppressor-cells) carry

CD8 antigens. The AIDS virus has an affinity for

the CD4 antigen on T lymphocytes and consequently, individuals with various manifestations

of HIV infection often have a deficiency of T4 cells

and a reversal of the usual ratio of T4 to T8 cells.

The T4/T8 ratio can be measured by an automated method of sorting and counting labeled Tcells (flow cytometry, using a fluorescenceactivated cell sorter).

The T4/T8 cell testis not very predictive of HIV

infection. Advanced age and acute infections are

associated with positive test results. And as described earlier, the T-cell test does not accurately

identify those that are infected.

There are two other indirect tests of Human Immunodeficiency Virus (HIV) infection. The measurement of urinary or serum neopterin and betazmicroglobulin levels has been described as immunological tests that may be useful in the diagnosis of viral infections, including HIV. Both neopterin and betaz-microglobulin are markers for

activation of cell-mediated immunity. While elevated neopterin and beta2

-microglobulin levels

have been noted in individuals with AIDS and

American Red Cross (ARC), elevated levels have

not been consistently associated with the HIVinfected, but asymptomatic, state (129). tiurthermore, both markers are non-specific. For example, neopterin is elevated in many individuals with

bacterial and viral infections (e.g., staphylococcal pneumonia) (222). The medical community
128

rarely uses these tests for diagnostic purposes, and

there is no evidence that insurers are using neopterin or betaz-microglobulin levels in underwriting

applicants.

Accuracy and Reliability of

Commercially Available HIV

Screening Tests

HIV testing errors may occur because of intrinsic limitations of the tests themselves, laboratory

errors in performing the tests, mislabeling, and

inaccurate communication of results. The accuracy of a diagnostic test is usually measured in

terms of its sensitivity and specificity. Sensitivity is a function of how well a test correctly identifies affected individuals, and specificity describes

a test’s ability to correctly identify those that are

unaffected (figure 4-2). A sensitivity of 99.3 percent means that for every 1,000 screening tests on

positive specimens, on average 7 would be incorrectly identified as negative. A specificity of 99.7

percent means that for every 1,000 negative samples screened, on average 3 would be incorrectly

identified as positive.

There is no “gold standard” against which the

performance of new screening tests for HIV infection can be compared. Instead, measurements

of test sensitivity and specificity are based on testing those with clinically diagnosed AIDS and

those without known exposures or risk factors.

Using these populations, the ELISA HIV-antibody

tests are between 99 and 100 percent sensitive and

specific (see table 4-4). However, these measurements would be flawed if some “normal” specimens assumed to contain no HIV antibodies indeed contained them. Moreover, some persons

meeting the clinical definition of AIDS do not

have detectable levels of HIV antibodies.

A number of investigators have evaluated the

performance of ELISA screening tests by applying the tests to Western blot-confirmed positive

and negative samples, rather than reporting the

performance of tests when applied to presumptively positive and negative samples. When evaluated against Western blot-confirmed samples, the

sensitivity of commercially available tests ranged

from 97 to 100 percent, and the specificity, from

70 to 100 percent (117). Differences have also been

Figure 4-2.—Results of Screening Test Illustrating

Sensitivity and Specificity

Result of screening Disease state

Test Disease No disease

Positive true positive TP false positive FP

Negative false negative FN true negative TN

T P T N

&?nsitivity = Tp + F N Specificity = TN + F p

Percentage sensitivity =

Percentage false

negatives ——

Percentage specificity =

Percentage false

positives ——

percentage of people

with the disease who

are detected by the

test

percentage of people

with the disease who

were not detected by

the test

percentage of people

without the disease

who were correctly

labelled by the test

as not diseased

percentage of people

without the disease

who were incorrectly

Iabelled by the test

as having disease

TP

NOTE: Predictive value of a positive test = T- p 

x

. T P x 100

TP + FN

. F N x 100

TP + FN

T N x 100

= TN + F P

—— FP x 100

TN + FP

100

SOURCE: Office of Technology Assessment adapted from J. Mausner and A.

Bahn, Ep’dernio/ogy: An Introductory Text, 2nd ed. (Philadelphia, PA:

W.B. Saunders Company, 19S5).

noted between the ability of various commercial

test kits to identify early infections (254). Some

investigators have reported variations in test results when identical ELISA kits from the same

manufacturer have been used by different laboratories; and within a lab, batch-to-batch variation

has occurred (224).

The predictive value (the percent of positives

that are true positives) improves with the prevalence of infection among those screened. For example, suppose the ELISA test can be conducted

with a sensitivity of 100 percent and a specificity

of 99.8 percent. If the prevalence of antibodies

against HIV in the tested population was 0.1 percent (1 in 1,000), only one-third of positive ELISA

tests would actually be positive. In contrast, if the

prevalence were 10 percent, 98 percent of positive ELISA tests would be truly positive (see fig-
129

ure 4-3 and table 4-5). Therefore, even with a

highly sensitive and specific screening test, errors

will occur, and errors will increase as populations

with lower and lower levels of infection are

screened (196). Confirmatory tests are therefore

necessary to avoid falsely identifying persons as

being infected.

The Western blot is much more specific than

the ELISA and is therefore useful in correctly identifying those that are truly negative. However,

both false positive and false negative Western

blots have been reported. For example, as a part

of the U.S. Army quality assurance program for

HIV testing, a panel of fifteen repeatedly negative serums from healthy adults were sent to five

commercial laboratories offering HIV Western

blot testing. Six different specimens were classified as positive (four of five of the labs made at

Figure 4.3.— Predictive Value Calculation for

Prevalence of 10 Percent; Test Sensitivity = 100°/0,

Specificity = 99.8°/oa

Antibody present

Yes No

I True positive I False positive I

Test positive

‘

e s

l-===k +

No I o I 8,982 I

1,000

Predictive value = @ = 98.2 percent

1,018

aAssume that 10,000 persons are tested.

SOURCE: Office of Technology Assessment,

9,000

1988

Table 4-5.—Relationship Between Predictive Value

and Prevalence of the Index Condition in the

Population Being Screeneda

Predictive value of

Prevalence a positive test

10 percent. . . . . . . . . . . . . . . . . . . . . . . . 98.2 percent

5 percent . . . . . . . . . . . . . . . . . . . . . . . . 98.3 percent

1 percent. . . . . . . . . . . . . . . . . . . . . . . . 83.5 percent

0.1 percent. . . . . . . . . . . . . . . . . . . . . . . . 33.2 percent

0.01 Dercent . . . . . . . . . . . . . . . . . . . . . . . . 4.8 percent

aAssumes test sensitivity of 100 percent and specificity of 998 Percent

SOURCE Off Ice of Technology Assessment, 1988

least one error; one lab made three errors). This

suggests that the errors were due to technique and

not to intrinsic biologic properties of the specimens. In addition, five confirmed positive samples were sent to each of the five laboratories. One

laboratory falsely identified an HIV positive specimen as negative. In light of these findings, the U.S.

Army has adopted a number of policies aimed at

minimizing errors in the interpretation of Western blot tests (36).

According to proficiency testing data, the performance of HIV testing is not as accurate under

“usual” conditions of use as that reported under

ideal conditions of use. Results of the College of

American Pathologists’ (CAP) proficiency testing

program from more than 500 laboratories participating in the 1986 and 1987 CAP surveys reveal

that of 6,946 ELISA HIV-antibody tests on reactive samples, 99.5 percent were reported as positive and on the 1,142 HIV-antibody negative samples, 98.3 percent were interpreted as negative.

For the Western blot test, the results of only

the October 1987 test were analyzed, consisting

of three reactive and one nonreactive samples. Of

the tests on the 3 reactive samples, 89.2 percent

(215 of 241 tests) were interpreted correctly as

positive; 23 were reported as indeterminant and

3 were reported as negative. Of the 58 tests performed on the nonreactive sample, 94.8 percent

(55 of 58) were correctly interpreted as negative;

3 were reported as indeterminant. The performance of reference laboratories (selected laboratories with good performance records) was more

accurate for ELISA and much more accurate for

the Western blot tests than was the performance

of the other participating laboratories. None of

the laboratories participating in Western blot testing reported a negative specimen as positive.

When they erred, the results were reported as indeterminate. However, as only one nonreactive

sample’s results were analyzed, whether labs have

in fact never reported nonreactive samples as positive by Western blot is not known. Unfortunately,

performance with the licensed versus unlicensed

Western blot tests could not be compared, because

the data were not collected (206).

These results most likely underestimate problems in HIV-antibody testing, as the proficiency
130

testing was “open’ ’-i.e., the laboratories knew

they were being evaluated and knew that these

were test samples. “Blind” performance testing in

which participating laboratories are unaware that

they are being evaluated would be a more accurate

assessment of laboratory HIV-antibody testing

proficiency. (In a further effort to assess the quality of the performance of HIV tests, the Center

for Disease Control (CDC) will also implement

a nationwide performance evaluation program for

HIV antibody testing, but this program too will

be of the “open” type, and participation in the

program will be voluntary (205).

Advances in HIV Screening

Technology

A number of new screening products are under development that will improve the accuracy

of HIV testing, and some of these tests are already

available for research use.

“Second generation” antibody screening test kits

that contain viral components derived from genetic engineering techniques are likely to reduce the

number of false positive screening results attributed to contaminants from cell culture present

in the first generation tests. Some evidence suggests that these assays may detect infection earlier

than the first generation tests (166). In addition

to being possibly more accurate than the first generation tests, some of the second generation kits

will take less time to process (5 to 30 minutes as

opposed to 2 to 4 hours) and may be less expensive.

These very specific HIV-antibody tests may

eventually replace the Western blot confirmatory

test. An ELISA that uses a short, synthetic peptide that mimics the immunoreactivity of whole

HIV is currently being investigated. Nonspecific

reactions leading to false positives on Western blot

would be eliminated, because a single HIV immune site would be used. However, false-negatives may occur if there are variant HIV strains

without the specific immune site. To overcome

this problem, a panel of synthetic peptides may

be used that covers all HIV strains (192).

Although not yet commercially available, two

companies have developed antigen enzyme immunoassay to detect p24 antigen. The presence

of endogenous antibodies to HIV interferes with

such assays and therefore limits their use (i.e., after an individual produces HIV antibodies, the antigen test may be negative). The HIV antigen enzyme immunoassay has been used to diagnose

acute HIV illness in high-risk patients at a time

when they have not yet developed HIV antibodies (155). Although the sensitivity and specificity

of the HIV-antigen immunoassay are as yet unknown, they may be useful in screening blood

products, identifying acute HIV infections, and

monitoring the course of therapy for AIDS/ARC

patients.

Genetic probes are being developed to recognize viral DNA or RNA sequences (viral genetic

material) in cells (209). (Genetic probes are labeled

gene sequences synthesized to be complementary

to viral sequences. ) Probe-based tests will be useful in identifying HIV-infected individuals who

do not have detectable virus in their blood. While

there are technical difficulties that remain in perfecting DNA probe tests, some of these difficulties have been surmounted. As mentioned previously, the Cetus Corporation has developed a

process whereby viral DNA sequences can be multiplied a million times, making it possible to detect viral genes even if present in only one of every

5,000 cells (82).

All of the commercially available screening tests

are performed on blood or serum samples. One

team of investigators has applied a variant of these

tests (IgG-capture radioimmunoassays and ELISA

assays) to saliva samples. Almost total qualitative agreement was found in results between

paired serum and saliva samples (pairs of samples were both identified as positive or negative);

but for quantitative agreement, actual test values

for paired samples were not highly correlated

(229). Finally, recent investigations have determined that HIV antibodies can be found in urine,

and whether this finding will be useful in using

urine for HIV-antibody testing is under investigation (40).

Table 4-6 identifies the HIV diagnostic products under development as of early 1988.
131

Table 4-6.–HIV Diagnostic Products Under Development in Spring 1988

Manufacturer Product name Indication

Products pending FDA approval:

Abbott Laboratories

Abbott Laboratories

American Bionetics

Cambridge Bioscience

(Worcester, MA)

Cambridge Bioscience

Du Pent

Elect ro-nucleonics

Hoffman-La Roche

(Nutley, NJ)

Products in development:

Cetus

(Emeryville, CA),

Eastman Kodak

Cetus,

Eastman Kodak

Syntex/Syva

(Palo Alto, CA),

Cambridge Bioscience

Viral Technologies

(lnterleukin-2, Alpha-1 Biomedical)

(Washington, DC)

Products in clinical trials:

Chiron

(Emeryville, CA),

(Ortho Diagnostics, marketer)

Du font

MicroGeneSys

(West Haven, CT)

Thermascan

(New York, NY)

Products in research:

Gen-Probe

(San Diego, CA)

to be announced

Envacor

Wesblot

Recombigen

Latex HIV

(rapid HIV antibody test)

Recombigen EIA HIV

(two-hour immunoassay)

HIV p24 core antigen test

Virgo HIV IFA

(immunofluorescence assay)

to be announced

SureCell

to be announced

to be announced

to be announced

RIBA HIV216

Rapid HIV antibody test

MGSearch HIV-160

Fluorognost

(immunofluorescence assay)

to be announced

to be announced

detects HIV antigens

detects antibodies to core

antigen p24 and the envelope

antigen p41

automated

Western blot

detects HIV antibodies

detect HIV antibodies

detects HIV p24 core antigen

detects HIV antibodies

detects HIV antibodies

detects HIV antibodies

amplifies and detects HIV viral DNA

test for AIDS antibodies

detects HIV p17 antibodies

validates results of positive ELlSA test

detects HIV antibodies

detects HIV antibodies

HIV-1 antibody confirmation test

test for AIDS virus

SyntexlSyva test for AIDS virus

SOURCE: Adapted from Pharmaceutical Manufacturers Association, “Pharmaceutical Industw Response to the AIDS Cnsls, ” Washington, D. C., Feb. 19, 1988

HIV Self-Tests limit sales to physician offices and health clinics

Tests for HIV infection that can be performed (219). Although tests have been developed that

at home are not currently available, although tests may be simple enough to use on samples collected

have been developed that could be used as home at home, they have not been approved by FDA

tests. For example, Cambridge Bioscience has de- fer these purposes. In fact, the FDA has notified

veloped a rapid test for HIV infection that can companies planning to enter the self-testing marbe used on whole blood. The company plans to ket of medical guidelines restricting HIV test kit
132

use to professionals working within comprehensive health care environments (107).

Several companies had planned to sell kits that

allowed the purchaser to collect his own blood,

send it anonymously in a prepaid package to a

clinical laboratory, and obtain the results of

ELISA screening tests (without Western blot confirmation) by phone (189). People anxious to learn

about their antibody status but reluctant to see

their physicians or to use alternate test sites were

expected to use such services (193). Among the

GENETIC TESTS

Introduction

Advances in molecular genetics have led to the

development of a number of new diagnostic and

therapeutic products. Human insulin, growth hormone, and promising drugs for individuals with

heart disease have been developed through recombinant DNA technology. In the area of diagnostics, this technology has been used to improve a

number of tests for infectious diseases, including

HIV tests. While several recombinant DNA diagnostic tests are now being marketed for infectious

disease applications, a larger market for diagnostics may be realized when tests for common disorders with a genetic component are developed.

Several tests for relatively rare genetic conditions

are already available using this new technology.

However, they rely on relatively sophisticated

techniques, are difficult to interpret, and are therefore available at only a few specialized laboratories. As technological hurdles are overcome, and

as advances in molecular genetics continue to be

made, new genetic tests may revolutionize the

practice of medicine. Tests will improve the diagnosis of suspected genetic disorders and may be

widely applied to identify those predisposed to

common disorders with a genetic basis. In some

cases, early intervention will prevent or ameliorate manifestations of the diagnosed condition.

Although many genetic disorders are rare, collectively they constitute a major source of morbidity and mortality. Evidence suggests that specific genes predispose individuals to some forms

of diabetes, heart disease, cancer, and mental illconcerns that FDA raised in considering mail-in

tests were: 1) test results would be provided with

limited or no counseling, 2) confirmatory testing

was not being offered, 3) the quality of testing

would depend on the integrity of mailed samples,

and 4) as health professionals would not be involved in the testing process and testing would

be anonymous, compliance could decline with the

requirement to report the names of those testing

positive to State Health Departments in States that

have this requirement (e.g., Colorado and Arizona).

ness (267). When the prevalence of these conditions is considered, the potential impact of genetic

tests becomes clear. Table 4-7 summarizes one

market prediction of the number of DNA-probe

tests by type of disease that maybe in use by 1992.

Table 4-8 summarizes the projections of several

recent market forecasts. These projections probably overestimate the 1992 genetic test market (42)

but indicate that tests may soon be available for

a variety of genetic disorders and predispositions,

and when available, increasingly used in medical practice. As some of these tests are for canTable 4-7.—DNA Probe Test for Inherited Diseases

Number of tests Value

Disease per year (millions)

Purdy gmtic disoasos:

Adult polycystic kidney . . . . 250,000 $ 7.5

Cystic fibrosis . . . . . . . . . . 333,000 10.0

Duchenne muscular dystrophy ,.. ., 333,000 10.0

Familial hypercholesterolemia . . 250,000 7.5

Familial polyposis . . . . . . . . 165,000 5.0

Huntington’s disease. ., ., ., . . . . 20,000 0.6

Neurofibromatosis . . ... . . . . . . . . 250,000 7.5

Retinoblastoma, ., . . . . . . . . . ., ., 250,000 7.5

Sickle cell anemia ., ., ., 250,000 7,5

Other . . . . . . . . . ., ., 500,000 15.0

Subtotal . . . . . . . . . . . . ,., 2,601,000 $78.1

Common disoasas with a gonotic componont:

Alzheimer’s disease. . . . . . . . . . . . 1,000,000 $30.0

Cancer . . . . . . . . . . . . . . . . . . . . . ., 12,000,000 360.0

Diabetes mellitus ., ., . . ., 5,000,000 150.0

Heart disease, ., ., . . 12,000,000 360.0

Subtotal . . ,, ... , ... . . ... 30,000,000 $900.0

Totai ..,. .., ., ., ~9OO.O . . ... 32,601,000 $950-1,000

SOURCE: Genetic Technology News, “Market for DNA Probe Tests for Genetic

Diseases,” Gen. Tech. News, pp. 6-7, November 1966.
133

Table 4-8.—Genetic Test Market Projections

U.S. market

value By projected

Type of disease=

($ million) year Source

Genetic & genetic predispositions . . . . . . . . . . . . . . . . 210 — Biomedical Business International, 1986

Genetic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 1993 Genetic Engineering News, 1986

Genetic (includes laboratory revenues and

identity testing) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 550 1990 Robert S. First, 1986

Genetic, infectious and cancer . . . . . . . . . . . . . . . . . . . . 300-500 1995 Genetic Engineering News, 1987

Genetic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 1995 Frost&Sullivan, 1985

Genetic &genetic predispositions . . . . . . . . . . . . . . . . 950-1,000 1992 Genetic Technology News, 1986

a

lGe”etiC’ refers t. single gene disorders (e.g., cystic fibrosis, sickle cell anemia) and chromosomal disorders (e.g., Down syndrome). ‘Genetic predispositions’ refer

to common disorders known to have a genetic component such as heart disease and diabetes,

SOURCE: Office of Technology Assessment, 1988

cer, diabetes, or heart disease, they would appear

to be of considerable interest to insurers. However, it is important to understand some of the

technical characteristics and limitations of these

tests before concluding that they will be adopted

by insurers or employers.

Tests for genetic disorders have, to date, been

used almost exclusively within the disciplines of

pediatrics and obstetrics. For example, in all

States, newborns are screened for one or more

genetic conditions amenable to effective treatment

(e.g., phenylketonuria), and pregnant women 35

and older are routinely offered prenatal diagnosis to detect fetal chromosomal abnormalities such

as those associated with Down’s Syndrome. Aside

from pediatric and obstetric applications, genetic

testing has not yet become widely incorporated

into the practice of medicine. Genetic screening

programs targeted at young adults have generally

involved specific racial and/or ethnic groups and

have usually addressed reproductive risk rather

than the presence of disease itself. For example,

community-wide programs to identify carriers of

sickle-cell disease or Tay-Sachs disease have been

implemented to identify those couples who might

benefit from genetic counseling and prenatal

diagnosis.

Most available tests for genetic conditions are

not based on recombinant DNA techniques. In

fact, until recently, three basic approaches have

been used to diagnose genetic conditions. First,

chromosomal analyses are employed to detect

conditions such as Down’s syndrome. Tests for

chromosomal abnormalities can be conducted

with blood, with the fetal cells contained in amniotic fluid, or more recently, with chorionic villus

samples (obtained during the first trimester of

pregnancy). Second, biochemical assays to identify abnormal gene products or the consequences

of abnormal gene function have been used. In the

case of Tay-Sachs disease, for example, reduced

activity of the enzyme, Hexosaminidase A, signals either the disease or carrier state. Lastly,

genetic testing has relied on identifying clinical

manifestations of the disease itself. Table 4-9 summarizes information on some common genetic disorders.

Most conventional genetic tests rely on detecting the products expressed by abnormal genes. As

the gene product associated with most genetic disorders is unknown, there are relatively few genetic

tests available. In some cases, the development

of tests has been stymied by the inability to access tissues in which gene product abnormalities

may be found (e.g., brain, eye). Many available

tests are also of limited use, because irreversible

damage may have already occurred by the time

an abnormality in gene function is detected.

Since the 1970s, a variety of techniques has been

developed that allow a more direct examination

of the genes themselves. DNA-based tests overcome many of the limitations of conventional tests

for genetic disorders. They can be of diagnostic

use without knowing the gene’s product or function; furthermore, because genes are present in

virtually all body cells, tests can be applied using

easily accessible tissues such as white blood cells,

and in the case of prenatal diagnosis, fetal cells

can be obtained through amniocentesis or chorionic villus biopsy. With an individual’s genetic

84-750-88- 4 : a 3
134

Table 4-9.—Common Genetic Disorders

Nature

Genetic disease Cause of illness incidence Inheritance

Down syndrome autosomal range of mental 1 in 800 sporadic

chromosome

abnormality

sex chromosome

abnormality

‘?

retardation

Klinefelter’s Syndrome

Cystic fibrosis

defect in sexual

differentiation

complications

of excessively

thick mucus secretion

progressive mental

and neurological

degeneration

muscular degeneration,

weakness

impaired circulation,

anemia, pain attacks

1 in 2,000

1 in 2,000 Caucasians

sporadic

autosomal recessive

Huntington’s disease 1 in 2,500 autosomal dominant

Duchenne

muscular dystrophy

Sickle-cell disease

Hemophilia

Phenylketonuria

1 in 7,000 X-linked

abnormal hemoglobin 1 in 625 mostly black autosomal recessive

X-linked

autosomal recessive

defect in blood clotting

factors

enzyme deficiency

uncontrolled bleeding 1 in 10,000

mental deficiency 1 in 12,000 mostly

Caucasians and

Orientals

1 in 3,000 Ashkenazic

Jews

Tay-Sachs disease absence of an enzyme buildup of fatty

deposits in brain,

leading to early death

autosomal recessive

Lesch-Nyhan syndrome enzyme deficiency mental retardation, 1 in 100,000

self-mutilation

X-1inked

SOURCE: U.S. Department of Health and Human Services, Public Health Service, National Institutes of Health, National Institute of General Medical Sciences, “The

New Human Genetics,” Nlli Pub. No. 84-882 (Wash~ngton, DC: U.S. Government Printing Office, 1985).

mosomes (figure 4-4). DNA is a macromolecule

made up of two chains containing four nucleotide bases—adenine, guanine, cytosine, and thymine or A, G, C, and T. The two chains are complementary. The adenine base on one chain will

always bind with the thymine base on the other,

and cytosine on one chain always binds with guanine on the other. Hydrogen bonds hold the bases

of the two chains together to form a spiraling helix (the double helix). To illustrate the concept of

the complementary nature of the two chains, if

one strand had the base arrangement of CCAT,

its complementary strand would be GGTA (figure 4-5).

The location of a gene along the length of DNA

is called its locus. Because chromosomes occur in

pairs (humans have 23 pairs), there are two copies of a gene at each locus, one inherited from

each parent. Different “versions” of a gene at a

particular locus are called alleles. When there are

two or more versions (alleles) of a gene at a parmakeup determined at conception, DNA-based

tests can be administered pre- or post-natally and

before the onset of symptoms of the disease. Early

diagnosis affords the possibility of therapeutic intervention to prevent manifestations of disease.

As genes that are associated with an increased risk

of common disorders such as heart disease and

diabetes are identified, tests may be applied

widely, perhaps as part of a population screening effort. Before describing the newer genetic

diagnostic methods, a review of some basic

genetic principles is in order.

Some Basic Genetic Principles: A Review

Genes are lengths of deoxyribonucleic acid

(DNA) that have three main functions: 1) they

code for polypeptide chains, the components of

proteins; 2) they have important regulatory functions; and 3) they self-replicate during cell division. The human genome contains an estimated

100,000 genes arranged along the length of chro-
135

Figure 4-4.–Organizational Hierarchy of DNA, the

Carrier of Genetic Information in Human Cells

N ucleotides

AGC T

Adenine, guanlne,

cytosine, and

thymine, the basic

building blocks of

DNA.

Genes

–ACGAAAATCCGCGCTTCAGATACCTTA –

Functional units of

DNA needed to synthesize proteins or

regulate cell

function.

Chromosom e

Thousands of genes

arranged in a linear

sequence, consisting of a complex of

DNA and proteins.

Genome

SOURCE: Office of Technology Assessment, 1987,

The complete set of

genetic information;

each human reproductive cell contains

23 chromosomes,

and all other cells in

the body contain a

full set of 46

chromosomes.

Figure 4-5. —A Schematic Diagram

DNA Double Helix

SOURCE: Office of Technology Assessment, 1987

of the

ticular locus and the allele has a frequency of at

least 1 percent in the population, the genetic variant is referred to as a polymorphism.

Given the variety in human characteristics, it

is not surprising that there is variability in the

DNA sequence. Some of the variability is significant in that a change in the expression of the gene

results. In some cases, this change causes disease;

in other cases, no disease. Other variations in

genes occur but have no effect on gene expression.

A number of techniques has been developed

that help identify genetic variation at the DNA

level and consequently assists in distinguishing between those with disease-causing alleles from

those with normal alleles. There are two basic approaches. In the Zinkage method DNA markers

associated with abnormal alleles within families

are used to predict family members’ risks. Second, when the disease-causing alleles have been

identified, direct genetic tests can be used.

Linkage methods.—The discovery of enzymes

called “restriction enzymes” that cut DNA at specific sites has contributed to the development of

linkage tests. This method exploits the variation

that occurs along the length of DNA. The action

of the restriction enzymes is sometimes affected

by this variability. For example the restriction enzyme EcoRI cuts at the base sequence GAATTC

on one DNA strand and at CTTAAG on the

other. Following the action of this restriction enzyme, the sequence AATGAA TTCGT would be

cleaved into two segments of DNA. If, however,

an individual had a different sequence at the recognition site, say AATAAA TTCGT, the restriction enzyme would not cleave the DNA and there

would be one long sequence. These differences in

DNA fragment length after subjecting DNA to the

action of restriction enzymes are called rest~”ction

fragment length polymorphisms or RFLPs (figure

4-6). More recently, synthetic DNA cutters have

been made that will enable researchers to cleave

DNA anywhere along its length (272).

Investigators have studied the “inheritance” of

RFLPs in families in which a genetic disease occurs. Once it has been established that a particular RFLP is almost always present in individuals

with a disease and is almost always absent in those

without the disease, the RFLP can be used as a
136

Figure 4-6.—Restriction Fragment Length

Polymorphism (RFLP)

o 12,000

Scale

lndlvldual A 1,000 base pairs

DNA

a

800” 1,200 2,000 500 3,500 2,400 1,600

Individual B

D N A

a

5001,200 2,000 50 0 3,500 4,000

When a specific restriction enzyme cuts DNA, it may produce

fragments of different sizes in the DNA of different people.

SOURCE U S Department of Health and Human Services, Publlc Health Service,

National Institutes of Health, National Institute of General Medtcal

Sciences, The New Human Genetic s,” N IH Pub No 84.662

(Washington, DC U S Government Prlntlng Off Ice, 1985)

marker for that disease (different polymorphisms

may be associated with the same disease in different families). Such RFLP disease markers are in

close physical proximity along the length of DNA

to the disease-causing gene (figure 4-7). How linkage analysis works is well illustrated in the case

of Huntington’s disease (figure 4-8).

In order to conduct linkage analyses, geneticists

must usually have blood samples from more than

one affected family member. In addition, someFigure 4.7.—Genetic Linkage

~ ‘

a r k

’

r

’

Defective

gene

Marker 2

Huma n

chromosom e

Discovering specific DNA markers near a defective gene greatly

improves the accuracy of diagnosing the genetic disorder.

SOURCE: Integrated Genetics Inc., “Annual Report 1985,” Framingham, MA, 1986.

Figure 4.8.— Linkage Analysis for

Huntington’s Disease (HD)

onset

3erwmt10n

T

40

I

(~: ) (j: )

I

Thl.S tlgure presents the result of a genetic iinka~e test Using

three different restriction enzymes. The first p~oduces fou~

possible RFLP’s listed as A, B, C, or D: the second and third

enzymes produce two RFLP’s listed as 1 or 2. The three

RFLPs for each of the two number 4 chromosomes are presented vertically under each individual. In this example an

at risk consultant had an affected father and uncle and an

affected grandmother who is deceased. The form of the RFLP

linked to the HD gene appears to be C22 since this is the

RFLP that the father and uncle have in common. The consultant had inherited a B12 from her mother and a C21 from

her father and therefore has probably not inherited the HD

gene.

SOURCE: R. Myers, “Genetic Linkage Test for Huntington’s Disease,” The Genetic Resource 4(1):15-18, 1987.

times at least two generations of family members

must be tested. Once blood samples are obtained,

DNA must be purified from white blood cells.

Next, a technique called Southern blotting is used

to visualize individual RFLP patterns (figure 4-9).

First, the DNA is cut into fragments with restriction endonucleases. The fragments resulting from

the digestion are then placed on a gel and a charge

is applied (a process called electrophoresis) (figure 4-10). Because of their different sizes, the fragments migrate along the gel at different speeds and

segregate. Labeled probes are prepared (copies of

the different RFLPs are made and labeled) and applied to the gel. Both the DNA fragments and

probe are “denatured,” making them singlestranded. The single-stranded probe then binds

to (hybridizes with) complementary DNA sequences. Because the probe is labeled (either radioactively or with Biotin, a nonradioactive chemical), distinct bands representing the fragments of

different lengths can be visualized.
137

Figure 4-9.—Southern Blotting

\ I /

Agarose gel electrophoresis

/ Transfer (“blotting”)

— ——

—

Radioactively

labeled

prob e

*

—

— ——

Nitrocellulos e

filter with

DNA fragments

Autoradiograph

SOURCE U S Department of Health and Human Serwces, Public Health Serv.

Ice, National Institutes of Health. National Institute of General Medl.

cal Sciences, “The New Human Genetics, ” NIH Pub No 64-662 (Wash

Ington, DC. U S Government Printing Office, 1985)

Figure 4-10.— Electropheresis Preparation of a

Southern Blot

Larger

35r) ~

bas e

pairs

Direction

of movement

of fragments

through the gel

The use of linkage tests is limited, because the

exact location of the deleterious gene is not

known. Instead, an analysis of the transmission

of linked markers within families in which the disease occurs forms the basis of the test. Because

these analyses require the cooperation of multiple family members, they are not widely applicable. When affected family members are deceased, or when communication regarding the

disease is poor, such testing efforts can be

hampered.

SOURCE U S Department of Health and Human Ser-wces, Public Health Serv.

Because linkage analyses track the inheritance Ice, National Institutes of Health, National Institute of General Medl.

of a marker close to the disease-causing allele, it cat Sciences, “The New Human Genetics, ” NIH Pub. No. 84-662 (Wash.

tngton, DC: U S Government Print~ng Of ftce, 1985),

Smaller
138

is vitally important to accurately categorize those

represented in the family tree (pedigree) as affected

or unaffected. Sometimes the diagnosis of genetic

conditions such as Huntington’s disease, for which

no definitive diagnostic test is available, are subject to error. Alcoholism, multiple sclerosis, and

a number of other necrologic disorders have been

misdiagnosed as Huntington’s disease. In addition

to ensuring that family members participating in

linkage analysis are correctly identified as affected

or unaffected, sometimes evidence of paternity is

sought for those participating in the family studies

to further guarantee the accuracy of the tests.

Even when the appropriate family members are

available and the diagnosis of the genetic condition is well established, linkage tests may not be

informative. For the tests to be informative, family members must be polymorphic (i. e., have

different versions of the allele) at the relevant restriction site(s). In the case of Huntington’s disease, some families cannot benefit from linkage

analyses because they lack “heterogeneity” for the

RFLP. That is, those with the disease have the

same base pairs at the restriction site close to the

deleterious gene as unaffected members. Even for

those families that show variation and can be

studied using linkage analyses, the risk of being

affected for any particular family member (or fetus in the case of prenatal diagnosis) is rarely given

as zero or 100 percent. The certainty with which

diagnoses are made depends on how tightly linked

the marker is to the disease-causing allele.

As the distance between the marker and the

deleterious gene increases, the chance of an exchange of DNA between chromosomes (called

“crossing over”) within this region during meiosis (the cell division occurring at the time of conception) increases. If the exchange took place between the marker and the disease-causing allele,

an erroneous linkage study result would occur.

Diagnostic certainty increases when there are two

RFLP markers flanking the deleterious gene.

Flanking markers have been identified for cystic

fibrosis, so when a family undergoes linkage testing, the chance that the results represent their true

genetic state is very high. Sometimes, the RFLP

and the gene are observed to be “very tightly

linked.” When all of those with disease have one

form of an RFLP and those without disease have

another form, the association suggests that the

polymorphic restriction cleavage site includes the

disease-causing gene. Such tightly linked polymorphisms have been observed for phenylketonuria

(PKU) and some thalassemias (table 4-10). The

specific location of the gene that causes cystic

fibrosis has recently been identified (326). When

verified, a direct test will become feasible.

For some disorders, spontaneous mutation accounts for a relatively large proportion of cases.

For example, in the case of Duchenne Muscular

Dystrophy, even though flanking markers for the

gene have been located, linkage tests have been

reported to be uninformative in many families

studied. Some of the inconclusive results occur

because an estimated 10 to 15 percent of cases of

the disease result from spontaneous mutations that

are not inherited.

In summary, linkage studies are unwieldy because they involve multiple family members, are

technically difficult to conduct and therefore expensive ($500 to $1,000), and their interpretation

is somewhat subjective and requires a great deal

of knowledge regarding the expression of the disTable 4-10.—Available Genetic Tests by Type of Testa

Test type Disease

Linkage RFLP tests: . . . . Becker’s muscular dystrophy

Carbamyl phosphate synthetase

deficiency

Chronic granulomatous disease

Cystic fibrosis

Fragile X syndrome

Hemophilia A and B

Huntington’s disease

Myotonic dystrophy

Neurofibromatosis

Polycystic kidney disease (adult)

Direct tests: . . . . . . . . . . . Alpha, antitrypsin deficiency

Duchenne muscular dystrophy

Growth hormone deficiency

Lesch-Nyhan disease

Ornithine transcarbamyiase

(OTC) deficiency

Retinoblastoma

Sickle cell anemia

Thalassemia (some forms)

Tests for very tightly

linked polymorphisms: . . Hemoglobinopathies

Phenylketonuria (PKU)

Thalassemias

aThls represents a selected list of tests available as Of early 1988,

SOURCE: Office of Technology Assessment, 1988,
139

order in question. However, with the rapid discovery of more genetic markers, linkage studies

will be available for an increasing number of disorders. (Genetic maps have been constructed that

already include the relative positions of more than

400 markers (69). )

Direct Genetic Tests.—When a disease-causing

gene has been identified, direct tests have been

developed that avoid many of the problems associated with linkage analyses. Direct tests do not

rely on the analysis of multiple family members

and therefore may be amenable to populationwide screening. To date, there are few conditions

for which these direct tests are available (see table 4-10), and with the exception of sickle cell anemia, the conditions are rare.

The “candidate gene” method can be used to

identify disease-causing genes when the product

(a protein) of the gene is known or suspected. By

working backwards from the gene product, a

strand of DNA that is complementary to the gene

of interest is created. This is accomplished by taking the messenger RNA (genetic material involved

in protein synthesis) for the protein and using the

reverse transcriptase enzyme to manufacture a

complementary strand of DNA (called cDNA).

cDNA can be made for both the normal and abnormal gene products. Once the cDNA has been

shown to accurately distinguish affected from unaffected individuals, it can be used as a diagnostic test.

If a disease-causing gene has been located and

sequenced, then specific gene probes, complementary to the abnormal gene, can be synthesized,

labeled, and used to conduct direct tests using the

Southern blot technique. Gene probe tests are

available for sickIe cell anemia, retinoblastoma,

and some forms of thalassemia (see table 4-10).

Three techniques have been developed that will

allow the detection of any genetic variation along

a particular DNA sequence. The first method relies on the synthesis of short segments of DNA

sequences called “oligonucleotides. ” In order to

synthesize oligonucleotides, the amino acid sequence of at least a part of the gene product must

be known (if known, the related DNA sequence

can be deduced). Testing conditions are manipulated so that these oligonucleotide probes, when

applied to a Southern blot, only bind to perfectly

complementary sequences. Through comparisons

with a sequence of normal DNA, any number of

abnormal ,alleles at a particular locus can be identified (156). A second technique relies on detecting mismatches between a radioactively-labeled

RNA probe and an individual’s single-stranded

DNA. If the DNA includes an abnormal allele,

it will not match perfectly to the RNA probe.

When the resulting hybrid is mismatched, the enzyme, ribonuclease A, will cut the RNA probe at

the site of the abnormal allele (211). The third

technique detects differences in the paired probe

and DNA sequence according to their migration

on a “denaturing gradient gel. ” A perfectl y

matched pair of probe and DNA sequence will

migrate on a gel differently than a mismatched

pair (90).

Until recently, one technical difficulty limiting

the use of direct genetic tests was the inability to

obtain adequate amounts of DNA, especially

when analyzing prenatal diagnostic specimens. A

procedure to produce additional DNA from a patient sample has recently been developed (157,

255). After a sample is obtained, an enzyme (DNA

polymerase) can be used to amplify targeted DNA

sequences more than 200,000-fold. Improvements

in this technique have allowed direct visualization of the DNA fragments of interest on standard gels without the use of radio-labeled probes

(227). These advances simplify and accelerate the

diagnostic process and once automated, will allow more laboratories to conduct DNA-based

genetic tests.

Limitations of Genetic Tests

Although direct genetic tests avoid many of the

problems inherent in linkage analyses, both methods may yield inaccurate results because of some

unique characteristics of genetic diseases. Some

genetic conditions can be caused by more than

one mutation, either at the same or at a different

locus. For example, G6PD (glucose-6-phosphate

dehydrogenase) deficiency may be caused by

different mutations at the same locus. In the case

of congenital deafness, different recessive genes

at different loci can lead to the same clinical picture. And at least two different loci have been
140

implicated in families in which familial manic depression occurs (79,136). Unless such heterogeneity is identified, both linkage-based and some of

the direct tests may be misleading.

Another factor that may lead to diagnostic confusion is the extent to which a deleterious gene

is expressed, and when expressed, the constancy

of its expression. Sometimes, individuals with a

genotype associated with disease do not express

the disorder at all. Such a condition is said to have

reduced “penetrance. ” For example, retinoblastoma, a dominantly inherited eye cancer, has

reduced penetrance. Before an individual who has

inherited the abnormal allele expresses it, a mutation must occur in the cells of the eye. Furthermore, some conditions, although expressed, are

variable in their expression. Some individuals may

be mildly affected, while others are severely affected. In the case of tuberous sclerosis, although

the majority of cases represent new mutations,

there are cases in which a severely affected child

inherited the gene from a very mildly affected parent in whom the disorder had not been recognized.

Prospects for Genetic Testing

As of the end of 1987, there were no FDA-approved recombinant DNA tests for human genetic

conditions (325). Instead, a limited number of tests

were available through university genetics programs or through a few commercial laboratories.

According to a 1986 survey of biotechnology

companies, eight companies plan to offer genetic

tests as a laboratory service, and six plan to have

diagnostic test kits ready for sale by 1991 (291).

One company is in the process of evaluating the

predictive value of markers (RFLPs) in detecting

an individual’s susceptibility to atherosclerosis and

hypertension. Cetus Corporation has developed

an automated method to amplify DNA and conduct genetic analyses without radioisotopes (82).

Available DNA-based tests for genetic disorders

are technically difficult to perform and most rely

on the conduct of family studies. As more direct

tests become available and as the technologies are

simplified, genetic testing may become a part of

routine care. However, given the nature of genetic

diseases, there will be a significant element of diagnostic uncertainty associated with the tests for

many conditions. Heterogeneity, reduced penetrance, and variable expression of some genetic

conditions will make predictions difficult based

on the results of genetic testing. Furthermore, tests

for common disorders with a genetic component

(e.g., heart disease, cancers) will rarely be definitively diagnostic. Instead, a positive result from

a genetic test would usually mean that an individual’s relative risk (relative to those without the

gene) is increased. In some cases, modification of

lifestyle (cessation of smoking, changes in diet)

may reduce the relative risk substantially. In other

cases, early medical interventions may alleviate

the increased risk.

If genetic tests can provide information that

would lead to the adoption of preventive interventions, they may be embraced by primary care

physicians. In the past however, primary care

physicians have not adopted new genetic tests

(51). This may be attributed to the fact that to

date, tests have been used primarily to provide

reproductive risk information to couples, rather

than information regarding the health status of

the individuals themselves. Primary care physicians have little exposure to genetics in medical

school (47), and there have been few continuing

education opportunities directed at the community-based physician. Furthermore, there are few

genetic specialists available to offer genetic testing and counseling on a consultative basis (137).

For many diseases there will be a lag period between the time genetic tests are available and the

time when effective interventions for the diagnosed condition are available. Other than for reproductive planning, individuals may not find the

tests useful. In the case of a debilitating, late-onset

condition, however, having risk information early

in life may be helpful in making employment and

other life decisions. How readily such tests will

be adopted remains to be seen. In the case of Huntington’s disease, before the announcement of a

predictive test, approximately 55 to 80 percent of

those at risk indicated that they would elect to

be tested when the test became available (258, 275,

285). However, although interest in testing remained high after the announcement of the predictive test (174), in the first several months of

testing, less than 15 percent (44/349) of those informed of the test’s availability by one of three
141

genetic centers offering the test have requested

testing (236).

Will genetic tests be used in underwriting or as

part of an employee applicant screening program?

The answer depends on many factors. Genetic

tests in their present state are impractical to

administer, require considerable technical skill

both in their conduct and in their interpretation,

may require analyses of multiple family members

(i.e., linkage-based studies) that would be unacceptably intrusive, and are very expensive to conduct. (A direct test for sickle cell disease may cost

as much as $450, and linkage-based tests as much

as $1,000. ) Once tests are simplified and less

costly, and when direct tests for predispositions

to common diseases become available, they may

be considered attractive to insurers in evaluating

an applicant’s risk.

Although commercial insurers may be disinclined to test for rare genetic conditions such as

Huntington’s disease, they would be interested in

learning of the results of any genetic tests already

conducted by the applicant’s physician. Thus, for

rare conditions, it appears that the impact of

genetic tests on the underwriting process will be

felt when genetic tests become a part of routine

care.

The availability of genetic susceptibility tests

may have a dramatic impact on who the insurer

decides to test. At present, a small proportion of

applicants are tested. In general these are individuals who indicate a history of disease or presence

of a risk factor (e.g., age, hypertension) on the

application. As genetic tests can indicate risk in

the absence of clinical signs of disease, they may

be applied to all age groups to identify risk regardless of medical history. If widely used by primary

care physicians in their provision of preventive

health care, insurers may be in the position of testing to avoid the prospects of adverse selection.

TESTS OF POTENTIAL INTEREST TO INSURERS

BECAUSE OF DISEASE PREVALENCE

Testing for Cancer

Currently Available Cancer Screening Tests

Although employers and insurers deal with a

relatively young and therefore low-risk population

in terms of cancer incidence, a large number of

cancers occur among those under 55. Nationally,

approximately 19 percent of the estimated 930,000

new cases of cancer occurring in 1986 were diagnosed among those aged 15 to 54 (302, 293). Figure 4-11 summarizes 1988 estimates of the distribution of new cases of cancer by site and sex.

Screening tests for latent disease are available

for several of the most common cancers (e.g., colon, breast, and uterine/cervical cancers). The

American Cancer Society (ACS) has considered

the epidemiologic data regarding the impact of

screening tests on mortality and has made recommendations to physicians regarding the incorporation of screening into their practices (box 4-A).

For example, mammography has been recommended for women 50 and older, based on observed mortality differences between groups of

Figure 4-11 .—Distribution of New Cases of Cancer

by Site and Sexa —1988 Estimates

Pancreas

a

30/0

Prostate 200/0

q

Urinary 100/0

12°/0 ! All other

aExcluding non-meianoma skin cancer and carcinoma in Situ.

SOURCE American Cancer Society, Inc “Cancer Facts and Figures, 1987, ” New

York, NY, 1988
142

Box 4-A.—Screening Tests for Some Common Cancers

Disease: Colorectal cancer

Screening Methods:

Digital rectal examination: Although widely used as part of routine medical examinations, 90 percent

of colorectal cancers are not palpable using the digital rectal examination.

Sigmoidoscopy: Using a rigid or flexible scope, physicians can examine from 30 to 60 cm of the

colorectum. The flexible scope is more comfortable for the patient but is more difficult for physicians to

use. Given the distribution of neoplasms, the flexible scope will miss about 40 percent of cancers (111).

Stool occult blood test: There are several commercial fecal occult blood tests available. The most widely

used is the Hemoccult IIR screening test. The examination of two samples is recommended from each of

three consecutive bowel movements while an individual is on a meat-free, high-roughage diet. Individuals

are also advised to avoid use of aspirin, nonsteroidal anti-inflammatory drugs, vitamin C, iron, laxatives,

rare red meat and fruits and vegetables high in peroxidases (e.g., turnip, cauliflower). Even when used

optimally, Hemoccult IIR misses as many as 10 percent to 30 percent of cancers and 65 percent to 75 percent

of colonic polyps (29). Initial reports on HemoQuantTM a recently introduced quantitative test for occult

gastrointestinal bleeding, suggest it is more sensitive than Hemoccult, However, increased detection of upper

gastrointestinal tract bleeding and dietary hemoglobin may reduce its specificity (153). Several new methods are being developed that will be more sensitive and specific than current screening methods. For example,

immunoassay are being developed that will limit cross reactivity with foodstuffs, animal hemoglobins,

and drugs.

Screening recommendations:

American Cancer Society: Patients over the age of 40 should have a digital rectal examination annually.

T’hey should have a six-slide stool occult blood test annually after the age of 50 years. After age 50,

~igmoidoscopy should be done annually for 2 years, then every 3 years.

Canadian Task Force: Patients should have an annual stool occult blood test starting at the age of

16 years.

Epicfemiologic data in support of recommendations: Two prospective controlled trials are ongoing to

assess the impact of stool occult blood testing on mortality (106,320). Preliminary data indicate that occult

blood testing confers an advantage in detecting localized cancers over sigmoidoscopy alone or usual care.

Disease: Breast cancer

Screening Methods:

Mammography. The most widely used breast imaging techniques are screen-film mammography and

xeromammography. Preliminary results of the Canadian National Breast Screening study show first screen

mammography to have a sensitivity of 69 percent, a specificity of 94 percent, a positive predictive value

of 8.6 percent and a negative predictive value of 99.7 percent (13).

Screening recommendations:

American Cancer Society: All women should: 1) do monthly breast self-examinations, 2) have a

physician perform a breast examination every 3 years between the ages of 20 and 40 years and annually

thereafter, and 3) have a mammogram for baseline purposes between the ages of 35 and 40 years, every

1 to 2 years between the ages of 40 and 50 years, and annually thereafter.

U.S. Preventive Services Task Force: Women 50 years of age and older should be offered annual clinical

breast examinations and mammography. For women at high risk, especially those with a family history

~f premenopausally diagnosed breast cancer in first-degree relatives, physicians may elect to recommend

mnual clinical breast examination and mammography beginning at an earlier age (e.g., 35 years) (314).

Canadian Task Force: All women should have an annual physician breast examination and

mammograph y between the ages of 50 and 59 years.

Epidemiologic data h support of recommendations: Two randomized controlled trials have shown

reductions in breast cancer mortality secondary to breast cancer screening. The results of the Health Insurance

Plan (HIp) of Greater New york study show that yearly mammography, physician examination, and Patient

self-examination reduced breast cancer mortality in the study groups by 30 percent for women over 50

268). In Sweden, a 40 percent reduction in breast cancer mortality was demonstrated among screened women

ages 50 to 74 years (282). The benefits of screening for women under 50 should be determined by the National

Study of Breast Cancer Screening, being conducted in Canada (results are not expected before the 1990s) (197).
143

Disease: Uterine cervical cancer

Screening Methods:

Papanicolaou smear or PAP test: Cells scraped from the cervical os are examined to identify cancerous

and pre-cancerous cell morphology. The false negative rate associated with the PAP test is estimated to

be about 30 percent (243).

Screening recommendations:

American Cancer Society: All women who are or have been sexually active, or who have reached

age 18 should have an annual PAP test and pelvic examination. After a woman has had three or more

consecutive, normal annual examinations, the PAP test may be performed less frequently at the discretion

of her physician (318).

Canadian Task Force: Women between 18 and 35 years of age should have a PAP test annually. A

PAP test should be done every five years between ages 35 and 70. No PAP tests are necessary after the

age of 70 years.

Epidemiologic data in support of recommendations: Definitive evidence that PAP testing reduces mortality is not available. However, a body of inferential data supports the contribution of PAP testing to

reduced mortality. The incidence of invasive cervical cancer is significantly lower among screened as

compared to unscreened groups of women (88,170). Other evidence in support of the efficacy of PAP testing

is that there are correlations between the proportion of women screened in an area and the cancer incidence

and mortality rates of that area (.53). Lastly, the decline in cervical cancer incidence between the mid-1950s

and mid-1970s is consistent with the adoption of PAP screening (118).

Disease: Lung cancer

Screening methods:

Chest x-ray, sputum cytology: Chest x-rays and sputum cytology are used to complement one another.

Chest x-rays are useful in detecting peripheral tumors, whereas sputum cytology is used to detect centrally

located tumors.

Screening recommendations:

American Cancer Society: Specific screening for lung cancer is not indicated.

Canadian Task Force: Same recommendation.

Epidemiologic data in support of recommendations: The National Cancer Institute’s (NCI) Cooperative Early Lung Cancer Detection Program that was started in the early 1970s assessed the ability to improve

lung cancer detection and lower lung cancer death rates in high-risk men (smokers age 45 and older) by

adding sputum cytological screening to chest x-ray screening exams. When the NCI trials commenced, it

was generally accepted that yearly chest x-rays were not effective in reducing lung cancer mortality and

that a large proportion of cancers detected during the trials would be detected by sputum cytology. The

results of the randomized controlled trials indicate that although lung cancer detection is somewhat improved

with the addition of sputum cytology screening, there is no improvement in lung cancer mortality among

those subjected to both screening methods. Contrary to expectations, the majority of lung cancers were

detected radiologically and not cytologically (sputum cytology alone detects 15 to 20 percent of lung cancers,

almost all of which are squamous cancers with a favorable prognosis) (91,198). The evaluation of x-ray

itself as a screening methodology has not been possible, because annual chest x-rays have, in many areas,

become a part of routine care.

women randomized into screened and not to detect occult blood in the feces (stool) is estiscreened study populations (268). Similar trials

are underway as part of an evaluation of screening tests for colon cancer (106,320).

Although effective in reducing mortality when

applied to age-appropriate populations, most

available screening tests are not highly sensitive

or specific. In the case of colon cancer, the Hemoccult II@ kit, the most widely used commercial kit

mated to detect only 25 to 35 percent of colonic

polyps (an estimated 5 percent of polyps detected

would develop into colorectal cancer if not removed (2)) and 70 to 90 percent of cancers (29).

Because of the relatively low sensitivity, the

American Cancer Society recommends that people over 50 have sigmoidoscopy performed every

year for 2 years and then every 3 years, in addition to stool occult blood testing. Although the
144

specificity of Hemoccult II” is relatively high—

97 percent for benign polyps and carcinoma—

the predictive value of the test when applied to

an asymptomatic population is relatively low.

Fifty-two percent of positive tests represent cases

of either polyps or cancer; 40 percent represent

polyps, and 12 percent represent cancer (11). For

every 1,000 individuals screened, there will be an

estimated 20 to 60 positive results, of which about

half would represent cases of polyps or cancer (figure 4-12). All positive cases need to be further

evaluated by full colonoscopy or, less definitively,

by flexible sigmoidoscopy or barium enema (29).

Although the test for fecal occult blood is inexpensive to administer and interpret, the cost of

evaluating a positive case may be as high as

$1,000. In addition to being costly, the followup procedures are invasive and uncomfortable to

the patient.

Perhaps because of its poor predictive value,

physicians generally recommend stool sampling

to their patients less often than published guidelines recommend. For example, despite the ACS

recommendation for an annual screen for occult

blood in the stool after age 50, surveys indicate

that few in that age group (3 to 20 percent) have

ever had one (284). Furthermore, in a 1984 survey of primary care physicians, only 48 percent

reported that they followed or exceeded the ACS

guideline for stool blood sampling with all patients

(S). The IOW utilization of colorectal screening

may also be explained by poor patient compliance. The screening test, which relies on stool

sampling, is unacceptable to many individuals,

and as many as 30 to 50 percent of patients given

slides to return with stool specimens do not do

so (2, 321). Both patient and physician compliance may be improved when results of the two

randomized trials being conducted to assess the

impact of fecal occult blood screening on mortality are completed. In addition, tests with higher

sensitivity and self-tests have been developed,

which may improve compliance.

Other currently available, recommended

screening tests are also underutilized. Despite findings from randomized clinical trials showing reductions in mortality attributable to mammography screening for breast cancer, the procedure

is underutilized according to ACS guidelines. Although the ACS recommends that women 50 and

older have an annual mammogram, the 1984 survey of over 1,000 primary care physicians indicates that only 11 percent of physicians follow or

exceed the ACS guidelines with all patients. In a

study in which physician screening practices were

compared with those expected based upon published guidelines, less than 10 percent of expected

mammograms, given the age distribution of

women seen in the outpatient clinic, were actually performed (322). Much of the disagreement

with ACS recommendations stems from physician

concerns over the exposure to x-rays associated

with the procedure (5). Utilization may also be

depressed due to the cost of the procedure. Mammography is relatively expensive and requires

interpretation by a physician trained in radiology.

None of the widely available cancer screening

methods is being directly used by insurers. These

include tests for colorectal cancer, uterine/cervical cancer, and breast cancer. This may be explained by the tests’ poor predictive values and

ease-of-use, cost, and acceptability to the individual screened. Furthermore, as these screening tests

are not widely used in medical practice, insurers

are unlikely to obtain information regarding cancer screening test results when an attending physician is asked to document the applicant’s medical history.

In contrast to the examples given above, despite the fact that there is no direct evidence that

screening for lung cancer through chest x-rays decreases lung cancer mortality, chest x-rays continue to be widely used. Contrary to ACS guidelines, many physicians continue to conduct annual

chest x-ray examinations on their patients who

smoke. This may be explained by the fact that

x-rays are a useful technique to detect lung cancers

(as well as other diseases). Once detected, however, there are few effective treatments. This raises

an important issue in screening. When screening

tests are evaluated for their use by ACS and other

professional groups, the focus is on the ability of
145

Figure 4-12.— Fecal Occult Blood Screeninga

1,000 Asymptomatic persons age

50 or older

I I

20-60 940-980

test positive on test negative on

screen screenb

Diagnostic evaluations

(flexible signoidoscopy or

full colonoscopy)

EaAs sume s protocol for stool sampling is followed.

%he American Cancer Society recommends flexible sigmoidoscopy as a complementary screening procedure If conducted on those testing negative for

blood in the stool (to 60 cm), 9°/0 would be diagnosed with polyps and 10/. with

cancer

cApproximately 750/0 of these would be colonic polyps and 259/o cancer

SOURCE: Office of Technology Assessment, 1988

the screening test to reduce mortality. In order

to achieve significant mortality reductions, the

cancer must be detected at a stage in which effective therapy is possible. From the point of view

of those wishing to identify latent disease, with

the intent of excluding individuals from insurance

or employment, tests that are effective in detecting cancers, such as chest x-rays, may be useful.

Similarly, tumor marker assays have been used

to detect cancers but usually identify them at an

advanced stage, when they are not amenable to

treatment. Consequently, tumor markers are

limited in their applications. They are used to

monitor cancer therapy, to classify and stage

tumors, and, in some cases, to provide prognostic information (65).

Available marker assays often fail to distinguish

nonmalignant from malignant disease. As the

prevalence of nonmalignant disease greatly exceeds that of malignant disease, these tests are not

very predictive when used as screening tests. Sensitivity may be high for advanced cancer but is

usually less than 50 percent for early or localized

cancer. For example, the carcinoembryonic antigen (CEA) test, the most widely used tumor

marker available, is positive in more than 80 percent of stages C and D colon cancers (advanced

stages), but is positive in less than 40 percent of

stage A (early stage) colon cancers. First identified as a tumor marker in 1965, CEA is now

known to be associated with colon, lung, breast,

and pancreatic cancers. However, CEA may also

be elevated in the presence of nonmalignant diseases such as hepatitis, ulcerative colitis, gastric

ulcer, and renal disease. In addition, other factors such as age or cigarette smoking maybe associated with CEA elevations. When the test is applied to an asymptomatic population to detect

cancer, positive tests are poorly predictive—in a

population screening study of the CEA test, only

12 percent of positive tests represented CEAassociated cancers (55). Radioimmunoassay, enzyme immunoassay, and monoclinal antibodybased methods for measuring CEA are commercially available. Although test manufacturers do

not recommend tumor marker assays for screening use, at least one life insurance underwriting

publication has suggested that the CEA assay

could be adapted and used to screen insurance applicants (103). However, because tumor markers

such as CEA have not been used for screening purposes within the general medical community, they

have not been used by health insurers to screen

applicants.

Future Prospects for Cancer Screening

There have been reports of tests that may be

more widely applied as screening tools for cancer. One such test is based on differences found

between the lipid moieties of lipoprotein particles

found in the plasma of patients with cancer (called

oncolipids) as compared to those without cancer

(92, 328). The differences, which may represent

some type of host response to malignancy, can

be detected using magnetic resonance imaging

(MRI) (previously referred to as nuclear magnetic

resonance (NMR) spectroscopy). Patients with

cancers at a range of sites (breast, gastrointestinal tract, lymph nodes, lung, bone marrow, central nervous system, and genitourinary tract) have

resonance spectra that differ from both those of

healthy volunteers and those with nonneoplastic

illnesses, such as benign tumors, end-stage renal
146

disease, myocardial infarction, sepsis, and diabetes mellitus. There are, however, two significant sources of false positive results—pregnant

women and men with benign prostatic hyperplasia.

Although preliminary results from over 2,000

samples are promising (220), a prospective study

needs to be conducted to determine how early this

method can detect cancer development, and

whether there is a change in result with therapy,

remission, or relapse. If these studies indicate that

the test may be applicable as a screening tool, the

equipment, although expensive (current cost is

about $500,000 each), will accommodate automated testing. More detailed analyses of the composition of all plasma lipids and the physical structures of the lipoprotein-lipid complex in various

populations will improve the understanding of the

underlying specific abnormality. Further research

may lead to the development of a more direct assay that could be performed in laboratories without expensive MRI facilities (257).

There is a major difference in this MRI-based

test and available tumor markers. Preliminary results indicate that there appears to be no correlation between the MRI spectrum observed and tumor histology or extent of disease. In contrast,

tumor markers, such as CEA antigen levels, are

correlated with type of tumor, histology, or tumor differentiation, as well as with the extent and

sites of metastases (spread of the cancer beyond

its original site). The MRI test, while potentially

useful in screening for latent cancer, may not be

useful in monitoring patient management. Furthermore, as cancer patients who were undergoing treatment or who had completed therapy have

a range of MRI spectrum values that overlap with

both normal persons and untreated cancer patients, any screening program using this technique

would be expected to misclassify individuals with

a recognized and successfully treated cancer.

Radioisotopes bound to antibodies specific for

tumors are also being used to diagnose lung,

breast, colorectal, ovarian, gastric, and pancreatic

cancers. However, this in vivo imaging technique

is not suitable as a screening technology (182).

It is widely recognized that genetics plays a role

in the development of human cancers. For example, 30 to 40 percent of bilateral retinoblastoma

(an eye cancer) cases are attributed to genetic factors. Approximately 10 percent of breast and colon cancers are genetic in origin (228). Guidelines

have been established to help interpret family

pedigrees to evaluate an individual’s susceptibility to malignancy. For example, for those without cancer, the presence in the family of a first

degree relative with cancers occurring in both of

paired organs (not attributable to metastasis),

multicentric tumors, or cancer that has occurred

at an atypical age or at an atypical site, suggest

a genetic predisposition to cancer (228).

Genes have been identified that promote carcinogenesis when they are inappropriately activated (oncogenes) or when they are inappropriately inactivated (anti-oncogenes). For example,

ras oncogenes, when activated by point mutations, appear to precede the development of some

colorectal cancers (27) and adenocarcinoma of the

lung (247). Analysis of the DNA from tumor cells

indicates that anti-oncogenes contribute to the development of retinoblastoma and lung cancer

(158). Diagnostic tests based on recombinant

DNA techniques (e.g., use of oligonucleotide

probes) are proving to be useful in interpreting

tumor pathology. Finding oncogenes in cancerous tissues is helping physicians decide how to

manage patients with breast, lung, and cervical

cancers, and neuroblastoma. Patients with many

copies of an oncogene in their cancerous tissues

appear to have a poorer prognosis than patients

without oncogene amplification. However, this

does not hold true for all tumors. Thus, some high

risk cancer patients may be identified for particularly aggressive anti-cancer treatments. While

presently a useful tool in cancer patient diagnosis and management, applications in screening

have not yet been developed.

Investigators are searching for genetic markers

of susceptibility to cancer. Using blood samples

from individuals whose families are known to be

at risk of developing cancer, one biotechnology

company, with NCI support, is looking for the

presence of DNA markers for defective genes associated with lung, breast, and colon cancer (185).

Another biotechnology company has developed

DNA probes to detect gene rearrangements associated with lymphoid malignancies and is also
147

evaluating a test for human papilloma virus, a virus associated with a high risk of cervial cancer

in women (182).

Testing for Heart Disease

Introduction

The prevalence of coronary heart disease

(CHD, also called coronary artery disease or

CAD) among those between the ages of 25-44 is

estimated at 0.7 percent for males and 0.3 percent for females (8, 293). Figure 4-13 summarizes

the prevalence of heart disease among persons age

25 or older. For males 15-44 years old, heart disease is the second leading cause of hospitalization,

with an estimated 3.3 discharges per 1,000 males

in that age group (295). Approximately 13 percent of heart attacks occur among males between

the ages of 29-44 (8).

CHD age-specific mortality has been declining.

Between 1972 and 1984 it declined by about 34

percent (7). Most of the decline has been attributed

to changes in lifestyle, such as lowering dietary

fat intake and stopping smoking. Improvements

in managing hypertension and medical and surgical interventions for those with CHD have also

contributed to the decline (108). Despite this decline in age-specific mortality, some predict that

deaths, sickness, and costs associated with CHD

could increase by more than 40 percent over the

next quarter century. These increases are, in part,

attributable to demographic trends and to inFigure 4-13.-Estimated Number of Persons

With Coronary Heart Disease, 1985

Sex/age gtoup . -

Male 25-4 4

45-64

65+

Female 25-4 4

45-6 4

6 5 +

277,465

~ 141815 0

1,204,89 8

L I 8 I J

o 500 1000 1500 2000

Number of persons (in thousands)

SOURCE: Office of Technology Assessment, 1988.

creases in costs associated with CHD diagnostic

technologies and treatments (301).

Electrocardiogram (EKG) and

Exercise Stress Testing

The electrocardiogram (EKG) is a record of the

electrical activity of the heart and is used to detect abnormal cardiac rhythm and heart muscle

damage. The EKG is not a sensitive test for

presymptomatic heart disease (93). Exercise EKGs

(also called stress EKGs) are more sensitive than

resting EKGs. However, in a population at low

risk for heart disease, the predictive value is poor.

In a population with a prevalence of coronary disease of 1 percent, a person with a positive exercise EKG would have only a 7 percent chance of

having CHD, while a person with a negative test

would have a 0.3 percent chance of having CHD.

While the relative risk is high (23 times the lower

risk), the absolute risk is low (134). Exercise EKGs

may be useful in evaluating a high-risk person

who wishes to engage in strenuous physical activity, but it is a relatively expensive test that also

carries a small, but definite risk (stress EKGs result in approximately 3 deaths per 10,000 patients).

An alternative to exercise EKGs will soon be

marketed (186). A device called the ischemia scan

uses 30 electrodes to measure approximately 500

heart beats for evaluation. The heart beats are

analyzed by a high-speed array processing microcomputer, and the results indicate the overall

amount of ischemic tissue (insufficient oxygen due

to poor blood supply) present. The test is reportedly able to provide earlier detection of heart

damage than EKGs, because it can test for as little as five grams of ischemic tissue, compared to

an estimated 100 grams of tissue required to provide a positive reading with EKGs. The sensitivity is also reported to be higher than that of EKGs

(9o percent versus 70 percent). Furthermore, the

ischemia scan involves no risk of death, since no

stress testing is involved. The scan’s projected cost

is comparable to that of the EKG (approximately

$200). Additional testing is being conducted to

evaluate the use of the scan among asymptomatic

patients.
148

Coronary Heart Disease Risk Factors

Risk of future CHD disease can be determined

by evaluating CHD risk factors singly or in combination. The three main predictors of CHD other

than age and sex are hypertension, hypercholesterolemia, and cigarette smoking (181).

Hypertension. —Hypertension is a risk factor

for heart attack, renal failure, stroke, and a number of other health problems (93). Blood pressure

measurements are noninvasive, can be performed

by a nonphysician, and are often performed during routine medical visits. According to medical

practice guidelines, blood pressure should be

recorded on any visit to a physician, not just at

periodic health examinations (39). When hypertension is defined as a diastolic pressure greater

than 95 mmHg, 38 percent of black males, 39 percent of black females, 33 percent of white males,

and 25 percent of white females ages 18 to 74 are

affected (figure 4-14). According to prospective

studies, a 45-year-old hypertensive (systolic

BP= 195 mmHg) male without other risk factors

is at about twice the risk for CHD than a similar

but normotensive male (7).

Although hypertension is a known risk factor

for CHD, treatment of hypertension is not clearly

associated with a decline in CHD deaths. One epiFigure 4-14.-Hypertension Prevalence by

Sex and Race, U.S. Adults Age 18-74’

Race\ sex

White mal e

Black mal e

White femal e

Black femal e

1 1 I 1 1 J

o 1 0 20 30 40 50

Percent of race\ Sex grou p

aHype~ensives are defined aa persons with a systolic level 9reater than or Wual

to 140 andlor a diastolic level of greater than or equal to 90 or who report using

anti-hypertensive medication.

SOURCE: American Heart Associaticm, “1988 Heart Facts)” Dallas, TX, 1988.

demiologic study (the Hypertension Detection and

Follow-up Program) showed a 20 percent reduction in CHD deaths with control of hypertension,

but other studies have not shown significant reductions of complications from CHD associated

with hypertension control (93).

Hypercholesterolemia. —Epidemiologic studies

have shown a close relationship between serum

total cholesterol and the subsequent development

of CHD (154). The risk is not confined to those

with extremely high values. Instead, the risk rises

continuously with cholesterol level (273). An expert panel convened by the National Heart, Lung

and Blood Institute has recently issued a report

(3o3) setting a new standard for measuring cholesterol in adults over age 20. Previously, cholesterol levels above either the 90th or 95th percentile for age had been considered abnormal. The

new classification specifies three total cholesterol

ranges, characterizing those with high levels (240

mg/dl or more), borderline levels (200-239 mg/

all), and desirable levels (below 200 mg/dl).

As measurements of cholesterol, lipoproteins,

and the protein components of lipoproteins are

used in the evaluation of CHD risk, a brief

description of cholesterol and its metabolism is

in order.

Cholesterol is essential to the synthesis of cell

membranes, steroid hormones (e.g., testosterone,

estrogen), and is a component of bile (digestive

juices). Cholesterol found in the plasma does not

occur in a free state but is “packaged” and transported in the blood by plasma lipoproteins. Lipoprotein receptors are located on cell surfaces.

Through these receptors, the cell binds to the

lipoprotein containing the transported cholesterol.

The cell then engulfs the lipoprotein (endocytosis), and the cholesterol is “carried” into the cell.

This process, when functioning normally, keeps

the blood concentration of cholesterol low enough

to prevent the buildup of atherosclerotic plaques.

The plasma lipoproteins that carry cholesterol

can be distinguished by their density. The three

most important cholesterol-bearing lipoproteins are

very low density lipoproteins (VLDL), low density lipoproteins (LDL), and high density lipoproteins (HDL). Lipoproteins differ in density because

they consist of different proportions of lipids
749

(triglycerides and cholesterol). The LDL fraction

carries 70 percent of serum cholesterol, compared

to 20 percent carried by HDL (245). The protein

components of lipoproteins are called apolipoproteins (13 major human apolipoproteins, A

through H, have been described (32)). Apolipoprotein A (apo A) is the protein component of

HDL, while apolipoprotein B (apo B) is the major

protein component of LDL. These proteins exist

in various forms. For example, both apo A and

apo B exist primarily in two forms (apo A-I and

A-II; apo B-1OO and B-48). Changes in serum levels

of apo A and apo B correlate with changes in HDL

and LDL, respectively.

Elevations in total serum cholesterol, LDL, and

apo B are risk factors for atherosclerosis and CHD.

Conversely, low levels of HDL and apo A are associated with CHD (43). Evaluations of the relative

utility of plasma levels of cholesterol, triglycerides,

HDL-cholesterol, and apolipoproteins in distinguishing healthy men from those with CHD have

shown that levels of apo A-I, A-II and B are the

best discriminators. In one study, 75 percent of

men who were either normal or had significant

coronary artery disease could be correctly identified using age and apo A-I, apo A-II, and apo B

levels (160).

Much information about CHD risks has been

gleaned from the Framingham prospective study,

in which risk factors and heart disease status have

been monitored for a cohort of initially asymptomatic individuals for more than 20 years. This

study revealed that most cases of CHD arise from

those in the population with only modest elevations of serum cholesterol. The average cholesterol level among those under age 50 who later

developed CHD was only 244 mg/dl (154). Although high (NHLB1 defines abnormally high as

240 mg/dl or more), the fact that 244 mg/dl is

the average indicates that many had levels in the

borderline or normal range.

The strength of the association between cholesterol levels and CHD varies according to age

and the presence of other CHD risk factors. The

association declines with advanced age. In fact,

total cholesterol is no longer predictive of CHD

among men over age 65. The same cholesterol

level may confer a different risk according to the

presence of other risk factors (e.g., smoking,

hypertension, abnormal glucose tolerance test).

The relative risk of CHD developing within 18

years for a 35-year-old male with one risk

factor–high cholesterol (total cholesterol of 335

mg/dl)—as compared to a 35-year-old male with

no risk factors, is 3.9. The relative risk increases

to 23.2 when both cholesterol and blood pressure

(BP) are elevated (systolic BP =195 mmHg) and

to 60.2 when all risk factors are present (i.e., elevated cholesterol, elevated BP, smoking, abnormal glucose tolerance test, left ventricular hypertrophy) (154).

There has been concern over the accuracy of

the estimated 100 million cholesterol tests performed yearly. A 1985 study of the reliability of

cholesterol testing conducted by the College of

American Pathologists (CAP) showed that many

tests being conducted are inaccurate. As a part

of their evaluation, about 5000 of the nation’s

top laboratories were sent identical samples.

Nearly half of the results were, according to experts, unacceptable (26). In response to these

problems, CAP has recently made available “certified reference materials” in the form of freezedried human blood serum. The freeze-dried samples can be reconstituted and tested along with

other samples. These reference materials will help

to ensure that instrumentation is properly calibrated. CAP also conducts a laboratory proficiency survey program on a quarterly basis (5o).

To achieve accuracy and reliability in cholesterol testing, a NIH panel (Laboratory Standardization Panel) has recommended that uniform

cholesterol cutoff points be adopted to identify

adults at high risk for CHD and that cholesterol

measurements be standardized and that deviations

from true cholesterol values not exceed 5 percent

(within 5 years the deviation should not exceed

3 percent) (319).

Automated laboratory desk-top analyzers hold

promise in facilitating mass-screening efforts.

These new analyzers require only a small amount

of blood per test and are inexpensive (less than

$3 per screen) (112). Eleven lipid research clinics

have evaluated a rapid, desk-top analyzer. The

assay was applied to nearly 13,000 people at

schools, work sites, shopping malls, and other
150

locations. The analyzer determines cholesterol

levels within 3 minutes, giving results that vary

about 1 to 4 percent from rigorous, standardized

laboratory methods (78). Despite these favorable

results, there is concern that results may not be

accurate if machines are not maintained, as may

be the case in nonmedical settings. The NIH Laboratory Standardization Panel has not recommended the use of portable chemistry analyzers

to measure cholesterol, arguing that their accuracy

has not been thoroughly evaluated and that staff

are inadequately trained to use them.

Although widespread screening is now being

encouraged by the NIH National Cholesterol Education Program, physicians appear to be reluctant to participate (263). This may in part be explained by some uncertainty regarding the

beneficial effects of lowering cholesterol levels.

Hypercholesterolemia is a recognized risk factor

for CHD, and dietary and drug-induced reductions in serum cholesterol have been associated

with fewer new cases of CHD among asymptomatic men with high levels (225). The Lipid Research Clinics Coronary Primary Prevention

Trial, for example, showed that lowering LDLcholesterol by 12.6 percent with medications was

associated with a 19 percent reduction in CHD.

However, in all of the studies, the decrease in

CHD was offset by an increase in non-cardiovascular mortality, and in several of the studies, there

were no differences in total morta]ity (225).

With continued medical education, physician

screening practices may change. According to a

1986 national survey of physicians, 64 percent of

physicians thought that reducing high blood cholesterol levels would have a large effect on heart

disease, up considerably from 39 percent in 1983

(261). There is evidence that more individuals are

having their cholesterol measured. According to

a national survey, 46 percent of adults reported

that they had their cholesterol level checked in

1986, compared to 35 percent in 1983 (262).

When diet and exercise are ineffective in lowering cholesterol, medication may be effective. In

clinical studies, a recently approved drug (lovastatin) reduced total cholesterol by 18 to 34 percent.

The drug is the first of a new class of products

that inhibit the enzyme regulating the production

of cholesterol (10). Other classes of available

cholesterol-lowering medications include bile acid

sequestering resins, nicotinic acid, and fibric acid

compounds.

While an interaction of environmental and

genetic factors is known to contribute to the development of atherosclerosis, an estimated 5 to

10 percent of the population is strongly genetically predisposed to the development of atherosclerosis, while another 5 to 10 percent is strongly

genetically resistant. For the remaining 80 to 90

percent of individuals, both genetic and environmental factors determine who develops atherosclerosis (130).

Familial hypercholesterolemia (FH) is an autosomal dominant inherited disease (i.e., the offspring of affected individuals have a so percent

chance of inheriting the FH gene) and occurs with

a frequency of about 1 in 500 (33). FH is caused

by inherited defects in the gene encoding for the

LDL receptor. These defects (at least 12 different

mutations have been identified) disrupt the normal control of cholesterol metabolism (135). LDL

is very elevated in those with FH and results in

premature atherosclerosis (21). For those with one

of the defective genes, myocardial infarction frequently occurs by age 30 to 40, and death usually occurs before age 60 (33). Treatment for FH

is available, but it is necessary to institute it early

to prevent the vascular complications of the disease. Examining those with a family history of

early CHD is worthwhile. In fact, the American

Heart Association (AHA) recommends that physicians contact first-degree relatives of all patients

who have developed any clinical features of CHD

under the age of about so (7) . However, this will

not have a large impact on overall incidence.

Among those under age 60 who suffer myocardial

infarctions, only about 5 percent represent FH,

and approximately 10 to 20 percent of those with

one defective gene do not have myocardial infarctions until they are 80 to 90 years old, despite pronounced hypercholesterolemia from birth (33) .

Calculation of Risk Profiles.—In terms of recommended CHD screening practices, physicians

have generally been advised to screen for and reduce risk factors, including tobacco use, elevated

serum cholesterol, and hypertension. Routine
151

EKGs are not indicated as a screening test (93).

The Canadian Task Force on the Periodic Health

Exam states that no screening is recommended for

CHD, although screening for hypertension is recommended for other reasons.

Based on the longitudinal Framingham Study,

estimates of individual risks for heart disease have

been calculated according to demographic, behavioral, and health characteristics. Physicians

can apply the results of the Framingham Study

to their evaluation of individual asymptomatic

adult patients. Risk scores are calculated based

on a patient’s age, sex, systolic blood pressure,

serum cholesterol, presence of left ventricular

hypertrophy (as determined by EKG), smoking

status, and presence of sugar in the urine (154).

Figure 4-15 summarizes relative risks when

cigarettes, high cholesterol, and high blood pressure are present. While useful, these calculations

will identify many who will develop heart disease

as low risk, and predict others to be at high risk

who will remain disease-free. In fact, only about

half the risk of CHD can be accounted for by

known risk factors. For example, while both

hypertension and hypercholesterolemia are recognized risk factors for CHD, two-thirds of

healthy adult men ages 40-5s who are above the

80th centile for elevated cholesterol levels and

blood pressure will remain well over during the

Figure 4-15.-The Danger of Heart Attack

Increases With the Number of

Risk Factors Present

Risk factor a

Non e

Clgaret tes

Cigarettes

and cholesterol

Cigarettes,

cholesterol, and 3 8 4

high blood pressure , # I ,

0 100 200 300 400 500

Risk (average = 100)

aThe dangers of hearl attack increase with the number of riak factors Present.

For purposes of Illustration, this chart uses an abnormal blood pressure level

of 1S0 systolic and a cholesterol level of 310 in a 45 year old man.

SOURCE: American Heart Association, “19S7 Heart Facts,” Dallas, TX, 19S7.

subsequent 25 years (235). Therefore, although

the presence of these risk factors raises one’s relative risk, the absolute risk remains low.

DNA-based Tests for Heart Disease. -Analyses

of associations between genetic variations (polymorphisms) and the occurrence of cardiovascular disease are one of the promising areas of research relating to the development of predictive

tests for heart disease. Currently, disease risk

assessment includes measurement of risk factors

such as elevations of plasma lipids and blood pressure. Genetic tests may further refine risk assessment and can be applied early in life before signs

of disease become apparent. The development of

DNA predictive tests for non-infectious disorders,

however, is in its infancy, and many hurdles must

be overcome before they become a part of routine care. To date, several associations have been

documented between specific genetic polymorphisms and disease. These initial studies will need

to be replicated and prospective studies conducted

before predictive tests will have clinical utility.

Genetic polymorphisms in the region of the

three apolipoprotein genes (apolipoproteins A-I,

A-IV, and C-III) clustered on chromosome 11

have been associated with CHD and lipoprotein

abnormalities (130). Apolipoprotein A-I is the

principal protein constituent of HDL-cholesterol

and may promote removal of cholesterol from the

arterial wall. An HDL-cholesterol level below the

IOth percentile for age and sex has been observed

in 60 percent of patients with CHD under age 60

(226).

A restriction fragment length polymorphism

(RFLP) (see section on genetic tests for a description of RFLPs) flanking the apo A-1 gene has been

used to study the association of early CHD with

specific genetic variants. In one study, a 3.3 kb

(kilobase) band appeared in 4.1 percent of randomly selected control subjects and 3.3 percent

of 30 subjects with no angiographic evidence of

CHD. In contrast, 32 percent of 88 patients with

severe CHD before the age of 60 had the 3.3 kb

band. The authors concluded that the relative risk

of CHD associated with the presence of the 3.3-

kb band is at least 10 (226). To put this relative

risk in perspective, the relative risk of CHD developing within 18 years for a 35-year-old male
152

with only high cholesterol (total cholesterol of

335) as a risk factor is estimated to be 3.9 (154).

Although significant associations between the

presence of genetic variation and disease and/or

lipid abnormalities have been identified in some

studies, these have not been predictive of disease

in all studies. This is illustrated by looking at recent work relating to the association of DNA

polymorphisms within the coding sequence of the

apo B gene (located on chromosome 2) with lipid

abnormalities (164) and myocardial infarction

(MI) (131). As discussed earlier, high plasma apo

B levels (the protein associated with LDL) are

associated with an increased prevalence of

atherosclerosis. Some investigators have found

specific RFLPs associated with altered plasma LDL

cholesterol levels. In one study, subjects with a

specific apo B gene RFLP had triglyceride, cholesterol, and apo B levels of 36, 8, and 10 percent, respectively, higher than those without the

restriction site (164). However, the presence of the

restriction site is common. In the study group of

83 males ages 40 to 64 (enrolled in a prospective

heart disease study), 60 (72 percent) had the allele (Xl) associated with higher plasma lipid levels.

Furthermore, despite the observed differences in

plasma lipids, the 95 percent confidence limits

associated with the mean levels of cholesterol and

triglycerides for each group overlapped (table 4-

11), indicating that there was no statistically significant difference between the groups. Given the

frequency of the Xl allele and the lack of a strong

association between its presence and altered lipid

levels, it does not appear as a likely disease

marker.

Other investigators have studied this same polymorphism of the apo B gene and found it to be

associated with MI but not with altered levels of

LDL-cholesterol or apo B (131). When cases with

MIs were compared with matched controls, there

were significant differences between the groups

with and without the XbaI restriction site. Myocardial infarction cases were more likely to have

the 8.6 fragment (designated as X2 above) than

controls (88 percent versus 74 percent). As these

investigators did not find significant differences

between the allele associated with the 8.6 fragment and LDL-cholesterol or apo B levels, they

postulate that regions of the apolipoprotein B gene

other than the LDL receptor binding region represent independent risk factors for MI (131).

In addition to the XbaI allele, these investigators found two other alleles that were more common among MI patients. However, none of the

alleles were very predictive of MI (odds of disease, given the presence of associated markers,

were less than 1.8). As the investigators point out,

however, finding differences larger than these

would have been surprising, given the complexity of the atherosclerotic process. A very large

difference in allele frequency between cases and

controls would imply that variation at one particular genetic locus is associated with the development of MI in a large fraction of cases, and this

is unlikely. Further studies in which cases are

selected for a clinically defined subset of persons

experiencing an MI may show a stronger association. In addition, prospective studies will need to

be undertaken to evaluate the predictive value of

the presence of these genetic variants. It is unlikely

Table 4-il.—Serum Cholesterol and Lipid Concentrations in 83 Subjects by

RFLP Genotype (Xbal Restriction Endonuclease)

Genotype a

Xlx l X1X2 x2x2

(n=27) (n=33) (n =23)

Cholesterol (mmoI/l)b . . . . . . . 5.14 (3.89-6.80) 5.19 (3.73-7.23) 4.79 (3.75-6.12)

Triglyceride (mmol/l)b . . . . . . . 1.60 (0.67-3.84) 1.59 (0.46-5.60) 1.17 (0.46-2.96)

Apo B (mg/dI)c . . . . . . . . . . . . . 85.1 +/–29.6 86.2 +/–51.4 76.7 +/–35.4

%enotype X1X1 associated with one 5.0 kb fragment.

Genotype X1X2 associated with two fragments, 5.0 kb18.6 kb.

Genotype X2X2 msociated with ona 8.6 kb fragment.

bLog data analyzed; geometric mean and approximate %Vo range is given.

cMean pIus or minus the standard dSviatiOn.

SOURCE: Office of Technology Assessment, adapted from A. Law, L.M. Powell, H. Brunt, et al., “Common DNA Polymorphism

Within Coding Sequence of Apdipoprotein B Gene Associated With Altered Lipid Levels,” Lancet 1(8493):1301-1303,

June 7, 1986.
153

that DNA markers will replace the need for determining quantitative plasma lipoprotein or

apolipoprotein levels. Instead, DNA markers will

probably be used with plasma lipoprotein and

apolipoprotein levels to enhance the ability to diagnose susceptibility to develop atherosclerosis

(130).

Testing for Alcoholism

Alcoholism affects an estimated 10 million

Americans. Among males, the prevalence of alcohol abuse or dependence is estimated to be between 8 and 10 percent and among women, between 1 and 2 percent (241). Alcoholism, the

result of tolerance and physical dependence on alcohol following long-term use, was recognized as

a disease in 1956 (122). The health consequences

of alcoholism may include liver disease, nutritional deficiency, brain dysfunction, and an increased susceptibility to a number of other chronic

disorders, such as diabetes and heart disease. Furthermore, motor vehicle accidents, industrial accidents, and family violence occur in association

with alcohol use, in part as a consequence of

alcohol-related sensory-motor and cognitive impairment. With such wide-ranging physiologic effects it is not surprising that alcohol is estimated

to play a role in approximately 10 percent of all

deaths in the United States (73).

Several methods have been employed to improve the clinician’s ability to recognize alcoholism, because alcoholism is often not diagnosed

during physician-patient encounters. These methods include alcoholism questionnaires, biological

markers of alcohol consumption, and tests to detect the early effects of alcohol use. Future methods may include markers of vulnerability to alcoholism (e.g., genetic predisposition) and

predictors of who among those who drink will

develop serious health consequences of alcohol

use (e.g., cirrhosis of the liver) (240).

The two most widely used questionnaires are

the CAGE questionnaire (an acronym derived

from four questions asked) (Box 4-B) and the

Michigan Alcoholism Screening Test (MAST).

The MAST questionnaire contains 24 yes-no items

regarding drinking behavior and problems associated with excessive drinking. In contrast to the

Box 4-B.—CAGE Alcoholism Questionnaire

The CAGE Questionnaire:

1, Have you ever felt you ought to Cut down

on your drinking?

2. Have people Annoyed you by criticizing

your drinking?

3. Have you ever felt bad or Guilty about

your drinking?

4. Have you ever had a drink first thing in the

morning to steady your nerves or get rid of a

hangover (Eye opener)?

SOURCE: Hays, J.T. and Spickard, W. A., “Alcoholism: Early Diagnosis and Intervention, ” J. Gen. Intern. Med., 2:

420-427, November/December 1987,

CAGE questionnaire, when alcoholism is detected, MAST provides some information about

the severity of the problem. As screening devices,

the two questionnaires are comparable in accuracy. When evaluated in outpatient settings

their sensitivity ranges from 55 to 97 percent,

while specificity ranges from 79 to 96 percent

(57,122).

Laboratory indicators of alcohol consumption

include the blood alcohol concentration (BAC)

and elevated levels of the liver enzymes gammaglutamyl transpeptidase and glutamic-oxaloacetic

transaminase. BAC may be the most under-used

biochemical test in screening for alcoholism (162).

The level of alcohol in the blood may indicate high

alcohol consumption and provide evidence of tolerance to alcohol. However, recent consumption

may not be detected, because alcohol is usually

cleared from the system within 24 hours (241).

Serum levels of gamma-glutamyl transpeptidase

(SGGT) are not accurate indicators of alcohol use,

as there is little correlation between alcohol intake and levels of SGGT. Among known groups

of alcoholics, less than one-third have elevated

SGGT levels. Serum levels of glutamic-oxaloacetic

transaminase (SGOT) are even less sensitive indicators, because elevation in SGOT occurs only

with more severe liver damage. Taken singly,

these tests are not accurate predictors of alcoholism, but some investigators have analyzed

combinations of tests and found them useful. One

group of investigators has used statistical tech-
154

niques (quadratic discriminate analysis) to interpret the findings of a battery of 25 commonly ordered laboratory tests (complete blood count and

SMA-18) to identify alcoholics. This technique has

successfully distinguished between those with

biopsy-verified alcohol and nonalcoholic liver disease (252). However, this statistical technique has

not been evaluated for its ability to identify those

with preclinical or early-stage alcoholism.

One potentially promising method to assess alcohol consumption relies on the finding that alcohol modifies hemoglobin. Hemoglobin-carrying

red blood cells live for about 120 days and can

be sorted by age (110). By studying alcoholmodified hemoglobin in age-stratified red blood

cells, it may be possible to assess the nature and

pattern of alcohol use over the previous threemonth period (256).

Early physical signs and symptoms of alcoholism may include: gastrointestinal (GI) problems (e.g., early morning vomiting, chronic diarrhea, gastritis, GI bleeding); hypertension or

arrhythmias and palpitations in a patient without known heart disease; sleep disturbances; and

sexual dysfunction (122).

naires as alcoholism screening tools. In almost all

cases, both the CAGE and the MAST questionnaires have been shown to be superior to any of

the laboratory markers used to identify alcoholics

(122). Furthermore, the CAGE questionnaire has

been shown to be an effective tool for detecting

both alcohol-dependent and alcohol-abusing patients (34).

Recent preliminary research on another biologic-marker for alcoholism shows promise (inhibition of monoamine oxidase by ethanol and

stimulation of platelet adenylate cyclase activity)

(281). These markers correctly categorized 75 percent of alcoholics and 73 percent of nonalcoholic

controls. Furthermore, the tests were able to detect abnormalities in alcoholics who had abstained

from alcohol for as long as 23 days. If this biologic marker is a measure of the underlying basis

of alcoholism (there is evidence of genetic susceptibility to alcoholism) rather than a measure of

the effects of alcohol consumption, primary prevention would become possible, because susceptible individuals could be identified and counseled

before they began drinking. Further research will

be necessary to clarify whether this marker proves

to be useful.

Many studies have compared the relative effectiveness of laboratory indicators versus questionSELF-TESTING/HOME DIAGNOSTIC PRODUCTS

The Availability of Home Diagnostic

Products

Introduction

There are now approximately 60 do-it-yourself

kits available to detect a variety of conditions,

ranging from pregnancy and ovulation to blood

in the stool. These products have been popularized through books and journals. One such book

describes how to correctly obtain a urine and

blood sample at home and how to conduct and

interpret more than 160 screening tests, including tests for diabetes, hypertension, sickle cell disease/trait, gonorrhea, and alcoholism. The

authors do not suggest home medical testing as

an alternative to physician-ordered testing but

rather as an adjunct to it (234).

Self-administered tests may be valuable in identifying signs of latent disease. Asymptomatic individuals can test themselves for hypertension and

colon and breast cancer using over-the-counter

(OTC) testing products. Prompt medical attention at an early stage of disease may prevent or

ameliorate the course of the disease. Those with

symptoms of illness may screen themselves for

strep throat infections, urinary tract infections,

and some kinds of sexually transmitted disease.

The largest market for home testing has been

in the area of therapeutic monitoring. Diabetics
155

monitor their insulin control through urine and

blood glucose tests, and some patients with heart

disease monitor drug levels. Market forecasters

predict substantial growth in the home testing

market (table 4-12). This may be attributed in part

to the aging of the American public. By the year

2000, an estimated 13 percent of the population

will be aged 65 or older (292). Given the frequency

of those 65 or older who have at least one chronic

condition, these products, especially those used

to monitor therapeutic control, may be widely

used.

The number of home testing products has increased largely as a result of technological advances that have simplified tests. For example, accurate, easy-to-use, enzyme-linked immunoassay

have shifted testing away from clinical labs to

physicians’ offices. Many of the tests now available to the consumer are the same as those used

by physicians (95).

While some argue that home testing may facilitate early treatment and therefore better health

outcomes, others are concerned that consumers

will misuse or misinterpret test results and delay

or not seek needed medical care. There is also concern that the widespread use of tests with inherent false positive results may lead to unnecessary

physician visits and expensive follow-up evaluations. While physicians believe that patient selfdiagnosis is on the rise, their opinion on self testing is divided. Physicians favor urine glucose/ketone, blood glucose, and occult fecal blood testing, but are generally opposed to self-diagnosis

of urinary tract infections, sexually-transmitted

diseases and breast cancer (via thermography)

(23).

An extension of home testing is the development of self-service laboratories, where individuals may order a variety of clinical tests without

the participation of a physician. For example, a

California-based, private laboratory, offers 36

different tests directly to the public. Included are

tests for early detection of disease/infection (e.g.,

HIV antibody testing), indicators of exposure to

toxic industrial substances, nutritional and allergy

profiles, drug testing, and standard blood and

urine workups (e.g., glucose, cholesterol, and

triglyceride levels). The laboratory is run by a

physician who refers clients to a physician if warranted by the test results (28).

Some laboratories have sold kits in which the

consumer collects a specimen (usually blood by

the fingerstick method) and sends it to the lab for

analysis. Even though the test kit that is sold to

the consumer contains FDA-approved components (e.g., lances, swabs, blood collection tubes)

manufacturers of such kits are required to notify

the FDA prior to selling the kits. Manufacturers

of such kits have withdrawn them from the market and have applied to the FDA for their apTable 4-12.—Summary of Market Research Reports on Home Testing Products

Market researcher/product Year Market value (millions)

Find-SVP

Entire market. . . . . . . . . . . . . . . . . . . . . . .................1986 $668

Fecal occult kits. . . . . . . . . . . . . . . . . . . . . . ............1986 $33

Breast cancer screening kit . . . . . . . . . . . . . . . . . . . . .. ..1986 $ 1

Blood pressure monitoring . . . . . . . . . . . . . . . . . . . . .. ...1983 $69

Packaged Facts

Entire market. . . . . . . . . . . . . . . . . . . . . . .................1987 $515

Biomedical Business International

Entire market. . . . . . . . . . . . . . . . . . . . . . .................1986 $432

Blood glucose test. . . . . . . . . . . . . . . . . . . . . . ..........1986 $205

Blood pressure monitoring . . . . . . . . . . . . . . . . . . . . .. ...1986 $112

Urine glucose . . . . . . . . . . . . . . . . . . . . . ...............1986 $ 19

Fecal occult kits. . . . . . . . . . . . . . . . . . . . . . ............1986 $ 3

Business Communications Co.

Entire market, , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Frost and Sullivan

Entire market. . . . . . . . . . . . . . . . . . . . . . .................1984 $348

Year

1995

1995

1995

1986

1992

1990

1990

1990

1990

1990

1990

1989

Market value (millions)

$2,200

$ 136

$ 7

$ 100

$1,400

$1,200

$ 445

$ 211

$ 15

$ 9

$2,500

$ 736

SOURCE” Office of Technology Assessment, 1988
156

proval. As of early 1988, such

been approved by the FDA.

The Market for Home Tests

test kits have not

Estimates of the market value for home diagnostic products by 1989-1995 vary from $736 mil

lion to $2.5 billion (see table 4-12). The projections vary in part because of differences in what

is considered a home test. Some estimates include

the projected sales of thermometers and “home

care products” such as condoms. Earlier projections that sales of self-testing products would exceed $1 billion by the mid-1980s have not been

realized. Although actively promoted, home pregnancy tests are used by only 7 percent of women

of child-bearing age, and only 9 percent of all

households have blood pressure kits (23). An estimated 20 percent of insulin-dependent diabetics

use blood glucose kits (22). Among the barriers

to market penetration are that many consumers

do not want to know about their disease; rely on

their physicians for tests; are unwilling to pay for

OTC testing products; are intimidated by testing

technology; and lack knowledge of health problems that would enable them to consider selftesting (23). Self-testing products are used by the

better-educated and higher-income consumer (77).

Some of these barriers may be overcome by aggressive marketing. Retail outlets for tests include

drug stores, physician offices, HMOS, nursing

homes, health clubs, and businesses.

Accuracy and Reliability of Home Tests

The major concern regarding home diagnostic

tests is that false negative test results may lead

to a delay in treatment and that false positive test

results may lead to unnecessary follow-up testing and emotional stress. Erroneous results may

occur through test misuse or because of inherent

limitations of the tests themselves.

There are two reporting systems established to

identify problems associated with medical devices,

including home diagnostics. First, health care

practitioners can, on a voluntary basis, report

problems to The Medical Device & Laboratory

Product Problem Reporting Program, which is

administered by the United States Pharmacopoeia

Convention, Inc. and funded by the FDA. The

program is interested in receiving information

about design defects, device malfunctions, improper packaging, questionable sterility, and inadequate labeling or instructions (18).

A second reporting system, the FDA’s Medical Device Reporting (MDR) system, includes

reports of device-related injuries, deaths, and device malfunctions that could lead to injury or

death. Manufacturers are required to report such

experiences to the MDR system. Approximately

1,600 reports of injuries and malfunctions have

been logged with the MDR system for home glucose screens alone (from December, 1984 to June,

1987), mostly due to improper use (63). The FDA

is evaluating the source of the problems, and if

the patient education process is implicated, manufacturers may be required to provide clearer device labeling and less complex training literature

(64).

The FDA, in recognition of potential problems

associated with home test kits, is in the process

of issuing guidelines to the manufacturers of such

products. In the proposed guidelines, FDA suggests that manufacturers demonstrate that home

test kits show “probable health benefits” and that

they can be operated easily. Firms are also advised

to prove that there are benefits of performing the

test at home instead of having the test performed

by health care professionals. Manufacturers will

also be required to document the impact of a false

positive or false negative test result to the user

or to society (e.g., delay in seeking medical care).

Companies will be required to submit data showing that home tests “perform as well as their

professional-use in vitro diagnostic equivalents

. . . [and] should be designed . . . to ensure that

performance will not be appreciably affected by

anticipated variation in user technique” (63). Most

home test kits will be approved by the relatively

short premarket notification process. The currently available FDA-approved HIV tests are

licensed for blood bank and lab usage, but not

for home or in-office use.

Conclusion

Currently, there are few home diagnostic tests

that would lead an insurer to expand their use of

diagnostic testing. However, with improvements
157

in technology, a wider variety of home diagnos- home use will not be available in the near future

tics may be available. These include tests for dis- (see genetic testing section). However, if such tests

ease susceptibility such as HIV infection (see AIDS are available and they are widely used, insurers

section), and colon cancer (improved occult fe- may consider expanding their testing efforts to

cal blood tests). Genetic probe tests suitable for avoid adverse selection.
Appendixes
Appendix A

The Uninsured, Underinsured,

and People With AIDS

Introduction

In 1986, an estimated 13.3 to 15.7 percent of the U.S.

population did not have either private or public health

insurance (tables 1-1 and A-1).1 Furthermore, in 1984

people with inadequate health insurance coverage were

estimated to be between 8 and 26 percent of the under

65-year-old population (87). It is highly likely that a

large number of people with AIDS are underinsured

under some definitions of inadequate health insurance

coverage. Thus, the impact of AIDS on the uninsured

and underinsured populations must be considered in

analyses of options for decreasing the number of people without health insurance (31.0 million to 37.2 million in 1986) and helping those who are underinsured.

Definitions of the terms “uninsured” and “underinsured” have a large influence on the size and characteristics of the populations in question. In the case of

defining the uninsured population, there is general

agreement that the uninsured are people who lack any

form of private or public health insurance. However,

the definition of uninsured becomes complicated if a

time dimension is included. Is the uninsured population comprised only of people who lack health insurance over a period of time (e. g., a year)? Or is the

IThe upper bound of the estimates for the uninsured is used in

this Appendix; i.e., 15.7 percent or 37,180,000 persons, rather than

the lower bound of 13.3 percent or 31,010,000 persons summarized

in table 1-1.

Table A-l .—Geographical Distribution of the

Uninsured: Number and Percentage of Population

(all ages) by Census Division, 1986

Percent of each

Number of region’s population

Division uninsured that is uninsured

New England. . . . . . . . . . 1,348,000 10.7

Middle Atlantic . . . . . . . . 4,712,000 12.8

South Atlantic. . . . . . . . . 6,467,000 16.3

East North Central . . . . . 5,185,000 12.5

East South Central. . . . . 2,827,000 19.1

West North Central . . . . 2,213,000 12.8

West South Central . . . . 5,634,000 21.5

Mountain . . . . . . . . . . . . . 2,315,000 18.1

Pacific . . . . . . . . . . . . . . . 6,478,000 18.5

Total United States . . 37,180,000 15.7

SOURCE: U.S. Department of Commerce, Bureau of the Census, “Current

Population Survey,” unpublished data, March 1986.

uninsured population composed of anyone who has

lacked health insurance during a period of time but

not necessarily during the entire period?

The most widely used estimate of the number of

uninsured has relied on the point-in-time definition.

The reason for this is grounded in pragmatic considerations. Data on the uninsured over the course of a year

come primarily from the National Medical Care Expenditure Survey (NMCES) and the National Medical

Care Utilization and Expenditure Survey (NMCUES).

The NMCES was conducted in 1977, and the NMCUES

was conducted in 1980. Neither of these surveys can

account for the effects of the 1981-82 economic recession and the changes in Medicaid eligibility criteria

since 1980 on the total of uninsured people. In the

years since NMCUES was conducted, the size and

characteristics of the uninsured population have been

estimated primarily from the Health Interview Survey

(HIS) and the March supplement to the Current Population Survey (CPS). 2

Because the CPS and HIS have been used to estimate the size and characteristics of the uninsured in

the mid-1980s, the point-in-time definition of the uninsured is used. However, while the number of people

who are uninsured will change depending on whether

a point-in-time or a longer period of time is used, the

general characteristics of the uninsured population are

not very different for the two definitions. Thus, while

there are pragmatic reasons for choosing the point-intime definition of the uninsured, it does not create a

situation in which the characteristics of the uninsured

will be greatly biased in one way or another.

Defining the underinsured population is somewhat

more complicated than defining the uninsured. Calling something inadequate implies that there is a standard against which it can be judged. In the case of health

‘The Survey of Income and Program Participation (SIPP) was

used in 1986 to estimate the uninsured over a period of time, and

it will probably receive more attention in the future. The SIPP has

had enough attrition from the sample to create problems with developing appropriate weights for the respondents’ answers. The Congressional Budget Office (CBO) developed an alternative weighting scheme in the fall of 1987 that appears to give more satisfactory

estimates of sub-groups in the population compared to the original

weighting scheme. This development should lead to greater use of

SIPP. Research on differences and similarities between the CPS and

SIPP in terms of health insurance coverage is being conducted by

the Census Bureau and by others.

161
162

insurance, the standard seems to be insurance for unlimited hospitalization/surgical benefits and major

medical coverage, with a modest deductible, 20 percent coinsurance payments, a stop loss on out-ofpocket expenditures (i.e., medical expenses not covered by the insurance policy), and high maximum lifetime benefits.

Another standard is an insurance policy with an actuarial value of at least $2,000. By this standard, any

policy that is actuarially worth less would be termed

inadequate. However, at least two other dimensions

other than actuarial value might be included in measuring the adequacy of an insurance policy: 1) the

proportion of a person’s expected medical expenses

that would be covered by the insurance policy, and

2) the proportion of a person’s financial resources that

is spent on out-of-pocket expenses. For example, suppose two people have identical insurance policies. If

one person has large expected medical expenses and

the other person has small expected medical expenses,

their expected out-of-pocket costs may be different,

and the adequacy of their insurance policies may not

be the same. But the person who has fewer or none

of his or her expected medical expenses covered may

have a very high income and could easily afford to

pay out-of-pocket expenses. Thus, a person’s financial resources must also be taken into account in measuring the adequacy of an insurance policy. (Measuring the adequacy of an insurance policy in terms of

out-of-pocket expenses relative to a person’s income

or total financial resources does not take into account

the notion that people should be insured against very

expensive illnesses. Insurance against catastrophic

medical expenditures generally means that the policy

has a limit on out-of-pocket expenses and does not

have limits on total expenditures.)

The only source of data that has been used for estimating the underinsured population has been the

NMCES. Other surveys that have gathered information on health insurance have not been designed to

collect details about the benefits covered by the individuals’ health insurance policies. This detailed information has to be verified with employers and insurance companies, which was done with NMCES. The

NMCES data has been used to show that the number

of people who might be identified as underinsured

varies considerably with the way in which adequacy

of an insurance policy is measured. However, the characteristics of the underinsured generally did not vary

much with the definition used. Nonetheless, three definitions of the underinsured are used in this analysis

(87):

I. a five percent expectation that out-of-pocket expenses for medical care will consume more than

10 percent of family income,

2. a 1 percent expectation that out-of-pocket expenses for medical care will consume more than

10 percent of family income, and

3. the insurance policy does not have a limit (stop

loss) on out-of-pocket expenditures.

The estimates of how many people under age 65 are

underinsured increase from s.1 percent (11 million) under definition 1, to 8.3 percent (18 million) under definition 2, and to 18.3 percent (38 million) under definition 3.3

Characteristics of the

Uninsured Population

The 37.2 million uninsured are disproportionately

located in the five southern and western regions of the

United States (table A-l). With few exceptions, the

States in these regions have stringent eligibility criteria

for Medicaid (particularly low income eligibility ceilings) and a shorter history of large union representation among workers, so health insurance as part of

wage compensation is less prevalent than it is in the

Northeast and Midwest.

Among the uninsured population under 65 years of

age, children (persons less than 18 years of age) represent the largest group and account for a third of all

the uninsured (table A-2). These 12.3 million children

are a fifth of all children in the United States. Twenty3Definition 1 results in fewer underinsured than in definition 2,

because definition 1 defines a “costly illness” to include a somewhat

lower but more likely level of expense than definition 2 and considers the expectation of out-of-pocket expenditures for medical bills

above the 95th (a s percent expectation) rather than the 99th (a I

percent expectation) percentile by risk group. For 4 out of 5 people

out of 100 who exceeded this threshold in definition 1, these bilk

would be much lower than the medical bills of the 1 person in 100

considered in definition 2. When their insurance is measured against

these lower expenditures, fewer people in definition 1 than in definition 2 would exceed the thresholds defining the underinsured.

Table A-2.—Age Distribution of the Uninsured

Population Under the Age of 65, 1986

Percent of each

Number of age group that

Aae uninsured is uninsured

0-17 years . . . . . 12,325,000 (33°/0) 19.6

18-24 years . . . . . 7,912,000 (21 0

/0) 29.2

25-34 years . . . . . 6,880,000 (19°/0) 16.3

35-44 years . . . . . 3,887,000 (11 0!0) 12.0

45-54 years . . . . . 2,856,000 (08°/0) 12.6

55-64 years . . . . . 3,058,000 (08°/0) 13.9

Total. . . . . . . . . 36,898,000 (loo”/o)

aDoes not include2B2,000 persons 65 years or older who are Included in tables

A-1 and A-3.

SOURCE: U.S. Department of Commerce, Bureau of the Census, “Current Population Survey,” unpublished data, March 1986.
163

one percent of the uninsured are young adults 18-24

years of age, and these 7.9 million people represent

almost 30 percent of all 18-24 year olds. The remaining age cohorts include smaller numbers of people

without health insurance and have smaller proportions

of people who lack health insurance.

In terms of family income relative to the poverty

level (which was about $11,000 for a family of four

in 1985), a third of the uninsured have family incomes

below the poverty level (table A-3). (Recall that the

uninsured are persons with no private or public health

insurance, so these 12.3 million people do not meet

the eligibility criteria for Medicaid in the States in

which they live. ) Seventeen percent of the uninsured

have family incomes between 1 and 1.49 times the poverty level, and another 13 percent have family incomes

between 1.5 and 1.99 times the poverty level. Thirtyeight percent of the uninsured have incomes above two

times the poverty level. In terms of the proportions

of each income group without health insurance, the

risk of being uninsured falls dramatically as family income rises. Among people with incomes below the

poverty level, 35 percent are uninsured, while only 7

percent are uninsured among people with incomes

three or more times the poverty level. Thus, income

is a good simple indicator of the likelihood that a person has health insurance.

Nearly three out of five uninsured adults 18-64 years

of age are employed, and 11 percent are unemployed

(table A-4). The rest are in categories considered to

be out of the labor force. Men constitute almost three

out of five employed uninsured adults and almost twothirds of unemployed uninsured adults. Women constitute two-thirds of the uninsured adults who are out

of the labor force. These numbers reflect to some degree the proportions of men in each of the three categories. Men account for 55 percent of all employed

adults and 58 percent of all unemployed adults, but

only 27 percent of all adults who are out of the labor

Table A.3.—The Uninsured by Family Income

Relative to the Poverty Level (all ages), 1986

Percent of each

Number of income group

Poverty level uninsured that is uninsured

Below poverty . ......12,304,000 (33°/0) 35.0

1.0-1.49 x poverty . . . 6,317,000 (17°/0) 27.1

1.5-1.99 x poverty . . . 4,712,000 (13°/0) 20.0

2.0-2.99 x poverty . . . 6,048)000 (17°/0) 12.9

3,0 x poverty or

greater . . . . . . . . . . . 7,799,000 (21 0

/0) 7.2

Total . . . . . . . . . . . . .37.180.000 (101‘/O)a

aExceed9 IOOOA because of rounding.

SOURCE: U.S. Department of Commerce, Bureau of the Census, “Current Population Survey, ” unpublished data, March 19S6,

Table A-4.—Labor Force Status of Uninsured

Adults Ages 18-64, 1986

Percent of each

Number of labor force status

Labor force status uninsured who are uninsured

Employed (full- &

part-time) . . . . . . . .14,533,000 (59”/0) 14.2

Unemployed . . . . . . . 2,591,000 (1 10/0) 32.4

At school . . . . . . . . . 1,520,000 (06°/0) 29.1

Unable to work,

early retirement . . 2,298,000 (09°/0) 22.6

Keeping house . . . . . 3,630,000 (15°/0) 18.4

Total. . . . . . . . . . . .24,572,000 (lOOO

/o)

SOURCE: U.S. Department of Commerce, Bureau of the Census, “Current

Population Survey, ” unpublished data, March 19S6.

force. Fifty-six percent of workers without employment-based group health insurance are 18-34 years of

age, and employed uninsured adults are more likely

to be employed in the service and retail trade sectors

of the U.S. economy (279).

Table A-5 summarizes the relationship between marital status and insurance coverage for adult men. In

1986, 12.6 million men ages 18-64 lacked health insurance. They account for 51.5 percent of all uninsured

adults. Nearly half of these uninsured men had never

been married. Thirty-five percent of the uninsured men

were married and living with their wives, and 9 percent were divorced. Married men living with their

wives had the lowest risk of being uninsured. Only

10 percent of these men were uninsured, compared to

proportions two to three times higher for the other categories.

The fact that a group has a high risk of being uninsured is not alarming unless there are a lot of people

in that group. Thus, the fact that between 23 and 27

percent of divorced, separated, or widowed men are

uninsured is not as alarming as the fact that 30 percent of never married men are uninsured, because there

are relatively few divorced, separated, or widowed

Table A“5.—Marital Status of Uninsured Men,

Ages 18-64, 1986

Percent of each

Number of marital status

Marital status uninsured who are uninsured

Married. . . . . . . . . . 4,437,000 (3570) 10.3

Married, spouse

absent . . . . . . . . 268,000 (02°/0) 37.3

Divorced . . . . . . . . 1,140,000 (09%0) 22.8

Widowed . . . . . . . . 149,000 (01!40) 23.8

Separated . . . . . . . 444,000 (04%0) 27.2

Never married . . . . 6,209,000 (49°/0) 30.5

Total . . . . . . . . . .12,647,000 (loOO/”)”

SOURCE: U.S. Department of Commerce, Bureau of the Census, “Current

Population Survey,” unpublished data, March 19S6.
164

men. These numbers are noteworthy, because men

with AIDS are more likely to be never married.

The number of uninsured adult women in 1986 was

a little less than the number of uninsured adult men

(table A-6). However, the distribution of uninsured

women by marital status is different than that observed

for men. Whereas 49 percent of uninsured men had

never married and 35 percent were married and living with their wives, only a third of the uninsured

women had never been married, and 42 percent were

married and living with their husbands. About a quarter of never married women were uninsured, compared

to 30 percent of their male counterparts. Being divorced, separated, or widowed were more common

among uninsured women than among uninsured men.

However, the risks of being uninsured for divorced,

separated, or widowed women are not very different

from the risks of being uninsured for their male counterparts. The proportion of married women who are

uninsured is also essentially the same as the proportion for married men,

Thus, men and women who have never been married have the highest risks of being uninsured, and men

and women who have been previously married (i.e.,

divorced, separated, or widowed) have lower but still

high risks of being uninsured.

In sum, the 37.2 million uninsured people in the

United States are a heterogeneous group. However,

in terms of what an AIDS epidemic might mean for

the uninsured population, it is noteworthy that a third

of the uninsured are adult men (12.6 million of 37.2

million), of whom about half (6.2 million) have never

been married.

Characteristics of the

Underinsured Population

As stated earlier, under a strict definition of inadequate health insurance, around 11 million people

Table A-6.—Marital Status of Uninsured Women

Ages 18-64, 1986

Percent of each

Number of marital status

Marital status uninsured who are uninsured

Married. . . . . . . . . . 5,066,000 (42Yo) 11.1

M~rr~e$t spouse

192,000 (020/o) 37.7

Divorced : I 1 : : : ~ j 1,503,000 (13?40) 20.3

Widowed . . . . . . . . 736,000 (06%0) 23.4

Separated . . . . . . . 599,000 (050/0) 24.0

Never married . . . . 3,827,000 (32VO) 24.3

Total . . . . . . . . . .11,923,000 (looyo)

SOURCE: U.S. Department of Commerce, Bureau of the Census, “Current

Population Survey,” unpublished data, March 1986.

would have been underinsured in 1986; under a middle definition, 18 million; and under a lenient definition, 38 million. In general, people with nongroup insurance policies are far more likely to be underinsured

by any definition of inadequate insurance than people with group policies (87). Furthermore, because

most people obtain group insurance policies as part

of employment compensation, full-time employees and

their dependents are least likely to be underinsured.

However, a person has to have some private health

insurance to be underinsured, so the proportions of

people with different characteristics who are underinsured to some extent provide a mirror image of where

private health insurance is more common. For example, under the most lenient definition of inadequate

health insurance (i.e., a person does not have a limit

on out-of-pocket expenditures), the Northeast region

of the country has the highest proportion of underinsured, but the Northeast aIso has the highest proportion of people with private health insurance.

Table A-7 contains the proportions of people with

different characteristics who can be described as underinsured by the three definitions of inadequate insurance. What emerges from this table is that the patterns of being underinsured do not differ between the

two definitions that link out-of-pocket expenses with

income. For example, poor and near-poor people have

the highest proportion of underinsured, and the proportions decline as income rises. In contrast, the most

lenient definition of inadequate insurance sometimes

yields a different pattern of proportions of underinsured. By this definition, the poor and near-poor have

the lowest proportion of underinsured, and the proportion rises as income rises through the low and middle

income groups, then falls slightly for the high income

group.

In spite of the different effects resulting from different definitions of the underinsured, in general the risk

of being underinsured rises as a person’s expected outof-pocket expenditures rise, as people grow older, or

as a person’s income falls.

The Links Between AIDS Patients

and the Uninsured and

Underinsured Populations

By the end of 1987, nearly 50,000 cases of AIDS had

been reported to the Centers for Disease Control

(CDC), and nearly 28,000 of these people were reported to have died (56). Clearly, the number of living AIDS patients is small compared to the numbers

of uninsured or underinsured persons. However, the

number of Americans believed to be infected with Human Immunodeficiency Virus (HIV) is estimated to be
165

Table A-7.—Underinsured Persons in the U.S. Population Under Age 65:

Percentage With Inadequate Coverage According to Alternative Definitionsa

Only private and underinsured

Characteristic 1977 population Definition 1 Definition 2 Definition 3

Total b 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189,837,000 5.1 “!0 8.30/o 18.30/o

Employment status of household head

Full-time employee . . . . . . . . . . . . . . . . . . . . . . . . 136,686,000 4.0 6.9 18.0

Part-time employee . . . . . . . . . . . . . . . . . . . . . . . . 8,653,000 7.3 9.2 15.0

Self-employed .

Did not work in

Ages in years

Less than 19 . .

19-24 . . . . . . . . .

25-34 . . . . . . . . .

35-54 . . . . . . . . .

55-64 . . . . . . . . .

Family income

17,359,000 7.4 12.0 25.0

1977” : : : : : : : : : : : : : : : : : : : : : : 17,877,000 8.2 11.0 12.8

. . . . . . . . . . . . . . . . . . . . . . . . . . . 69,014,000 3.4 5.9 17.6

. . . . . . . . . . . . . . . . . . . . . . . . . . . 22,109,000 6.4 9.6 13.5

. . . . . . . . . . . . . . . . . . . . . . . . . . . 32,155,000 4.2 7.4 17.0

. . . . . . . . . . . . . . . . . . . . . . . . . . . 46,354,000 4.0 7.8 20.0

. . . . . . . . . . . . . . . . . . . . . . . . . . . 20,206,000 13.7 17.9 24.6

Poor and near poor. . . . . . . . . . . . . . . . . . . . . . . .

Low . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Middle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

High. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Perceived hea/th status

Excellent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Good . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Poor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Place of residence

SMSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not SMSA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

U.S. census region

Northeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

North central . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

South . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,413,000

27,005,000

75,238,000

62,182,000

89,027,000

71,249,000

16,881,000

4,572,000

131,346,000

58,492,000

39,915,000

55,947,000

60,474,000

33,502,000

15.1

7.7

3.5

1.9

3.9

5.6

8.0

8.1

4.4

6.7

5.3

5.0

5.5

4.5

17.7

12.3

7.1

4.3

6.9

8.8

12.3

11.8

7.4

10.4

9.1

7.3

9.2

7.5

10.1

17.3

20.7

19.3

19.4

17.8

16.3

13.1

18.0

19.1

23.7

17.4

18.6

12.9

aDefinitiOnS of underinsured (adjusted for changes in group rTIajOr medical insurance):

(l) 5 percent expectation of IO percent of family income in out-of-pocket expenses;

(2)1 percent expectation of IO percent of family income in out-of-pocket expenses;

(3) No limit onhosp!tal out-of-pocket expense.

blncludes Wrsons for~hom employment statusof household head and perceived health status are unknown, aswell as all other ethnic/racial groups not shown Separately.

SOURCE:P. Farley, “WhoAret heUnderinsured?” Mi/. Mere. Fnd C1./H/thand Soc. 63(3)476-503, Summer 1985.

U.S. Departmentof Health and Human Services, Public Health Service, National Center for Health Sewices Research, and Health Care Technology Assessment, Health /rrsurance/Emp/oyer Survey.+ UrIited Sfates 1977, unpublished data from the National Medical Care Expenditure Survey (NMCES), Hyattsville,

MD, 1977

276,000to 1,75 million (68). Thus, the potential existsfor a large number of people to have AIDS within

the next 10 years. The medical care expenses that an

AIDS patient can expect to incur before dying place

an AIDS patient at risk for being underinsured by even

the strictest definition of inadequate insurance. Estimates of such expenses are wide-ranging, but seem to

center between $40,000 and $100,000 (121,230,264,

265,271). Moreover, because AIDS frequently causes

its victims to be too weak to work, the disease increases the risk that people will lose their link to being insured.

Thus, several factors provide the basis for worrying about the link between AIDS and the uninsured

and underinsured populations. First, AIDS may cause

people to lose their health insurance, and the costs of

medical care for people with AIDS may cause even

the insured to be underinsured. Second, there may be

large numbers of people who are already infected,

which means that there is a potentially large group of

people who are very likely to incur large medical expenses and be at risk for being underinsured or uninsured sometime within the next decade.

Among the cases of AIDS reported to CDC, 65 percent of adults have been homosexual or bisexual men

without a history of intravenous (IV) drug abuse, 8

percent have been homosexual or bisexual IV drug

abusers, 17 percent have been heterosexual male and

female IV drug abusers, 3 percent had hemophilia or

had received blood transfusions, 4 percent were at84-750 - 88 - 5 : CL 3
166

tributable to heterosexual transmission, and the presumed means of acquiring HIV infection in the remaining 3 percent of adult AIDS cases was unknown.

Among the cases of AIDS in chiIdren, 77 percent were

acquired perinatally (over 70 percent of which were

related to IV drug abuse in the child’s mother or her

sexual partner), 13 percent were associated with transfusions, 5 percent occurred in children with hemophilia, and 5 percent were undetermined (56).

We can probably assume that most of the AIDS patients over the next decade will resemble the current

population with AIDS. To the extent that IV drug

abusers are unlikely to hold steady jobs with health

insurance, the 25 percent of future AIDS victims who

are IV drug abusers are least likely to have health insurance. If they have health insurance, it is more likely

to be Medicaid, because they may qualify under the

Aid to Families with Dependent Children program or

the Supplemental Security Income program. The 4 percent of future AIDS cases who are heterosexuals with

no history of IV drug abuse are likely to be spouses

or lovers of bisexual men or IV drug abusers. If these

heterosexuals have incomes below half the poverty

level and meet the categorical criteria for Medicaid

eligibility (principally, with custody of children or who

are disabled), they are likely to be covered by Medicaid. Otherwise, it is difficult to predict whether they

have health insurance or not. Hemophiliacs and other

recipients of contaminated blood are likely to have

health insurance or be covered by Medicaid or Medicare, because the condition that caused them to receive

transfusions probably made most of them eligible for

coverage if they did not have it before. Furthermore,

because of methods to inactivate HIV in blood clotting factors and screening for HIV among blood donors, it is unlikely that this group of AIDS cases will

grow rapidly in the future. Most of the children with

AIDS acquired it perinatally from their mothers. This

population is of growing concern, because it has the

potential to expand greatly if heterosexual transmission of HIV becomes widespread. Currently, however,

the number of children with AIDS is small, and most

are wards of the State and are usually covered by

Medicaid.

The largest subgroup among AIDS cases, homosexual or bisexual men with no history of IV drug abuse,

is the hardest group to analyze in terms of health insurance coverage. It is difficult to determine whether

homosexual or bisexual men are more likely to be employed in sectors of the economy that are less likely

to provide health insurance as part of the wage compensation package. If such men are disproportionately

employed in service sector or retail trade jobs, then

they are more at risk for being uninsured.

Assuming that the vast majority of homosexual men

never marry, the fact that half of the uninsured men

have never been married, together with the fact that

30 percent of never married men lack health insurance,

means that homosexual men are at risk for not having health insurance. (A large proportion of men who

abuse IV drugs are also likely to never marry and are

at risk for not having health insurance. ) Thus, the connections between age, insurance coverage, and

whether or not a man has ever been married must be

looked at closely. Table A-8 presents further details

about the 72 million men in the United States in terms

of the proportions of men of different ages who are

uninsured, never married, or both never married and

uninsured.

Fifty-eight percent of never married, uninsured men

are 18-24 years of age. Another 31 percent are 25-34

years of age. Eighty-one percent of men 18-24 years

of age have never married, and 32 percent of men 25-

34 years of age have never married. Thus, while 89

percent of all uninsured, never married men are between the ages of 18-34, this age cohort also has high

proportions of never married men. Consequently,

marital status alone (i. e., never married) cannot be

used as a proxy for homosexuality or bisexuality.

The Kinsey Institute has estimated that approximately 10 percent of the U.S. population is homosexual. The CDC estimates that there are 2.5 million homosexual men and another 2.5-7.5 million bisexual

men and men with very infrequent homosexual contacts. Considering both these estimates, perhaps between 5 and 10 percent of men in the United States

are homosexual or bisexual. These percentages approximate the percent of never married men age 35 and

over in table A-8, which range from 6-10 percent.

Some insurance companies have allegedly used similar characteristics in some parts of the United States—

for example unmarried men over the age of 35—as a

proxy for homosexuality in attempting to determine

an applicant’s sexual orientation. However, the similarity between the percentages of never married men

age 35 and over in table A-8 and estimates of the total

homosexual and bisexual male population in the

United States is more likely due to happenstance. For

example, there is probably not a one-to-one correlation between marital state and sexual orientation, particularly for bisexual men. Nevertheless, if we extrapolate from these data, there might be between 1 million

and 1.8 million uninsured homosexual men between

18-64 years of age. This estimate is arrived at in the

following manner. If we disregard the 33 percent of

never married men under the age of 25, approximately

25 percent of never married men ages 25-64 are uninsured (table A-8). If we assume that 6 to 10 percent
167

Table A-8.—Men 18-64 Years of Age: Percent Uninsured, Percent Never Married, Percent of Never Married Men

Who Are Also Uninsured, and Distribution of All Never Married Uninsured Men by Age Cohort, 1986

Never married,

Uninsured in Never married men uninsured men

age cohort in age cohort in age cohort Percent of all

all men in all men in all never married never married

Age cohort Number of men age cohort age cohort men in age cohort uninsured men

18-24 . . . . . . . . . . . 13,657,000 320/o 81 ‘/o 33%0 580/o

25-34 . . . . . . . . . . . 20,956,000 19 32 29 31

35-44 . . . . . . . . . . . 15,955,000 12 10 22 6

45-54 . . . . . . . . . . . 10,970,000 12 6 26 3

55-64 . . . . . . . . . . . 10,350,000 12 6 23 2

Total . . . . . . . . . 71,888,000 17.60/o 28.30/o 30.5 ’/0 100’/0

SOURCE U.S. Department of Commerce, 6ureau of the Census, “Current Population Survey,” unpublished data, March 1986.

of men in all age groups are homosexual and that 25

percent of all homosexual men are uninsured, table A-9

provides the estimates of uninsured homosexual men

for each of the age cohorts.

Methods Under Consideration

for Reducing the Number

of the Uninsured

The three major methods currently under consideration for reducing the number of uninsured are:

1.

2.

3.

mandatory employer-provided health insurance

for all employees and their dependents of firms

employing more than a specified minimum number of employees,

expanded Medicaid eligibility to include all people with incomes below some fraction of the poverty level, and

allowing people who are categorically ineligible

for Medicaid but who have incomes below the

poverty level (or some other multiple of the poverty level) to buy into Medicaid on a sliding scale

fee basis,

(The Medicaid options are usually discussed with a

managed care component. ) Many people who can no

longer work (including those with AIDS) now have

the option under the Consolidated Omnibus Budget

Reconciliation Act (COBRA) of 1986 to remain in the

employer-group for health insurance for up to 18

months, as long as they pay the full insurance

premium. 4 For many people with AIDS, 18 months

will cover the time between no longer being able to

‘Under COBRA, non-government and non-religious employers

with more than 20 employees must give ex-employees the option

to remain in the group for health insurance for up to 18 months,

as long as the employees pay the employer’s and the employee’s

shares of the premium, plus no more than another 2 percent of the

total premium.

work and death. However, treatment with the drug

AZT and other therapies may prolong life beyond

these 18 months, and the cost of health insurance may

be more than many people with AIDS can afford to

pay after they cease working.

Mandating employers to provide health insurance

to employees and their dependents would, by some

estimates, cover three-quarters of all the uninsured

(i.e., about 28 million people). It is the only option

currently under consideration that would cover such

a large proportion of the uninsured population. For

employed people who are at risk for AIDS, this approach would be particularly important, because it

provides a mechanism for them to obtain health insurance through group policies, which have lower

premium rates than non-group policies.

The employer-provided health insurance proposal

that has received the most attention is Senate Bill 1265.

This bill would require benefits for prenatal care and

well-baby care, and would place the limit on out-ofpocket expenses at $3,000 or 10 percent of annual income. The out-of-pocket limitation is what would

most assist employed people who develop AIDS (as

well as people with other illnesses and chronic conditions). A catastrophic type of health insurance policy

that would limit out-of-pocket expenses to a proportion of a person’s annual income would provide similar assistance.

The second major method under consideration for

reducing the number of uninsured is to expand Medicaid eligibility to all people below some fraction of

the poverty level. This option in particular would help

the very poor in States that currently have low income

eligibility ceilings. It would also help IV drug abusers

and homosexual men with AIDS who do not meet current categorical eligibility criteria for Medicaid, (e. g.,

custody of children) but who are below the poverty

level.

The third major method under consideration for reducing the number of uninsured is to allow people who
168

Table A-9.-Estimates of the Number of Uninsured Homosexual Men in Each Age Cohort

Estimate of uninsured Estimate of uninsured

homosexual men, assuming homosexual men, assuming

Aae cohort Total number of men G O I

O are hOfnOSeXUal 10°/0 are homosexual

18-24 . . . . . . . . . . . . . . . . . 13.657.000 205,000 342,000

25-34 . . . . . . . . . . . . . . . . . 20:956:000 314;000 524;000

35-44 . . . . . . . . . . . . . . . . . 15,955,000 239,000 399,000

45-54 . . . . . . . . . . . . . . . . . 10,970,000 165,000 274,000

55-64 . . . . . . . . . . . . . . . . . 10,350,000 155,000 259,000

Total . . . . . . . . . . . . . . . . . 71,888,000 1,078,000 1,798,000

SOURCE: K. Swartz, “What is the Overlap Between the Uninsured, Underinsured, and People With AIDS?” contract paper in the Urban Institute prepared for the Office

of Technology Assessment, U.S. Congress, Washington, DC., 1988.

are categorically ineligible for Medicaid but who have

incomes below some multiple of the poverty level (e.g.,

75 percent or 150 percent of the poverty level) to buy

into Medicaid on a sliding-scale fee basis. The extent

to which this option might reduce the number of uninsured depends on the proportion of the Medicaid

premium that would be subsidized. If only a small fraction of the premium is subsidized, it is unlikely that

many of the uninsured poor will buy into Medicaid.

Other methods for reducing the size of the uninsured

population include pooling risks for small firms, so

that premiums per employee for participating small

firms are lower. The idea of these Multiple Employer

Trusts (METs) is based on the notion that premiums

can be lowered for small employers who band together

and act as a larger employer. METs have not lived up

to expectations along this line, but it is not clear why

this is the case. Another method of creating larger risk

pools for small firms is to create statewide pools, such

as those created by the Federal unemployment insurance tax. Such proposals will lower premiums for employees in small firms but are unlikely to affect many

people.

Similarly, risk pools for uninsurable people have

been introduced in 15 States for people at high risk

for expensive health care services (see app. B). This

approach will not greatly reduce the number of uninsured nor assist people with AIDS who do not have

large financial resources.
Appendix B

Overview of State High Risk Insurance

Pools and Catastrophic Health

Insurance Plans

Health Insurance Pools

Roughly 37 million Americans under the age of 65

do not have adequate health insurance. This problem

affects different groups of people for varying reasons.

Many people find themselves without health insurance

because their employers do not offer coverage, their

health insurance plans drop them when they become

unemployed, they lose dependent coverage through

a spouse, or they fall between the cracks of government plans such as Medicaid and Medicare due to eligibility limitations. Some are offered only partial coverage and are not able to obtain supplemental policies

to make their health coverage complete, while still

others are plagued with pre-existing, long-term illnesses and are, therefore, categorized as “high-risk”

individuals and considered virtually uninsurable by

commercial insurance plans.

Currently in Federal and State legislatures there is

action to establish health insurance pools for underinsured and uninsurable persons. These programs would

provide an opportunity for the hard to insure population to purchase health insurance regardless of circumstance or physical condition, although at a rate

considerably higher than those of commercial plans.

While it is important to create these opportunities for

assistance in purchasing health coverage, the pools are

not the solution to the overall problem of insurance

coverage for the uninsured and underinsured. Due to

the high cost of participation in these health insurance

pools, they will not benefit those who cannot afford

to purchase health insurance.

Although the plans vary from State to State, the

basic pattern is that persons who have been turned

down by commercial insurers are eligible for participation. Those receiving government assistance are usually disqualified from participation; ten plans will not

accept Medicaid recipients and six plans will not accept Medicare recipients. Seven of the fifteen States,

however, have a special supplement plan for beneficiaries of Medicare. A choice of deductibles is usually

offered, ranging from $150 to $2,000 with correspondingly differing premiums, and a 20-percent coinsurance

charge required for all covered expenses. For example, in Connecticut a 35-year-old woman pays quarterly premium rates of $310.44 for a policy with a 20-

percent coinsurance and a $1,000 deductible.

Typically, all health insurance companies within the

State organize and elect one company to administer

the plan under regulations established by State law.

Even with high premium rates, the premiums are generally insufficient to cover the costs of the claims. Most

States cover losses by assessing the health insurance

companies in proportion to each company’s share of

the State health insurance market, the companies,

then, deduct these payments from premium and income taxes. Two exceptions are Illinois and Maine

who use general revenue funds and tax hospital patient services revenue, respectively, to cover pool

losses.

A major point of contention regarding this legislation is that increasing numbers of employers are opting to insure their employees through employee benefit programs; that is, they are using self-insured plans

in lieu of operating through a commercial insurance

firm. A group health plan offered by an insurance

company is subject to State regulations, while selfinsured plans, those which are financed and run by

an employer without using an insurance company,

have been determined by the U.S. Supreme Court in

1981 to be exempt from State insurance regulations and

are, instead, governed by the Employee Retirement Income Security Act (ERISA). ERISA establishes Federal

guidelines for employee benefit plans and preempts all

State laws that relate to such plans. Self-insured plans,

then, are subject to almost no regulations, including

State requirements to contribute to the health insurance pool when losses are incurred. Insurance companies claim that this gives employers an incentive to

fund their own plans, thereby avoiding State insurance regulatory requirements as well as escaping mandatory participation in health insurance pools. The insurance industry is willing to implement the health

insurance pool plan and, in fact, supports the idea,

but only if self-insured plans are subject to the same

regulations regarding contributions to the pool association. The insurance industry wants Congress to

amend ERISA so that self-insured plans are incIuded.

Self-insured plans want to maintain the law as it stands

now, arguing that the problem of paying for health

care for uninsured people is not an employer’s concern but rather one for which society should be responsible.

169
170

Legislation has been introduced at the Federal level

that would provide incentives for employers to participate in health insurance pools by mandating certain penalty taxes to be applicable to both self-insured

plans and commercial plans if either fails to comply

with health pool regulations. Senators Dave Durenburger and Donald Reigle are among the leading legislators on this issue, persistently proposing legislation

to promote the establishment of health insurance

pools. Table B-1 provides a brief synopsis of the major legislative attempts of the l00th Congress regarding health insurance pools. As it is early in the legislative session, more proposals are promised to surface

in the foIlowing months. Fifteen States have already

established health insurance pools. The first programs

were established in Connecticut in 1975 and in Minnesota in 1976, followed by Wisconsin and North

Dakota in 1981, then Indiana in 1982 and Florida in

1983; plans in Iowa, Montana, and Tennessee began

operation in 1987 while the plans in Illinois, Washington, New Mexico, Maine, and Oregon plan to be

functioning by 1988. Table B-2 provides a comparison of these plans. Descriptions of each of the State

health insurance plans are provided below. Unless

otherwise indicated, each plan’s benefits include hospital services, professional diagnostic and treatment

services (other than dental), skilled nursing facility

services, home health services, oral surgical services,

prescription drugs, and rental of durable medical

equipment.

Connecticut

The Connecticut Comprehensive Health Care Plan

was created in 1975 to help meet medical costs of nonoccupational injuries and diseases.

Eligibility

Any State resident, including Medicare recipients

under 65 but excluding those eligible for Medicare

solely because of age, is eligible for pool membership.

There is no waiver of the 12-month waiting period required for an existing medical condition or one treated

within 6 months prior to coverage unless the applicant is converting directly from a Connecticut-issued

group contract. The group contract must remain in effect and the applicant must have been insured by the

group plan for at least a year. Eligibility for the plan

differs somewhat from other State plans in that there

Table B-l. –Congressional Bills on High-Risk Insurance Pools (1987)

S. 1634: Sen. Durenburger; The Access to Insurance for the

Medically Uninsurable Act of 1987

Encourages States to setup pooling mechanisms through

a $10 million grant program. States will receive funds based

on their proportionate share of the national population to

be used toward establishing health insurance risk pools.

The States themselves would be responsible for financing, design, and subsidization of the pools.

S. 177: Sen. Reigle; Health Care for the Uninsured Act of 1987

Permits States to establish health care pools to provide

health care services to all uninsured individuals and share

among all hospitals in the State the costs of uncompensated care. Requires the implementation of the health care

pool at the Federal level where a State does not establish

such a program or receive a waiver from the Secretary of

Health and Human Services. Uninsured individuals wishing to secure health coverage through the pool will pay a

premium for such coverage based on the individual’s family income.

S. 1139: Sen. Chafee; MedAmerica Act of 1987

Amends the Social Security Act to give States the option

of extending coverage to individuals whose family income

does not exceed an income level established by the State

at or below 200 percent of the Federal poverty level, who

are unable to obtain health insurance coverage from another

source by reason of a preexisting medical condition, have

exhausted some or all benefits under their health insurance policy, and whose employer employs no more than

25 individuals and is unable to provide adequate health insurance coverage for such individuals at a reasonable cost.

Also offers provision to those with catastrophic health expenses who have exhausted private insurance coverage

or who have a preexisting condition and are therefore denied by private insurers, by allowing them to purchase

Medicaid coverage at full premium with no income adjustment.

H.R. 406: Rep. Roe; National Catastrophic Illness Protection

Act of 1987

Establishes a national catastrophic illness insurance program under which the Federal government, State insurance

authorities, and the private insurance industry cooperate

to make available adequate health protection to all Americans at reasonable cost. State-wide plans providing extended health insurance will be provided and the Federal

government will reinsure insurers and pools of insurers

who offer such insurance.

H.R. 1182: Rep. Regula; Health Services Act of 1987

Amends Title XIX of the Social Security Act to establish

a publiclprivate program providing health services to the

medically uninsured. Provides benefits to residents of a

State where there exists a Statewide Pooling Corp. and establishes a Federal Health Trust Fund to pay direct grants

to such corporations. Employers who are not members of

the corporation will be taxed, the revenues going to the

trust fund.

SOURCE: Office of Technology Assessment, 19S8.
171
172

is no requirement that one must be rejected by a commercial plan prior to applying for membership in the

pool. Because of this, the plan attracts many good risks

such as those between jobs, recent school graduates

not yet employed, and group conversions.

Payments and Benefits

There is a 20-percent coinsurance required for all

covered expenses and deductibles of $400, $1,000, and

$1,500 are offered. The maximum lifetime benefit is

$1,000,000. The premium cap is no less than 125 percent initial and no more than 150 percent of the average group premium rate offered for comparable coverage. Stop loss/out-of-pocket expenses are limited to

$2,000 for an individual and $4,000 for a family. There

is no Medicare Supplement Plan, as Medicare beneficiaries are ineligible to participate.

Administration

The pool is governed by a board of seven individuals selected by participating pool members. The

Travelers Insurance Company administers the plan,

and there are special provisions for Blue Cross/Blue

Shield (BC/BS). In the past, BC/BS operated an identical plan and was not required to pay assessments on

the State operated plan. In 1984, however, BC/BS became mutualized and, although it continues to cover

it’s existing policyholders of over 25,000 individuals,

it now refers uninsurable to the State pool. All health

insurance carriers, including health care service plans,

health maintenance organizations authorized to issue

insurance in the State, and self-insured employer health

benefit plans established in the State after 1976 (however, self-insurers can no longer be obligated to join),

are required to be members of the pool and are assessed

in proportion to their share of the State insurance market. The enrollment dropped from 4,399 in 1983 to

3,101 as of August 1, 1986. In calendar year 1985, the

members shared an estimated loss of $1,s33,000.

Florida

The 1983 Florida Comprehensive Health Insurance

Plan is designed to provide adequate health insurance

coverage to those unable to procure coverage in the

private market due to their mental or physical condition.

Eligibility

To be eligible, an individual must be a Florida resident ineligible for Medicaid who has been rejected by

at least two health insurers for similar coverage, or

who has received notice of benefit reduction, condition exclusion, or premium increase exceeding the rate

for pool coverage. There is no waiver of the 6-month

waiting period for any illness diagnosed or treated

within 6-months of policy date.

Payments and Benefits

Deductibles of $1,000, $1,500, and $2,000are available, accompanied by a 20-percent coinsurance requirement. There is a $5,000,000 maximum lifetime benefit and a premium cap of 200 percent of the average

plan for comparable coverage. Stop loss/out of pocket

expenses can vary from $2,500 to $3,500 for an individual and from $5,000 to $7,000 for a family. Benefits include limited mental health services and the option to purchase durable medical equipment, but do

not include home health care services or oral surgical

services. A Medicare Supplement Plan is included.

Administration

The plan is administered by Mutual of Omaha as

of 1986, and is governed by a seven-member board.

The board is composed of three members appointed

by the Insurance Commissioner (one from the general

public, one from medical providers, and one from

health insurance agents) and four members appointed

by participating insurers (at least one from a nonprofit

insurer and one from a domestic insurer). All health

insurance carriers, including health care service plans

authorized to issue insurance in Florida but excluding

health maintenance organizations, are required to participate in the pool, All pool members are assessed in

proportion to their share of the State insurance market

and can credit their assessments against State premium

and income taxes. The number of citizens taking advantage of the pool is low, 1,036 as of December 1986,

yet represents a substantial increase from the 49 enrollees in 1983. During the first year of operation the

Florida plan was unique in that it recorded no losses.

However, by 1985 the 1-year waiting period was changed

to 6 months, the enrollment increased and the plan

began assessing members for pool losses as do other

plans.

Illinois

The Comprehensive Health Insurance Plan for 11-

Iinois was created to provide satisfactory insurance

coverage for those unable to purchase traditional

health insurance because they are perceived as highrisk persons. The plan passed into law in early 1987

but has postponed the operational date. If appropriations are granted, the plan will open in August 1988.
173

Eligibility Eligibility

All Illinois residents are eligible for pool membership

who do not qualify for Medicaid coverage, have been

rejected for health insurance coverage for health reasons

by an insurance company, or were offered coverage

at a rate exceeding the plan’s rate. Additionally, those

suffering from a condition listed by the plan automatically satisfy eligibility requirements. A waiting period

of 6 months is required for pre-existing conditions

manifested or treated within 6 months prior to the

effective date of coverage. An additional premium of

up to 10 percent of the annual premium (to be effective

for the life of the contract) can be chosen. This coverage would exclude charges or expenses incurred during

the first 2 months of coverage date for any condition

manifested or treated within 2 months preceding coverage effectiveness. A group of 10 or less is eligible for

membership if one or more of the group meets the

above pool criteria.

Payments and Benefits

A 20-percent coinsurance payment is required in

addition to the deductible charge which can be $250,

$500 or $1,000 for an individual and $500, $1,000 or

$1,500 for a family. The maximum lifetime benefit is

limited to $500,000 and the premium is capped at 135

percent. Stop- loss/out-of-pocket expenses are set at

$1,500 for an individual, $3,000 for a family and $5OO

for Medicare recipients. Benefits include hospice care,

physical, speech and occupational therapy, and some

outpatient mental health coverage. No Medicare Supplement Plan is offered.

Administration

The plan administrator has not yet been named. A

board of 11 people will oversee the plan including representatives from participating insurers, public members, the Illinois Health Care Cost Containment Council, the Office of the Attorney General and members

of the General Assembly (nonvoting). Costs of the plan

are to be paid from the premiums. If, however, costs

exceed the premiums received, the deficit will be paid

out of the general revenues of the State.

Indiana

The Indiana Comprehensive Health Insurance Association was enacted in 1982 to offer health insurance

for those residents who find it difficult to obtain or

keep health insurance due to a medical condition.

Any Indiana resident not eligible for Medicare who

has been rejected by two health insurers for similar

health coverage or who has received notice of benefit

reduction, condition exclusion, or premium increase

exceeding the rate of pool coverage is eligible for pool

participation. There is a 6-month waiting period for

a pre-existing condition treated 6 months prior to the

policy date, which can be waived on request (for a 25

percent premium increase) if other health insurance

was effective immediately before pool coverage began

or if application for pool coverage was within 60 days

of becoming eligible. Indiana also includes a provision

for any individual suffering from a specified illness

(e.g., cancer) listed on the premium rate page which

merits automatic eligibility for pool coverage.

Payments and Benefits

In addition to a 20-percent coinsurance requirement,

two deductible plans are offered, one with a $2OO deductible, the other with a choice of a $2oo, $5oo, or

$1,000 deductible. There is no maximum benefit limit,

however, under plan II there is a $50,000 benefit cap

for mental and nervous disorders, The premium cap

is set at 150 percent. Stop loss/out-of-pocket expenses

vary by plan: plan I sets $1,000 for an individual and

$2,000 for a family, while plan II ranges from $1,000

to $2,OOO for an individual and from $2,000 to $4,000

for a family. Benefits include limited mental health

services. There is no Medicare Supplement Plan available as Medicare beneficiaries are ineligible to participate.

Administration

A board of five to nine people oversees the plan,

administered by Mutual of Omaha. All health insurance carriers, including health care service plans,

health maintenance organizations authorized to issue

insurance in the State, and self-insured employer health

benefit plans (self-insurers can no longer be obligated

to join), are required to participate in the pool association. All pool members are assessed in proportion

to their share of the State insurance market and can

credit assessments against State premium and income

taxes and can increase rates to offset assessment. The

Indiana plan has increased it’s enrollment to 3,229 in

1986 from the 41 people it served during the first year

in operation. Calendar year 1985 showed an estimated

loss of $3,339,ooo for the pool.
174

Iowa

The Iowa Comprehensive Health Insurance Association began service in 1987.

Eligibility

All Iowa residents ineligible for Medicaid who have

been rejected by one insurer for similar health insurance coverage, or who were only offered health coverage at a rate exceeding the pool rate, are eligible to

participate in the pool.

Payments and Benefits

Along with 20-percent coinsurance, deductibles of

$500, $1,000 or any other amount authorized by the

board are offered. There is a $250,000 lifetime maximum benefit and a 150-percent premium cap. Stop

loss/out-of-pocket expenses vary between plans, with

limits of $1,500 or $2,OOO for an individual and $3,OOO

or $4,000 for a family under plan I and plan II, respectively. Benefits include limited mental health services. A Medicare Supplement Plan is available and provides coverage of at least 50 percent of the deductible

and 80 percent of covered expenses, with Medicare

plan premiums to be determined by the board.

Administration

The plan administrator is Mutual of Omaha, Between five and nine people comprise the board, including one public member selected by the Insurance Commissioner and four to eight selected by the members

of the association. All health insurance carriers, including health care service plans and health maintenance

organizations authorized to issue insurance in the

State, are required to be members of the pool. All pool

members are assessed in proportion to their share of

the State insurance market and can credit assessments

against State premium and income taxes.

Maine

The Maine High-Risk Insurance Organization will

be in effect July 1, 1988 for those persons who are unable to obtain health insurance coverage for medical

reasons,

Eligibility

To be eligible for coverage under the risk pool one

must be a resident of the State and either be unable

to procure adequate coverage or is being charged

higher premium prices by the current carrier than those

offered in the pool. Those receiving Medicare and

Medicaid benefits are exempt from risk pool coverage,

The pool offers major medical expense coverage to

every eligible person up until a 300-person maximum

enrollment is reached (unless legislative approval is

given to expand). A 90-day waiting period is in effect

for any condition which was diagnosed or for which

treatment or medical advise was sought during the 90-

day period preceding the effective date of coverage.

The pre-existing-condition waiting period can be waived

if similar exclusion stipulations have been met under

previous coverage involuntarily terminated if the pool

application is made within 31 days following the involuntary termination and no conversion plan is available at equal or less cost than risk pool costs. Additionally, the waiver is granted if $3,500 has been paid

for uncovered medical expenses (exclusive of the deductible) during the 90-day waiting period in which

case the remainder of the waiting period will be waived.

Also, any person enrolling in the plan during the first

6 months of operation will not be subject to the preexisting condition waiting period exclusion.

Payments and Benefits

Deductibles will be no less than $500 and no more

than $1,000. There is a $500,000 maximum lifetime

benefit and premium cap of 150 percent maximum.

Stop loss/out-of-pocket expenses are not to exceed

$1,500 for an individual and $3,OOO for a family. No

Medicare Supplement Plan is available as Medicare recipients are not eligible for pool coverage. The pool

will also subsidize premiums for individuals denied

health insurance due to a health condition and who

meet income eligibility requirements set by the board.

The subsidy plan will be paid from the General Fund

and shall not exceed $50,000 in costs during the first

2 years of operation. No subsidy will be given to a

person if the premium amount, after deducting the

subsidy, is less than the premium of any comparable

individual health insurance policy currently available

to that person in the State.

Administration

The governing board will consist of seven members

including two members representing consumers of

health insurance not otherwise affiliated with the provision of health care financing, one member representing domestic commercial insurers, one representing

nonprofit hospital and medical service organizations,

one representing hospitals and one member being the

Superintendent of Insurance or a designee from that

office. The Maine pool will be financed through the

Reserve Fund established to cover any expenses and

claims above premium income. The reserve will be
175

funded by assessing the revenues of all hospitals in the

State. The amount of the assessment is not to exceed

.0015 percent of all hospitals’ gross patient services revenues and will be adjusted annually by the board.

However, under the Maine law enacting the risk pool,

the pool will cease enrollments and renewals of participants by June 30, 1991 and if the legislature decide

to renew the law, the committee with jurisdiction will

consider methods of funding the reserve fund other

than by assessing the hospitals.

Minnesota

The Minnesota Comprehensive Health Association

was created in 1976 to make the minimum benefits of

hospital and medical-surgical expense coverage available to all State residents.

Eligibility

An eligible individual must be a State resident who

has been rejected by one insurer for similar health insurance coverage, or was offered health coverage with

a restrictive rider which decreases benefits, or had a

preexisting condition limitation within 6 months prior

to enrolling in the pool plan. Individuals who have

been treated for certain chronic health conditions

within 3 years of pool application are automatically

eligible for pool coverage regardless of other requirements.

Payments and Benefits

Deductibles of $500 and $1,000 are available and

a 20-percent coinsurance payment for all covered services

is required. A Medicare Supplement Plan is available.

The maximum lifetime benefit for the Medical-Surgical

Plan is $250,000 and $100,000 under the Medicare

Supplement Plan. There is a premium cap of 125 percent, and the stop loss/ out-of-pocket expenses are

$3,000 per person for the Medical-Surgical plan and

$1,000 per person for the Medicare plan. Benefits

include well-baby care and the option to purchase

durable medical equipment.

Administration

Blue Cross/Blue Shield is the plan administrator,

and the board consists of seven individuals selected

by pool members and two appointees of the Governor. All health insurance carriers, including health care

service plans and health maintenance organizations authorized to issue insurance in the State, are required

to be members of the pool. Self-insurers were previously required to participate but are now exempt because of ERISA. All pool members are assessed in

proportion to their share of the State insurance market. However, members can no longer credit assessments against State premium taxes as that privilege

was repealed as of January 1987. This plan served

10,439 people as of May 1, 1986, an increase from

2,918 in 1981.$5,507,000 of estimated pool losses were

reported in calendar year 1985.

Montana

The Montana Comprehensive Health Association,

operational in July 1987, was created to provide adequate health insurance coverage to all State residents

otherwise considered uninsurable.

Eligibility

All State residents who have been rejected by two

health insurers or who have had restrictive rider or

pre-existing condition limitations imposed by two insurers within 6 months prior to pool application are

eligible for pool participation. There is no waiver for

the 12-month waiting period established for any preexisting condition diagnosed or treated during the past

5 years immediately preceding pool application, An

individual who had continuous coverage under a policy during the previous year is exempt from the preexisting condition clause.

Payments and Benefits

Deductibles are not to exceed $1,000 in addition to

the 20-percent coinsurance requirement. The lifetime

maximum benefit is $250,000. The premium cap is set

at no less than 1500 percent and no more than 400 percent, the stop loss/out-of-pocket expense is set at

$5,000 for an individual. Benefits include the option

to purchase durable medical equipment but do not include skilled nursing facility services. There is no Medicare Supplement Plan, even though the law does not

specifically prohibit participation by Medicare beneficiaries.

Administration

The plan administrator is Blue Cross/Blue Shield.

The board is comprised of eight members, one from

each of the seven participating members with the highest annual premium volume of disability insurance or

health service contracts, and one member appointed

by the Insurance Commissioner to represent the public interest and who serves in an advisory capacity.

All health insurance carriers, including health care

service plans and health maintenance organizations au-
176

thorized to issue insurance in the State, are required

to be members of the pool. All pool members are

assessed in proportion to their share of the State insurance market and can credit assessments against the

State premium tax.

Nebraska

The Nebraska Comprehensive Health Insurance

Pool, operational in 1987, was established to provide

health insurance coverage to all State residents regardless of pre-existing medical conditions.

Eligibility

All persons who have been State residents for at

least 6 months, who are ineligible for Medicare, Medicaid, or other medical assistance and who, within 6

months prior to applying to the pool, were rejected

by one health insurer or had coverage with a restrictive rider which limits coverage for more than 12

months, and those individuals with coverage at a rate

higher than the pool rate, are eligible for coverage. A

waiting period of 6 months is required for any condition which manifested itself during the 6-month period

preceding the policy date, but a waiver is provided if

similar exclusions have been satisfied under prior

health insurance coverage (the board may assess an

additional premium of up to 10 percent for this waiver).

Payments and Benefits

Deductibles of $250, $500, and $1,000 are offered,

with a 10-percent coinsurance required for all covered

expenses. A $500,000 maximum lifetime benefit is set.

There is a premium cap of no less than 135 percent

and no more than 165 percent. Stop loss/out-of-pocket

expenses are set at $5,000. Benefits include limited

mental health services and the option to purchase durable medical equipment, but do not include oral surgical services. There is no Medicare Supplement Plan,

as Medicare beneficiaries are ineligible to participate.

Administration

Blue Cross/Blue Shield is the plan administrator,

and the board is comprised of nine members, including at least one representative of a domestic insurance

company, one representative of a domestic hospital

service corporation plan, one representative of a health

maintenance organization, and one representative of

the general public. All health carriers, including health

care service plans and health maintenance organizations authorized to issue insurance in the State, are required to be members of the pool. All pool members

are assessed in proportion to their share of the State

insurance market and can credit assessment against the

State premium tax. During the plan’s first year of operation, it served 67 people.

New Mexico

The New Mexico Comprehensive Health Insurance

Pool, scheduled for operation by January 1988, was

created to assist all State residents considered uninsurable or who are denied adequate health insurance.

Eligibility

Those State residents having received a rejection of

health insurance coverage, a rate increase exceeding

the pool rates, or a reduction or limitation of coverage (including a restrictive rider), and do not qualify

for Medicare or Medicaid benefits are eligible for pool

coverage. The plan enforces a 6-month waiting period

for those conditions that manifested themselves within

6 months prior to pool coverage or for which medical

advice or treatment was sought within 6 months before coverage was effective. Unique to the New Mexico Plan is a conversion provision for those moving

to New Mexico from a State where they were covered

under the State health insurance pool. If application

for pool coverage is completed within 31 days after

the termination of the other policy and premiums were

paid for the entire coverage period, the effective date

of the new coverage will be the termination date of

the previous coverage. If waiting period stipulations

were satisfied and benefit limitations were not reached

under the previous plan then the waiting period under

the new plan is waived.

Payments and Benefits

Deductibles of $500 or $1,000 are offered unless

otherwise approved by the board. There is no maximum lifetime benefit and the premium is capped at 150

percent. The stop loss/out-of-pocket costs are $1,500

for an individual and $2,500 for a family under the

$5W deductible plan and $2,OOO or $3,OOO for an individual or family respectively under the $1,000 deductible plan. No Medicare Supplement Plan is included

in the New Mexico Pool. Another unique feature of

the New Mexico Plan is the provision stating that employers are authorized to “make a payroll deduction

from the compensation of an employee for the portion of the pool policy premium the employee is responsible for, and an employer shall contribute the

same dollar amount of the cost of that policy on behalf of the employee that the employer contributes for

other similar employees for health insurance. ”
177

Administration

The 10-member board composition will include the

Superintendent or his designee, one representative

from a nonprofit health care plan, one from an HMO,

and two representatives from members of the pool,

all 4 of which will be appointed by members of the

pool. Additionally, the Superintendent will appoint

five members including one representative of Statewide

health planning and four citizens not professionally affiliated with an insurer, two of which will be individuals qualifying for coverage under the pool. Pool losses

are assessed to all members yet no credit will be given

on future taxes until one member’s assessment reaches

$75,000 per year at which point the member will receive a 30-percent tax credit for the amount paid over

$75,000.

North Dakota

In 1981 North Dakota created The Comprehensive

Health Association to provide health coverage for

those denied health insurance, given only restricted

coverage due to health problems, or who were considered to be in a high risk category.

Eligibility

Any individual who has been a North Dakota resident for at least 6 months and who has written evidence of rejection by one insurer or a restrictive rider

or a pre-existing condition limitation from at least one

insurer within 6 months prior to the date of enrollment

is eligible for pool membership. There is a 6-month

waiting period for any condition diagnosed or treated

within 90 days prior to the policy date. The waiting

period can, however, be waived upon payment of an

additional premium or proof of continuous coverage

for the 12-month period immediately preceding the

contract date.

Payments and Benefits

Along with the required 20-percent coinsurance,

deductibles of $150,$500, and $1,000 are offered. The

maximum premium cap is set at 135 percent. The maximum lifetime benefit is $250,000. The stop loss/outof-pocket expense is limited to $3, OOO for all deductibles. Benefits include the option to purchase durable

medical equipment. A Medicare Supplement Plan is

offered.

Administration

Blue Cross/Blue Shield of North Dakota administrates the plan. Ten board members, 1 from each of

the 10 insurers with the highest annual premium

volumes, govern the association. All health insurance

carriers are required to participate. This includes all

health care service plans authorized to issue insurance

in the State, although health maintenance organizations are excluded. All pool members are assessed in

proportion to their share of the State insurance market and can credit assessment against State premium

and income taxes. This plan served 1,131 people as

of May, 1986, an increase from the 78 people served

during it’s first full year of operation,

Oregon

The Oregon Medical Insurance Pool was created to

offer health insurance coverage to all State residents

denied adequate medical insurance while also avoiding

undue financial impact on the State and private insurers,

The plan is scheduled to go into effect in the Spring

of 1988.

Eligibility

Those applying for pool coverage must be residents

of Oregon ineligible for Medicaid and Medicare and

have proof from an insurer of an adverse underwriting decision on medical insurance for health reasons,

proof of a history of any medical or health condition

on the list adopted by the board (the board may adopt

a list of medical or health conditions for which a person is eligible for pool coverage without proving that

they were denied medical insurance), or must be a

spouse or dependent of a person described under this

eligibility. A six-month pre-existing condition waiting

period is enforced for any condition for which treatment, care, or medical advise was sought within the

six-month period preceding the effective date of pool

coverage. The pre-existing condition waiting period

can be waived if similar exclusions have been satisfied under prior health insurance involuntarily terminated, provided pool application is made within 60

days following the involuntary termination.

Payments and Benefits

The deductibles and stop loss/out-of-pocket expenses have not yet been determined by the board although a maximum lifetime benefit of $1,000,000 and

a premium cap of 150 percent initial maximum have

been set. No Medicare Supplement Plan will be offered.

Administration

The board will be composed of seven members selected by pool members. The commissioner or a desig-
178

nee will serve as the chair of the board. Other members will include at least one representative of a

domestic insurance company licensed to transact health

insurance; one representative of a domestic not-forprofit health care service contractor; and one member of the general public not associated with the medical profession, a hospital, or an insurer. The members of the Oregon pool will consist of all insurers

issuing medical insurance within the State and, to the

extent Federal law allows, self-insurance arrangements

either covered or not by ERISA, including governmental and church plans. The plan Administrator has

not yet been named. Deficits incurred under the risk

pool will be paid by the State. Members of the pool

may be assessed for an amount not to exceed $ls0,000

to cover initial operating expenses. However, the plan

has a built-in protection against losses to the pool.

While benefits and premiums will be adjusted annually, pool losses are to be kept at under 1 percent of

the total of all medical insurance premiums, subscriber

contract charges, and 110 percent of all benefits paid

by member self-insurance arrangements. The board

can also place a ceiling on the maximum number of

persons enrolled.

Tennessee

The Tennessee Comprehensive Health Insurance

Pool, created in 1986 and effective in July 1987, was

established to provide health insurance coverage to

State residents denied adequate health insurance for

any reason.

Eligibility

All residents not eligible for Medicaid and who have

been rejected for similar coverage by one health insurer are eligible for pool coverage. There is no waiver

for the 6-month waiting period for any condition which

manifested itself or was treated within 6 months prior

to the policy date.

Payments and Benefits

Deductibles of $s00, $2,000, and any other offered

by the board will be available, with a 20-percent coinsurance for all covered expenses required, The premium cap is set at ISO percent. The maximum lifetime

benefit is $s00,000. The stop loss/out-of-pocket expenses range from $1,500 to $2,500 for an individual

and from $2,500 to $3,500 for a family, depending on

the plan. Benefits include limited mental health services and the option to purchase durable medical equipment. A Medicare Supplement Plan will be offered.

Administration

Mutual of Omaha admistrates the plan. The board

is composed of nine members, with at least one representative of a domestic insurance company; a foreign

insurance company; a domestic non-profit health care

service plan; a health maintenance organization; a

member from a health-related profession; one member from the general public not associated with the

medical profession, a hospital, or an insurer; and one

member to represent a group considered to be uninsurable. All health insurance carriers, including health

care service plans and health maintenance organizations authorized to issue insurance in the State, are required to participate in the pool association. If premiums do not cover costs, all pool members will be

assessed in proportion to their share of the State insurance market and can credit assessments against the

State premium tax.

Washington

The Washington State Health Insurance Pool began

operating in January 1988 to assist all State residents

denied adequate health insurance.

Eligibility

Any Washington resident is eligible for pool participation who does not qualify for Medicaid coverage and has proof of rejection for health insurance coverage from at least one insurer or who has insurance

with a restrictive rider or a pre-existing condition limitation which reduces the coverage from a standard risk

within 6 months of the date of application. There is

a 6-month waiting period for any condition for which

advice or treatment was sought within 6 months before the effective date of coverage. The pre-existing

condition clause can be waived if the individual applies for membership within 30 days of being involuntarily terminated from prior coverage under which

similar exclusion stipulations were met.

Payments and Benefits

Deductibles of $500 and $1,000 (or an amount approved by the board) are offered. The maximum lifetime benefit is $sOO,OOO and the premium cap is set

at 1s0 percent. The stop loss/out-of-pocket expenses

are $l,SOO for an individual and $3,000 for a family

for those who choose the $s00 deductible plan, $2,500

for an individual and $s,000 for a family for those on

the $1,000 deductible plan, and $1,000 for an individual on the Medicare Supplement Plan.
179

Administration

The pool is governed by a nine-member board. A

representative of health care providers, health insurance agents, and the general public will be appointed

by the commissioner. The remainder of the board is

selected by the pool members and includes at least one

health care service contractor, one representative of

a health maintenance organization, and one representative of commercial insurers providing disability insurance. Self-insurers will be included as soon as Federal law permits their participation. Pool members are

assessed for any deficits incurred through the plan for

which they will receive full tax credit on future taxes

owed to the State.

Wisconsin

The Wisconsin Health Insurance Risk Sharing Plan

was created in 1981 to provide health insurance for

those unable to find adequate health insurance coverage due to their mental or physical condition.

Eligibility

All Wisconsin residents who have been rejected by

one health insurer or who have received notice of benefit reduction or a 5o percent or more premium increase are eligible for pool membership. There is no

waiver of the 6-month waiting period for any condition diagnosed or treated in the 6 months preceding

the plan. Effective April 21, 1988, Medicaid recipients

can buy into the pool. This allows pool benefits to act

as a supplementary coverage net to the primary assistance provided by Medicaid.

Payments and Benefits

Two deductible plans are offered, one for $1,000 and

the other for $500 under Medicare Part A. A 20-percent coinsurance payment is required for all services.

There is a 150-percent maximum premium cap and a

$500,000 maximum lifetime benefit. Stop loss/out-ofpocket expenses vary by plan but range from $500

(Medicare) to $2,000 for an individual, but is set at

$4,000 for a family. Wisconsin has set aside revenue

funds to subsidize premium payments and deductible

costs. Policy holders with annual incomes below $16,000

can apply for subsidies to cover from 17 to 33 percent

of premium costs and a reduces deductible of $500 to

$900, depending on income bracket. Benefits include

limited mental health services and the option to purchase durable medical equipment. The Medicare Supplement Plan is for those under 65 and receiving medical assistance.

Administration

Mutual of Omaha is the plan administrator. The

board is composed of nine members, including two

participating insurers from nonprofit corporations,

two other participating insurers, three public members

(two of whom could qualify for coverage in the pool),

a health policy council representative, and the Insurance Commissioner or a representative from the commissioner’s office. All health care carriers, including

health care service plans and health maintenance organizations authorized to issue insurance in the State,

are required to be pool members (self-insurers can no

longer be obligated to join). All pool members are

assessed in proportion to their share of the State insurance market but can no longer credit assessment

against the State premium tax. Effective January 1988,

the State instigated a subsidy to policy holders in the

form of $200,000 in tax relief from general revenues.

This is used to moderate deductibles and cost sharing

expenses for those in need of pool services yet unable

to meet the pool costs. As of May, 1986, this plan

assisted 1,964 individuals, an increase from the 309

participants in 1981.

Catastrophic Health Insurance Plans

Unlike health insurance risk pools, plans established

to offer coverage for those unable to procure adequate

health care coverage elsewhere, catastrophic plans simply supplement already existing insurance plans. Catastrophic Health Insurance Plans (CHIPS) are operated

by State Departments of Human Services and are generally used as a last resort source of funds to help pay

for forbiddingly high medical bills. If medical costs

financially drain a family to the point where their customary standard of living can no longer be maintained,

a catastrophic plan can be purchased. After satisfying a deductible, the CHIP will pay the balance of expenses that private insurance will not cover. Deductibles are determined by a formula sensitive to the

income of the applicant; a State may require a deductible of, for example, $2,500 plus 10 percent of the annual net income. Deductibles are usually set as per

family rather than per capita requirements, although

there have been exceptions. The costs are pro-rated

in that those with no insurance pay much higher

deductibles than those with private insurance policies,

and Medicare recipients pay the least amount. The deductible screens out a majority of people, and of those

remaining with high expenses, many are already covered by Medicare, Medicaid, and private sector health

plans. Approximately 10 percent of the population has

no coverage, and about half of the people with pri-
180

vate insurance have catastrophic stop-loss coverage,

so these people generally are the ones to take advantage of the catastrophic plans. Also, the non-poor

elderly may have high enough expenses not covered

by Medicare to qualify for CHIP membership. As for

State expenses, when spreading the costs across the

residents of the State, per capita costs hover around

$2.00.

CHIP participation has been low; in 1986 the enrollment in Rhode Island was 624 and in Maine was

57. Although a few States have attempted catastrophic

plans, only one, Rhode island, has been successfully

maintained. Rhode Island has the model CHIP in that

it is the oldest (effective since 1975) and the sole plan

able to continue service. Maine, Minnesota, and Alaska

each had programs but lost appropriations and folded.

The now defunct programs hope to be refunded but

none received allocations for fiscal years 1988 and

1989. New Jersey passed a law in early 1988 to establish a Catastrophic Illness in Children Relief Fund. The

program is based on the same principles of a CHIP yet

is extremely limited in its service in that only children

under 18 years of age are eligible for membership.
Appendix c

Medical Testing

Model Regulation Service — July 1987

Medical/Lifestyle Questions and Underwriting Guidelines

PROPOSED BULLETIN

(Effective Date)

SUBJECT: Medical Lifestyle Questions on Applications and Underwriting Guidelines Affecting

AIDS and ARC

( Recital of applicable authority if needed and purpose of bulletin. Issuance of bulletin is to assist

insurers to formulate and design medical/lifestyle questions in applications for and underwriting

standards affecting health and or life insurance coverage in conformity with the fair standards

adopted by the .NAIC at its December 1986 meeting. 1

I. General Propositions

A. No inquiry in an application for health or life insurance coverage. or in an investigation conducted by an insurer or an insurance support organization on its behalf

in connection with an application for such coverage. shall be directed toward determining the applicant-s sexual orientation.

B. Sexual orientation may not be used in the underwriting process or in the determination of insurability.

c. Insurance support organizations shall be directed by insurers not to investigate,

directly or indirectly, the sexual orientation of an applicant or a beneficiary.

H. Medical Lifestyle Applications Questions and Underwritinq Standards

A. No question shall be used which is designed to establish the sexual orientation of

the applicant.

B. Questions relating to the applicant having or having been diagnosed as having AIDS

or ARC are permissible if they are factual and designed to establish the existence

of the condition.

For Example: Insurers should not ask “do you believe you may have . . .?”, but rather

“do you know or have reasons to know . . .?”

c. Questions relating to medical and other factual matters intending to reveal the

possible existence of a medical condition are permissible if they are not used as a

prox}’ to establish the sexual orientation of the applicant. and the applicant has

been given an opportunity to provide an explanation for any affirmative answers

given in the application.

For Example: ‘“Have you had chronic cough. significant weight loss. chronic fatigue.

diarrhea. enlarged glands. ., .?” These types of questions should be related to a finite

181
182

period of time preceding completion of the application and should be specific. All of

the questions above should provide the applicant the opportunity to give a detailed

explanation.

D. Questions relating to the applicant’s having or having been diagnosed as having or

having been advised to seek treatment for a sexually transmitted disease are permissible.

E. .Neither the marital status. the “living arrangements. ” the occupation. the gender.

the medical history. the beneficiary designation. nor the zip code or other territorial

classification of an applicant may’ be used to establish. or aid in establishing, the

applicants sexual orientation.

F. For purposes of rating an applicant for health and life insurance, an insurer may

impose territorial rates, but only if the rates are based on sound actuarial principles

or are related to actual or reasonably anticipated experience.

G. No adverse underwriting decision shall be made because medical records or a report

from an insurance support organization shows that the applicant has demonstrated

AIDS-related concerns by seeking counseling from health care professionals. This

subsection does not apply to an applicant seeking treatment and/or diagnosis.

[Provision for States permitting testing]

H. Whenever an applicant is requested to take an AIDS-related test in connection with

an application for insurance, the use of such a test must be revealed to the applicant

and his or her written consent obtained. No adverse underwriting decision shall be

made on the basis of such a positive AIDS-related test unless an established test

protocol has been followed.

>-o[e. “’Establlsned test protocol” means the protocol adopted An a particular state. .At J mlnlmum. it requmes two

posltl~’e EMS.+ tests. In some states. It also includes one posltlve Western blot. It M anticipated that new and more

effectl~”e .lDIS-related tests w*I11 be developed which might replace those currently in use.

I. Options to be considered by each state.

Alternative A. Insurers should not be permitted to ask an applicant whether he or

she has tested positive on an AIDS-related blood test.

.Alternative B. Insurers should be permitted to ask an applicant whether he or she

has tested positive on an AIDS-related blood test.

Legislatlve H[story all references are to the Proceedings of the .V.AXCl.

1987 Pmc. I 11, 19, 609, 655, 659-660 (adopted).
Appendix D

OTA Survey Questionnaire

NOTE: The following pages reproduce the OTA survey questionnaire sent to the commercial

health insurers. The questionnaire was modified slightly for the Blue Cross/Blue Shield

plans and Health Maintenance Organizations to include proper terminology and reflect

differences in rating and enrollment practices.

183
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187

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D. ‘l’his question concerns individually underwritten policies only, Read the list below and pla ce

in column 2 next to the ten diagnoses which account for the largest proportion of your claims

In colwn 3, please estimate the proportion of total costs tha~’each of the to]

.

In column 4, rank the ten diagnoses (~,e+, ~ - 10) in order of cost.

QJAGNos~s

(1) (2>

lCD9.C~ CODES TOP TEN

AIDS and ue~ated conditions* See note below. [

Diseases of Che blood and blood-forming

o~gan$ and ~~urlity (excluding AIDs and 280..28g

I%lated con~~t~ons)

[

Ci~cu~atOry system (please specify below)

- Esserltial hypertension

- ~eart disease 391-3g2.0, 393-398 , [J

402, 404, 410.4~6,

420.42g

- Cerebrovascular disease

- Other circulatory “system disorders

Coilgenital a bnorInaliCi eS /conditio n s

of perj~ata~

Diseases of tl)e digestive sys~em

‘is@aS~s of the ear, no se and ~hroat

430-438 []

39o, 392.g,3gg-400,

403, 405-409, 41 7 -4 1 9 ,

430-45g,785 []

740-779, v30-t139 []

520-56g, 787 []

380-3(jg, 460-464, 7/14 [ }

----- - --,-- - ---- --- ---- -- --

Con~td on next page

*Noce: Please include any illsured diagnosed Wich A~~s, ARc, or any opportunisti c

infecLion thought co be AIDS-related.

3 t,en diagnoses

( 3 )

ESTIMTEB %

a check

costs,

repre se n ts <

( 4 )

OF TOTAL COST RANK

—------%

—------%

—------%

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Appendix E

Acknowledgments

The development of this report has benefited from the advice and review of a number of people in addition

to the advisory panel. OTA staff would like to express its appreciation of the following people for their valuable

guidance.

Bob Arnold

University of Pennsylvania

Philadelphia, PA

J. Robert Beck

Dartmouth-Hitchcock Medical Center

Hanover, NH

Jan L. Breslow

The Rockefeller University

New York, NY

T. Thomas Casky

Institute for Molecular Genetics

Baylor College of Medicine

Houston, TX

Charles Eby

Health Insurance Association of America

Washington, DC

Paul S, Frame

Tri-County Family Medicine

Cohocton, NY

Marsha Gold

Group Health Association of America

Washington, DC

Neil A. Holtzman

Mary Nell Lehnhard

Blue Cross and Blue Shield Association of America

Washington, DC

David Llewellyn

Health Insurance Association of America

Washington, DC

Sue Palsbo

Group Health Association of America

Washington, DC

Theodore Reich

Department of Psychiatry

Jewish Hospital of St. Louis

St. Louis, MO

Bill Roberts

Home Office Reference Laboratories

Shawnee Mission, KS

Robin Wagner

Blue Cross and Blue Shield Association of America

Washington, DC

Kenneth R. Warren

National Institute on Alcohol Abuse and

Alcoholism

Rockville, MD

The Johns Hopkins University School of Medicine Steve White

Baltimore, MD Metropolitan Life Insurance Co.

New York, NY

Mark Joffey

Group Health Association of America

Washington, DC

Diana Jest

Blue Cross and Blue Shield Association of America

Washington, DC

195
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