Insurance Risk Classification in an Era of Genomics: Is a Rational Discrimination Policy Rational?

There is continuing societal debate about whether insurers should be able to collect, access, or use genetic test results when considering applications or setting premium and coverage levels.1 This debate centers around deeply rooted beliefs over the privacy and personal nature of genetic information on the one hand and the financial necessities and economic considerations of the insurance industry on the other. Insurers argue access to applicants’ genetic test results is essential for the industry’s financial security. However, public distrust of insurance companies, coupled with anecdotal evidence of individuals unable to secure insurance, led to calls for barring insurers from considering genetic test results and, in the context of health insurance, the realization of this goal.2 In 2008, Congress passed the Genetic Information Nondiscrimination Act (GINA), which bars covered health insurers and employers from collecting and using genetic information.3 Other insurers, such as life, long-term care, and disability insurers, are exempt from the law.4 Since GINA’s passage, continued suggestions have been raised to expand legislation to these other insurances, but to date regulation has been limited, variable, and confined to the state level.5 It remains an open question whether and how the use of genetic test results by life, long-term care, and disability insurers should be circumscribed. Across the globe, countries similarly struggle to balance public and insurance industry concerns. In many countries, especially those that have universal or national health care and insurance systems, the debate has focused on the types of insurances excluded from GINA, such as life, disability income, and critical illness insurance.6 In a survey of international policy approaches addressing insurer use of genetic information, Yann Joly and colleagues identified six intersecting and overlapping approaches often employed.7 Three of these approaches relate specifically to whether insurers can access all, some, or no genetic test results—labeled status quo, rational discrimination, and prohibitive approaches, respectively.8 Under a status quo approach, insurers set their own standards for which genetic tests they will gather and use.9 This approach is premised on the fact that the overarching goal of the insurance market is to assess applicants’ risks in order to offer a premium that is commensurate with risk level and is economically viable.10 Additionally, since insurance companies are in the business of attracting customers, they have an incentive to assess risk as accurately as possible.11 For these two reasons, a status quo approach allows insurers to create their own rules for use of risk characteristics,12 implicitly trusting the insurers to use available data responsibly. In contrast, under a prohibitive approach, insurers are barred from accessing or using genetic test results.13 Such legislation prioritizes social arguments that insurer use of genetic information is unfair, may violate privacy concerns, or may discourage individuals from undertaking medically recommended genetic testing. The rational discrimination approach stands as a middle ground between the status quo and prohibitive approaches. Here, insurers are allowed to use a subset of genetic tests that meet established standards of scientific, clinical, and actuarial significance.14 Given current scientific knowledge, this subset of tests may actually be quite small. Overwhelmingly, genetic test results do not provide insurers with helpful risk information. Despite promises, current clinical understanding of genetics is, for the most part, lackluster at best in its ability to accurately predict risk.15 Although some genetic tests can identify individuals at high risk for conditions such as cancer or neurodegenerative diseases, this is a small subset of overall genetic information.16 Much of the information arising from genetic tests is vulnerable to misinterpretation17 and will arguably have a small effect on aggregate health18 and insurance markets.19 Therefore, a rational discrimination approach narrows insurer use to only those tests that meet established criteria and are helpful in risk prediction. A rational discrimination approach was implemented in the United Kingdom in the early 2000s, and versions of the approach have been proposed in the United States and Australia.20 Additionally, United Kingdom and Australia policies place an independent body as a mediator in actuarial decisions, and an external committee must approve the genetic tests before insurer use is permitted. This Article examines the merits and drawbacks of a rational discrimination approach to address life, long-term care, and disability insurer use of genetic test results. It argues a rational discrimination approach should be adopted as a necessary baseline protection against misuse of genetic test results, while allowing insurers access to and use of genetic test results that have met sufficient scientific, clinical, and actuarial evidence. Part II begins with an overview of two theoretical underpinnings of insurance—social fairness and actuarial fairness—and examines how these theories have been employed in U.S. insurance law. Social fairness focuses on insurance as solidarity; ensuring access to insurance coverage is a paramount goal. In contrast, actuarial fairness, also called fair discrimination, seeks to treat equal risks equally and unequal risks unequally. Part III applies these theoretical frameworks to genetic test results. It discusses in greater depth the three policy approaches employed to address insurer use of genetic test results—a prohibitive approach, a rational discrimination approach, and the status quo. Part IV discusses the economic considerations that motivate risk classification. Risk classification is the process of gathering information, referred to as “characteristics,” about an applicant, assessing how these characteristics affect risk, and placing applicants into risk classes that dictate premium and coverage levels. Historically, insurers used data for a relatively small number of characteristics, such as age, gender, and occupation, to assess individuals’ risk and assign premiums; however, over time, this process of risk classification became more refined as increasing information from medical exams and lifestyle are factored into risk assessment.21 The technical realm of risk classification is imbued with subjectivity. Thus, this Part foreshadows areas where a rational discrimination approach can ensure appropriate standards are met. The following Part discusses how insurers currently access and use genetic test results. Precision medicine and advancing genetic technologies further expand the possible information available to insurers challenging existing regulatory frameworks and bounds of fair use of data. Some have argued that because it is in the insurers’ best interests to avoid misuse of genetic test results, market forces should obviate the need for additional oversight. Part VI responds by arguing the market is an insufficient check on the system due to the burden placed on consumers, the competitive pressures insurers face to more narrowly refine risk classes and capture low-risk customers, the differences between insurance markets and other competitive markets, and the failure of the market to address fear of genetic discrimination. Finding the rational discrimination approach provides a balanced mechanism to address these concerns, Part VII delineates the standards for determining scientific, clinical, and actuarial relevance used or recommended by the United States, the United Kingdom, and Australia. Part VII proposes five additional areas of inquiry necessary in any determination of actuarial relevance for genetic test results. As discussed in Part VIII, the rational discrimination approach is a compromise that does not address all concerns of the public or of insurers. This Part, however, maintains this approach is an appropriate balance between the two positions and may in fact be beneficial for both. A rational discrimination approach balances the economic needs of insurers with the social concerns of the public. As one regulator quipped, “The math of correlation can be so lovely. Because math is blind and so the math must be fair. The math can’t be biased because it doesn’t know who you are, but it does know all about you.”22 Assessing risk can be a highly technical determination, but the math of statistical correlation and actuarial relevance is not an exact science—it is not blind, and it is certainly not guaranteed to be fair.23 Instead, the underlying assumptions, evidence, and inputs that go into actuarial calculations affect the outcome. Genetic tests that lack predictive precision may be useful for parents weighing subjective risks or patients considering alternative treatments, but they are generally not economically feasible for use in insurance risk classification. A rational discrimination approach has the potential to level the playing field across insurance companies nationally, enhance the economic efficiency of the insurance system, increase public understanding and trust in insurance risk classification, and dampen fears of genetic discrimination. Therefore, it is a necessary baseline policy for countries grappling with insurer use of genetic-test results.