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The Potential for Discrimination in Health Insurance Based on Predictive Genetic Tests
Subcommittee on Commerce, Trade, and Consumer Protection
Dr. Donald A. Young
Introduction
Chairman
Stearns, distinguished members of the committee, I am Dr. Donald A. Young,
Interim President of the Health Insurance Association of America (HIAA).
I am very pleased to be here today to discuss concerns about the
potential for genetic discrimination in health insurance.
HIAA is the nation's most prominent trade association representing the
private health care system. Its
more than 300 members provide health, long-term care, dental, disability, and
supplemental coverage to more than 123 million Americans.
It is the nation's premier provider of self-study courses on health
insurance and managed care. HIAA
is well aware of the fact that there is considerable public concern about the
potential for genetic discrimination in the insurance marketplace.
At the same time, we are convinced that there is a great deal of
misinformation about this matter. In
particular, we believe that calls for federal legislation to address this issue
fail to appreciate the extensive array of federal and state laws already in
place, and the potential negative consequences of additional federal
requirements. In this regard, it appears that advocates for increased
government regulation of the private health insurance market often overlook the
need for the appropriate balance of risk and cost in a voluntary health
insurance market. I would
like to begin by summarizing current legal protections against genetic
discrimination in the health insurance sector and the inappropriate disclosure
of genetic information. Current
Legal Protections Against Insurance Discrimination
Current federal law already provides significant protections to consumers. Let us first look at group health insurance coverage. Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), employer-sponsored group health plans and health insurance issuers offering coverage in connection with group health plans cannot:
In highlighting these
existing protections, it should be noted that about nine out of 10 Americans
with private health insurance coverage receive it through some type of
employer-sponsored arrangement.[6] HIPAA also speaks to the issue of genetic discrimination in the case of individual health insurance coverage. Under HIPAA, insurance carriers offering coverage in the individual insurance market cannot:
These protections are substantial. Nevertheless, Congress was extremely careful with the restrictions it placed on the individual market for two reasons:
In
addition to the federal protections outlined above, the majority of states have
passed laws to protect individuals who undergo genetic testing. As a result, insurers that offer policies in the individual
market are generally limited in their ability to use genetic information in risk
classification and risk selection. Current
Health Insurer Practices
A
recent Public Policy Monograph issued by the American Academy of Actuaries notes
that private health insurers do not require applicants for insurance to undergo
genetic testing or use genetic testing to limit coverage for preexisting
conditions.[13] Similarly,
a survey conducted in 1998 found that no HIAA member company requires applicants
to undergo genetic testing in determining whether to offer or renew major
medical coverage, and that our members had no plans to do so.
In addition, the survey found that member companies do not exclude
coverage for certain benefits or establish differentials in premium rates or
cost-sharing for coverage on the basis of genetic information. Independent research confirms this ¾
health insurers are not "either asking for or using presymptomatic
genetic test results in their underwriting decisions," even in states where no
genetic testing legislation has been enacted.[14] Current
Privacy Protections
Some
pending genetic nondiscrimination proposals include provisions that would impose
special confidentiality requirements regarding genetic discrimination.
Once again, however, current federal law already speaks to the
confidentiality of personal health information, including genetic information.
For example, the preamble to the HIPAA privacy rule, published December
28, 2000, specifically notes that genetic information is included in the term
"protected health information" and subject to sweeping new requirements
governing the use and disclosure of health information by health plans; health
care clearinghouses; and doctors, hospitals, and other health care providers.
In addition, the Gramm-Leach-Bliley Act (GLBA), enacted November 12,
1999, requires health insurers and other covered financial institutions to
protect the privacy of nonpublic personal information.
In the case of insurers, the statute delegates the enforcement of these
requirements to state insurance authorities, and states are now considering
legislative and/or regulatory responses to GLBA.
Furthermore, the National Association of Insurance Commissioners has
adopted a model regulation to guide state policy makers in complying with
GLBA's privacy requirements. I
should note that HIAA's members are increasingly concerned about the
multiplicity of federal and state laws governing the privacy of personal health
information. It is becoming
increasingly costly for our members to sort through and comply with all of these
vary requirements, especially when an insurer does business in a large number of
states. This cost ultimately is
borne by consumers in the form of higher premiums. It is for this reason that HIAA has called for federal
preemption in the case of privacy requirements.
For purposes of this hearing, suffice it to say that HIAA strongly
opposes additional federal requirements that would uniquely govern the privacy
of genetic information. This would
only further complicate an already difficult situation. HIAA member companies believe it is important to treat
all medical information - including genetic information - equally to assure
strong and uniform confidentiality protections.
In this regard, I think it is important to note that health insurers have
an excellent track record of processing literally hundreds of thousands of
information transactions daily, with virtually no violations of patient
confidentiality. One final point is in order. It is increasingly critical that providers in an integrated system share health information and communicate about such information in order to treat patients effectively and avoid harmful medical errors. Genetic information, including the results of predictive genetic tests, is an integral and inextricable part of the medical record of each patient. This information can and should be used by providers and health plans to ensure that prevention - often the most effective type of care - is provided. Early detection, identification, and treatment are often critical to success. In addition, as the technology of genetic testing becomes more sophisticated, health professionals will need to know the results of genetic tests to avoid harmful medical errors. To require genetic information to be segregated and kept "private" in an effort to avoid the perceived risk of discrimination would thus be contrary to the best interests of the patient. HIAA Concerns
Given
current federal and state restrictions on the use of genetic information in the
health insurance sector, HIAA opposes additional legislation in this area. We
have a number of concerns regarding such proposals. Individual
Health Insurance
HIAA
is concerned about genetic nondiscrimination proposals that are at odds with the
fundamental principles of the individual health insurance market and go beyond
the restrictions imposed by HIPAA. In
the individual health insurance market, each person must decide whether or not
to participate based on the perceived value of coverage, i.e., the relationship
of the premium they must pay to their perception of their risk of loss.
In this market, risk selection (whether or not to accept an application
for insurance and issue a policy) and risk classification (ensuring that the
policy provisions and premiums charged are consistent with the level of risk
involved) - together known as underwriting - are important for consumers and
health insurers alike. For
consumers, underwriting ensures fairness among purchasers of insurance since
their premium reflects the likelihood of needing health care services.
In addition, underwriting protects the solvency of the insurance program,
making it possible for the insurer to fulfill the promise to pay claims as they
become due. No less important,
underwriting helps stabilize and hold down premiums by avoiding the effects of
adverse selection. For insurers,
underwriting protects the insurer's financial health by allowing premiums to
be set at a level commensurate with the expected level of claim cost. This financial health is necessary to ensure ongoing
operations and the continuing ability to develop and market new products.
In short, both consumers and insurers benefit when the insurance system
can offer financially sound, competitively priced products to a broad range of
consumers.[15] In
enacting HIPAA, Congress expressly, and wisely, refused to impose federal price
controls, or to extend additional guarantee issue requirements, to individual
insurance products. Such controls
and requirements would impede the ability of insurers to engage in legitimate
risk assessment activities that are necessary to set premiums commensurate with
actual risk. Laws prohibiting
insurers from accurately weighing the risks of offering coverage at a certain
price in the individual insurance market - for example, by proscribing the use
of information on health status - would compromise the ability of insurers to
remain financially viable and to meet their obligations to existing
policyholders. States that have
enacted guaranteed issue and some form of community rating in their individual
health insurance markets have experienced significant increases in the price of
indemnity insurance options, and are seeing a drop in the number of people
covered in the individual market. For
example, following the adoption of community rating and guaranteed issue in New
Jersey in 1993, average rates for the most popular individual indemnity health
plans rose to more than double the national average of rates for similar
coverage. During 1996 alone, the
number of people with individual coverage in the state declined 17.2 percent,
and the number of families covered declined 37 percent. To
sum up, in a voluntary, individual insurance market, restrictions on the ability
of insurers to evaluate applicants and charge appropriate premiums will simply
result in higher average premiums and fewer consumers purchasing coverage.
At a time when more than 42 million Americans lack health insurance, this
would certainly not be a very prudent course of action. HIPAA
"Excepted Benefits"
HIAA
also is concerned about proposals that would apply restrictions on the use of
genetic information on insurance products not covered by HIPAA, such as
disability, long-term care, and supplemental insurance.
Disability income, long-term care, supplemental insurance and other HIPAA
excepted benefits are commonly purchased by individuals - much more frequently
than is the case for comprehensive medical expense insurance.
In general, these insurance products are also held for longer periods of
time, and are more sensitive to biased or adverse selection based on long-term
health prospects. Consequently,
restrictions on risk selection and risk classification would be much more
detrimental for these types of coverage.[16] While
there appears to be considerable concern about the potential for insurers to
discriminate against consumers based on genetic information, there appears to be
a conspiracy of silence regarding the potential for individual consumers to use
genetic information in a way that disadvantages insurers and their other
policyholders. The potential for
such "biased selection" or "adverse selection" is especially a risk in
the case of insurance products that are voluntarily purchased by individuals,
who can choose the timing of their insurance purchase, as well as the extent and
duration of coverage. In these
cases, individual applicants have the opportunity to make decisions that favor
themselves at the expense of the insurance program by making purchase decisions
based on risk characteristics that are known or suspected by them but unknown to
the insurer. If the insurer is
unaware of a risk characteristic, it cannot be reflected in the premium charged,
and applicants with that characteristic will on average contribute less to the
insurance pool than they receive from it. Without the ability to properly assess the risk, insurers
would see more and more high cost individuals purchase coverage at an average
premium level. As this occurred,
premiums would rise for all policyholders, some of which might find that the
value received for their premiums no longer justified continued coverage. Of
course, biased or adverse selection is not necessarily an intentional deception
on the part of the consumer. It can
also occur if the insurer fails to inquire about a health condition, or is
prohibited from doing so. In any
case, this situation would be akin to one in which you had a test that would
indicate how likely it is that a fire would occur in your home and used that
information to time the purchase of fire insurance. Definitional
Problems
Another
problem arises with proposed definitions of such terms as "genetic test" and
"genetic information," which are often unnecessarily broad.
While these definitions purport to apply to newer genetic technologies,
they frequently sweep in tests and information collection practices that have
been routinely used by insurers for many years, especially in the individual
health insurance market. For example, some proposals define the term "genetic
information" in a way that includes information gathered when asking about an
individual's family history. Similarly,
some proposals include a definition of "genetic test" that could be
construed to include routine tests such a blood pressure reading, even including
"the analysis of . . . phenotypes," which would include almost any
observable characteristic of an individual.
In fact, Dorland's Illustrated
Medical Dictionary defines phenotype to include "the entire
physical, biochemical, and physiological makeup of an individual as determined
both genetically and environmentally." Furthermore,
while some proposals provide a "safe harbor" for routine laboratory tests,
the language used may not be adequate. This
safe harbor language is often circular, only protecting those tests to the
extent they do not constitute "genetic tests" as defined by the bill.
It is unclear how a safe harbor excludes anything from the scope of
"genetic tests" if it does not apply to genetic tests.
In any event, the current definitions are unnecessarily vague and seem
likely to encourage litigation. The
American Academy of Actuaries monograph cited earlier summarizes the problematic
nature of overly broad definitions as follows: If
a ban on information obtained from "genetic tests" defines such tests to
include medical history, routine physical examinations, and other routine
laboratory testing, it would severely hamper individual medical expense
insurance underwriting. Since some
individuals' health risks would be unknown, the pool of insurance purchasers
might soon include a disproportionate number of people with higher-than-average
anticipated medical expenses. This
biased selection would cause premium rates to rise, making individual medical
expense insurance even less affordable than it is now. [17] Evolving
Technology
It
is important to remember that genetic technology is still evolving and we do not
know what its ultimate capacity or impact on society will be.
Given the demonstrated lack of use of genetic information and existing
legal protections, HIAA believes it would be premature at this time to enact
additional legislation, locking-in certain legislative parameters in the face of
the rapid evolution of these genetic technologies. Conclusion
In conclusion, HIAA opposes federal legislation intended to prohibit discrimination based on the use of genetic testing or genetic information because:
The
public sensitivity about the use of genetic information is understandable, given
that genetic technology is new and unfamiliar.
However, insurer use of genetic information is subject to the same
restrictions as is any other type of personal health information.
Independent research confirms that individuals are not being denied
access to coverage based on genetic test results.
Given the emerging nature of the new technologies, the fragility of the
individual market, the high cost of coverage, and the demonstrated lack of any
abuse by health insurers, it is vital that we avoid premature action that would
undermine access to affordable health care coverage in the future.
It is also important that the public policy debate be carried on in a way
that does not feed unjustified public fears about insurers' use of genetic
information and thus discourage people who could benefit from these new tests
from undergoing them. [1] HIPAA Title I, Subtitle A, Part 1, Section 101 (ERISA Section 702(a)(1)). [2] HIPAA Title I, Subtitle A, Part 1, Section 102 (ERISA 702(a)(1)) (for individual enrollees); HIPAA Title I, Subtitle A, Part 1, Section 102 (PHSA Section 2712) (for groups). [3] HIPAA Title I, Subtitle A, Part 1, Section 101 (ERISA Section 702(b)(1)). [4] HIPAA Title I, Subtitle A, Part 1, Section 101 (ERISA Section 701(b)(1)(B)). [5] HIPAA Title I, Subtitle A, Part 1, Section 101 (ERISA Section 702(a)(1)). [6] William S. Custer and Pat Ketsche, The Changing Sources of Health Insurance, HIAA, December 2000. [7] HIPAA Title I, Subtitle B, Section 111 (PHSA Section 2741). [8] HIPAA Title I, Subtitle B, Section 111 (PHSA Section 2741(a)(1)(B)). [9] HIPAA Title I, Subtitle B, Section 111 (PHSA Section 2742). [10] The Changing Sources of Health Insurance. [11] American Academy of Actuaries, Risk Classification in Individually Purchased Voluntary Health Insurance, February 1999; U.S. General Accounting Office, Health Insurance for Children: Private Individual Coverage Available, but Choices Can Be Limited and Costs Vary, GAO/HEHS-98-201, August 1998; U.S. General Accounting Office, Private Health Insurance: Millions Relying on Individual Market Face Costs and Coverage Trade-Offs, GAO/HEHS-97-8, November 1996; American Academy of Actuaries, Providing Universal Access in a Voluntary Private-Sector Market, February 1996. [12] Stephen Zuckerman and Shruti Rajan, "An Alternative Approach to Measuring the Effects of Insurance Market Reforms," Inquiry, Spring 1999, page 44; William S. Custer, Health Insurance Coverage and the Uninsured, HIAA, January 1999; Frank A. Sloan and Christopher J. Conover, "Effects of State Reform on Health Insurance Coverage of Adults," Inquiry, Fall 1998, page 280; Melinda L. Schriver and Grace-Marie Arnett, Uninsured Rates Risk Dramatically in States with Strictest Health Insurance Regulations, The Heritage Foundation, August 20, 1998; Jill A. Marsteller et al., Variations in the Uninsured: State and County Level Analyses, The Urban Institute, June 11, 1998. [13] American Academy of Actuaries, Genetic Information and Medical Expense Insurance, June 2000. [14] Mark A. Hall and Stephen S. Rich, "Laws Restricting Health Insurers' Use of Genetic Information: Impact on Genetic Discrimination," American Journal of Human Genetics, January 2000, p. 293. [15] Risk Classification in Individually Purchased Voluntary Health Insurance. [16] American Academy of Actuaries, Risk Classification in Voluntary Individual Disability Income and Long-Term Care Insurance, Winter 2001. [17] Genetic Information and Medical Expense Insurance.
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