Essay Sample on Insurance and Genetically Inherited Diseases

Insurance companies and employers are tasked with the role of providing insurance coverage to the insured. Health insurance has, however, become a great challenge, especially in this era of Genetically Inherited Diseases such as Alzheimer’s disease, ALS, and Huntington’s disease. The insured are always required, according to the principle of utmost good faith, to provide factual and correct information, including their health information to enable the insurance providers to formulate appropriate insurance coverage.

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Facts of the Case Study

Insurance companies provide insurance coverage for individuals based on various identified risk factors which include age, general health status, lifestyle as well as occupation. Upon payment of the insurance premium, the policyholder is entitled to insurance coverage as specified in the insurance policy. Premium payments are subject to the insurers’ risk assessment of the prospective customers’ probability of filing a claim as well as the possible amount of the claim filed. Insurance companies charge higher premiums to individuals with higher risks of filing a claim. For instance, a race car driver is charged considerably higher premiums than an accountant for a life or health insurance coverage.

Similarly, the premium for smokers is higher than for nonsmokers. Therefore, knowledge of the health risks associated with the individuals taking out insurance coverage enables the insurance companies to adjust their premiums appropriately. In the insurance industry, adverse selection occurs when one party has an information advantage over the other party. For example, individuals taking out life or health insurance possess more knowledge and information than the insurance company concerning their health and lifestyle. In such situations, the insurance company is likely to extend insurance coverage to an individual whose real risk is significantly higher than the risk that the insurance company is aware of. A good example is a smoker who successfully manages to obtain life or health insurance coverage as a nonsmoker.

Smoking is a critical risk factor for life or health insurance; hence a smoker must pay higher premiums to receive similar coverage as a nonsmoker. The insurance company, thus, bears the adverse consequences of providing insurance coverage at a cost that does not give a true reflection of its risk exposure. All the parties in an insurance contract, in accordance to the principle of utmost good faith, are required to give factual and correct information, and voluntary provision of false information by a policyholder has severe penalties including misdemeanours to felonies both on state and federal levels.

Also, some individuals are subject to genetically inherited health problems, such as Alzheimer’s disease, ALS, and Huntington’s disease. For instance, Huntington’s is a degenerative brain disorder that affects about 1 in 10,000 people. Children whose parents have Huntington’s possess a 50% chance of inheriting the disease hence the need to disclose such essential health information to the insurance providers. However, according to ‘’Health Insurance in the Age of Genetics’’ research conducted by the National Human Genome Research Institute, most Americans are unwilling to disclose their genetic information to insurance providers due to the fear of potential discrimination and stigmatization based on the genetic information.

The principle of privacy and confidentiality requires insurers to treat policyholder’s information with the highest levels of confidentiality. Any information about the insured should be released for treatment purposes only and upon consultation and agreement with the holder. Contravention of the principle has serious legal implications for any party in an insurance policy contract. Discrimination against people who may have genetically inherited diseases is against the principles of insurance and countries such as Belgium, Denmark, Finland, France, Norway, and Sweden have put in place legislations that illegalize it. Similarly, in 2008, the United States enacted the Genetic Information Nondiscrimination Act that prohibits employment and insurance discrimination simply on the basis that a person has a genetic predisposition to developing a disease in the future.

Ethics for Insurers in Charging Higher Premiums to High-Risk Individuals

It is unethical for insurance companies to charge higher premiums to high-risk individuals. Firstly, it contradicts the fundamental insurance concept of pooling of risks. The main purpose for the existence of health insurance companies is to allow members to pool financial resources together after which the costs are combined to calculate premiums for every individual. Therefore, in the case of a premium rating category, the comparatively lower amounts paid by the healthy individuals can be appropriately used to offset the higher amounts of the less healthy individuals.

Secondly, charging higher premiums to high-risk individuals is unethical because in most cases, it is never their fault of individuals to get exposed to high-risk factors. In the case of Huntington’s disease, children whose parents have the disease possess a 50% chance of inheriting the disease; hence it is unfair to charge them higher premiums. However, individuals need to take personal responsibility to minimize high-risk factors. For example, smokers should ensure that they do it responsibly in a manner that does not risk their health and that of others.

Additionally, charging higher premiums to high-risk individuals is unethical because it is like punishing the individuals for their condition. Even if it were their fault, it is still not appropriate to punish them by charging higher premiums. Instead, it is important for insurance providers to devise better ways of handling individuals to ensure that they reduce their exposure to high-risk factors.

Responsible Actions of Insurance Companies and the Disclosure of Medical Reports

It is a responsible action for the insurance providers to require their customers to disclose medical information or are required to submit to a medical examination. Disclosure of medical information minimizes the chances of adverse selection occurring between the insurer and the policyholder. Policyholders are, therefore, expected to provide honest and accurate information relating to their past and present health conditions to enable the insurance companies to formulate appropriate insurance policies for the insured. However, certain reasons have contributed to the opposition of disclosure of medical information to the insurance companies by the policyholders. The main reason is that people who carry genes that code for particular diseases may or may not eventually develop them. Secondly, some people may not want to be forced to take a test because they do not want to know what their eventual fate in life may be.

Actions I would take if I were an Insurance Commissioner

I would first ensure that insurance companies are financially stable. Financial strength enables the insurance companies to have enough liquidity to honour their policies, thereby reducing cases of insolvency among the insurance companies. To achieve this, I would put in place the necessary oversight measures aimed at ensuring that the insurance companies have kept adequate reserves of money that allows them to respond effectively in the event of the occurrence of a catastrophe. By working hand in hand with the insurance providers, analysts as well as actuaries, I would aim to ensure that insurance providers have enough finances that can enable them to sell their policies without any limitation.

Secondly, I would put control over the insurance rates. There are some insurance products, such as health insurance, that are essential for every person, whether rich or poor. Insurance providers may take advantage of this requirement to exploit people; therefore, the need to have control over the rates charged by the insurance companies. Furthermore, as an insurance commissioner with the ability to approve the rates for particular products before their implementation, I would ensure that there exists a balance between an insurance providers’ right to gain reasonable profits with the customers right to acquire affordable insurance policies.

Thirdly, I would ensure that insurance products are at par with the ever-changing health, legal as well as economic environments. The approved state and federal government contract stipulations can be appropriately reflected in the market environments by having meetings with the insurance providers, consumer organizations, and health practitioners regularly. Moreover, I would ensure that the insurance products sold offer enough coverage without putting a huge burden on the insurance companies.

Next, in an attempt to guarantee the confidentiality and privacy of medical information, I would put in place regulations that prohibit the insurance providers from giving out such sensitive information for nontreatment purposes without approval of the person. Besides, the regulation would impose restrictions concerning the release of medical information to other insurance providers, planning agencies, and other bodies governed by state insurance laws such as disability, life, and long-term care insurers among others. Also, the regulation would prohibit insurance providers from giving out personal health information to the Medical Information Bureau or other agencies authorized to collect, compile, or spread insurance information.

Lastly, I would investigate complaints and offer effective remedies. It is expected that in a perfect insurance market, each transaction would make a sequel in a satisfied and happy consumer. However, this is never the case in the real market. Therefore, as an insurance commissioner, I would establish an investigative department that is responsible for examining complaints made by consumers against the insurance providers. Independent agencies will conduct the investigations to ensure that insurance companies and providers act in conformity with the regulations and utmost good faith.

Conclusion

In summary, it is clear from the above discussion that insurance companies play a key role in providing health coverage to people. However, health insurance remains to be a great challenge for most people, especially those with genetically inherited diseases and other high-risk individuals. Charging higher premiums to high-risk individuals is unethical because it is against the fundamental insurance concept of pooling of risks.

The insurance companies must, however, act responsibly when they require their customers to disclose medical information or are required to submit to a medical examination because doing so enables the insurers to minimize chances of adverse selection. The insurers, therefore, need to guarantee the privacy and confidentiality of the medical information of policyholders. If I were an insurance commissioner, I would put in place effective guidelines, legislations as well as regulations aimed at ensuring sanity in the insurance industry while considering the interest of every stakeholder.

Reference

Turenne, P. (2010). MP Fights Genetic Discrimination. Winnipeg Sun. http://www.winnipegsun.com/news/winnipeg/2010/02/25/13023676.html.