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Genetic testing, income distribution and insurance markets, CHERE Working Paper 2006/3

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Author Info
Ray Rees (Univerity of Munich)
Patricia Apps () (Univerity of Sydney)

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Abstract

This paper analyses the policy implications for health insurance markets of the development of genetic testing. A central issue surrounding this development is whether insurers should be allowed access to the information provided by such tests. The paper first shows that on efficiency grounds alone, insurance buyers should be allowed voluntarily to supply this information to insurers. The source of the considerable opposition to this proposal is really the distributional implications: those with the worst genetic endowments will as a result have to pay the highest insurance premiums. The paper then goes on to analyse possible redistributional policies that can remedy this. In doing so, it makes a significant departure from the mainstream literature on adverse selection in insurance markets, by assuming that individuals have differing income endowments.

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File URL: http://www.chere.uts.edu.au/pdf/insurance.pdf
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File Function: First version, 2006
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Publisher Info
Paper provided by CHERE, University of Technology, Sydney in its series Working Papers with number 2006/3.

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Date of creation: Jul 2006
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Handle: RePEc:her:chewps:2006/3

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Related research
Keywords: health insurance; genetic testing;

Find related papers by JEL classification:
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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  1. Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December. [Downloadable!] (restricted)
  2. David M. Cutler & Richard J. Zeckhauser, 1997. "Adverse Selection in Health Insurance," NBER Working Papers 6107, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-74, September. [Downloadable!] (restricted)
  4. Harris Milton & Townsend, Robert M, 1981. "Resource Allocation under Asymmetric Information," Econometrica, Econometric Society, vol. 49(1), pages 33-64, January. [Downloadable!] (restricted)
  5. Hoy, Michael, 1982. "Categorizing Risks in the Insurance Industry," The Quarterly Journal of Economics, MIT Press, vol. 97(2), pages 321-36, May. [Downloadable!] (restricted)
  6. Strohmenger, R. & Wambach, A., 2000. "Adverse selection and categorical discrimination in the health insurance markets: the effects of genetic tests," Journal of Health Economics, Elsevier, vol. 19(2), pages 197-218, March. [Downloadable!] (restricted)
  7. Michael Hoy & Fabienne Orsi & FranÁois Eisinger & Jean Paul Moatti, 2003. "The Impact of Genetic Testing on Healthcare Insurance," The Geneva Papers on Risk and Insurance, The International Association for the Study of Insurance Economics, vol. 28, pages 203-221, 04. [Downloadable!] (restricted)
  8. Hoy, Michael & Polborn, Mattias, 2000. "The value of genetic information in the life insurance market," Journal of Public Economics, Elsevier, vol. 78(3), pages 235-252, November. [Downloadable!] (restricted)
    Other versions:
  9. Smart, Michael, 2000. "Competitive Insurance Markets with Two Unobservables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 153-69, February.
    Other versions:
  10. Crocker, Keith J. & Snow, Arthur, 1992. "The social value of hidden information in adverse selection economies," Journal of Public Economics, Elsevier, vol. 48(3), pages 317-347, August. [Downloadable!] (restricted)
  11. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  12. Bertrand Villeneuve, 2003. "Concurrence et antisélection multidimensionnelle en assurance," Annales d'Economie et de Statistique, ADRES, issue 69, pages 06, Janvier-M. [Downloadable!]
  13. Doherty, Neil A. & Thistle, Paul D., 1996. "Adverse selection with endogenous information in insurance markets," Journal of Public Economics, Elsevier, vol. 63(1), pages 83-102, December. [Downloadable!] (restricted)
  14. Tabarrok, Alexander, 1994. "Genetic testing: An economic and contractarian analysis," Journal of Health Economics, Elsevier, vol. 13(1), pages 75-91, March. [Downloadable!] (restricted)
  15. Hoy, Michael, 1989. "The value of screening mechanisms under alternative insurance possibilities," Journal of Public Economics, Elsevier, vol. 39(2), pages 177-206, July. [Downloadable!] (restricted)
  16. Cutler, David M. & Zeckhauser, Richard J., 2000. "The anatomy of health insurance," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 11, pages 563-643 Elsevier. [Downloadable!] (restricted)
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