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Genetic Information: Comparing Alternative Regulatory Approaches when Prevention Matters

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  • Francesca Barigozzi

    ()

  • Dominique Henriet

    ()

Abstract

We compare the alternative approaches for regulating genetic information in the health insurance market when prevention measures are available. In the model, firms offer insurance contracts to consumers who are initially uninformed of their risk type but can obtain such information by performing a costless genetic test. A crucial ingredient of our analysis is that information has decision-making value since it allows for optimal choice of a self-insurance action (secondary prevention). We focus on the welfare properties of market equilibria obtained under the different regulatory schemes and, by using an intuitive graphical analysis, we rank them unambiguously. Our results show that Disclosure Duty weakly dominates the other regulatory schemes and that Strict Prohibition represents the worst regulatory approach.

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Bibliographic Info

Paper provided by CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY in its series CHILD Working Papers with number wp01_09.

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Length: 31 pages
Date of creation: Dec 2008
Date of revision:
Handle: RePEc:wpc:wplist:wp01_09

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Keywords: health insurance markets; information gathering; discrimination risk; classification risk; self-insurance;

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References

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  1. Richard A. Posner, 1980. "The Economics of Privacy," University of Chicago - George G. Stigler Center for Study of Economy and State 16, Chicago - Center for Study of Economy and State.
  2. Michael Hoel & Tor Iversen, 2001. "Genetic Testing When There is a Mix of Compulsory and Voluntary Health Insurance," CESifo Working Paper Series 495, CESifo Group Munich.
  3. Cochrane, John H, 1995. "Time-Consistent Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 445-73, June.
  4. Posner, Richard A, 1981. "The Economics of Privacy," American Economic Review, American Economic Association, vol. 71(2), pages 405-09, May.
  5. Cremer, Jacques & Khalil, Fahad, 1992. "Gathering Information before Signing a Contract," American Economic Review, American Economic Association, vol. 82(3), pages 566-78, June.
  6. 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.
  7. 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.
  8. Tabarrok, Alexander, 1994. "Genetic testing: An economic and contractarian analysis," Journal of Health Economics, Elsevier, vol. 13(1), pages 75-91, March.
  9. Hoel, Michael & Iversen, Tor & Nilssen, Tore & Vislie, Jon, 2006. "Genetic testing in competitive insurance markets with repulsion from chance: A welfare analysis," Journal of Health Economics, Elsevier, vol. 25(5), pages 847-860, September.
  10. Krupa S. Viswanathan & Jean Lemaire & Kate Withers & Katrina Armstrong & Agnieszka Baumritter & John C. Hershey & Mark V. Pauly & David A. Asch, 2007. "Adverse Selection in Term Life Insurance Purchasing due to the BRCA1/2 Genetic Test and Elastic Demand," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(1), pages 65-86.
  11. Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December.
  12. 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.
  13. 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.
  14. Ray REES & Patricia APPS, 2006. "Genetic testing, income distribution and insurance Markets," Annales d'Economie et de Statistique, ENSAE, issue 83-84, pages 353-368.
  15. George J. Stigler, 1980. "An Introduction to Privacy in Economics and Politics," University of Chicago - George G. Stigler Center for Study of Economy and State 10, Chicago - Center for Study of Economy and State.
  16. Alberto Bennardo, 2008. "Information Gathering, Disclosure and Contracting in Competitive Markets," CSEF Working Papers 190, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  17. Michael Hoy & Michael Ruse, 2005. "Regulating Genetic Information in Insurance Markets," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 8(2), pages 211-237, 09.
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Cited by:
  1. Bardey, David & De Donder, Philippe, 2013. "Genetic testing with primary prevention and moral hazard," Journal of Health Economics, Elsevier, vol. 32(5), pages 768-779.
  2. Georges Dionne & Nathalie Fombaron & Neil Doherty, 2012. "Adverse Selection in Insurance Contracting," Cahiers de recherche 1231, CIRPEE.

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