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The Impact of Genetic Testing on Healthcare Insurance


  • Michael Hoy

    (University of Guelph, Ontario, Canada)

  • Fabienne Orsi
  • FranÁois Eisinger
  • Jean Paul Moatti


The article discusses the potential impact of the diffusion of genetic testing on healthcare insurance markets. It refers to the theoretical approaches respectively proposed by Rothschild and Stiglitz (1976) and Wilson (1977, 1980) about insurance market equilibrium with adverse selection due to asymmetries of information about individual risks. The article shows that, in such contexts, a market equilibrium can be reached either on the basis of separating contracts discriminating between risk levels or of pooling unique contracts based on the average risk in the population, and that the choice of this alternative depends on an empirical parameter: the effective proportion of "high-risk" individuals in the population. An application to the case of genetic risk of breast cancer, the most emblematic advance in practical application of genetic testing in recent years, confirms that, due to the limited incidence of the gene mutations associated with a higher risk in the general female population, a pooling equilibrium would be obtained. These results suggest that current alarmist claims that diffusion of genetic tests in medical practice will inevitably increase adverse selection and inefficiencies in health insurance systems if the use of this information to establish insurance contracts is banned (either because compulsory universal health insurance excludes separating contracts by essence, or by current legislation banning the use of genetic testing by private insurers) are rather overstatements. Copyright 2003 The International Association for the Study of Insurance Economics.

Suggested Citation

  • 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, April.
  • Handle: RePEc:bla:geneva:v:28:y:2003:i::p:203-221

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    Cited by:

    1. Maureen Durnin & Michael Hoy & Michael Ruse, 2012. "Genetic Testing and Insurance: The Complexity of Adverse Selection," Working Papers 1208, University of Guelph, Department of Economics and Finance.
    2. 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.
    3. Oster, Emily & Shoulson, Ira & Quaid, Kimberly & Dorsey, E. Ray, 2010. "Genetic adverse selection: Evidence from long-term care insurance and Huntington disease," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 1041-1050, December.
    4. Emons Winand, 2009. "Genetic Tests and Inter-Temporal Screening in Competitive Insurance Markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-19, July.
    5. David Bardey & Philippe De Donder & Cesar Mantilla, 2014. "Adverse Selection vs Discrimination Risk with Genetic Testing. An Experimental Approach," CESifo Working Paper Series 5080, CESifo Group Munich.
    6. Ray Rees & Patricia Apps, 2006. "Genetic testing, income distribution and insurance markets, CHERE Working Paper 2006/3," Working Papers 2006/3, CHERE, University of Technology, Sydney.
    7. Bardey, David & De Donder, Philippe & Mantilla, Cesar, 2017. "How Is the Trade-off between Adverse Selection and Discrimination Risk Affected by Genetic Testing? : Theory and Experiment," TSE Working Papers 17-777, Toulouse School of Economics (TSE).
    8. Vicky Barham & Rose Anne Devlin & Olga Milliken, 2016. "Genetic Health Risks: The Case for Universal Public Health Insurance," Working Papers 1605E, University of Ottawa, Department of Economics.
    9. Christine Arentz, 2012. "Auswirkungen von Gentests in der Krankenversicherung," Otto-Wolff-Institut Discussion Paper Series 04/2012, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland.
    10. Michael Hoy & Michael Ruse, 2008. "“No Solution to This Dilemma Exists”: Discrimination, Insurance, and the Human Genome Project," Working Papers 0808, University of Guelph, Department of Economics and Finance.

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