The relentless advance of genetic science was always one of the best (and least-mentioned) arguments for the necessity of somehow guaranteeing Americans access to affordable health insurance.
The reason was that if readily available tests could identify who was most at risk for certain diseases, insurers could use the data to deny coverage or set prices beyond most people's reach. In turn, that prospect would scare people away from taking the tests, even when the results might prove valuable for protecting their health - and perhaps even saving some health-care expenses - or planning their careers and personal lives.
That looming problem was solved, we hope, by March's enactment of the new health-care law. But a parallel problem - and one much harder to address - faces life insurers and prospective policyholders, according to Harvard economist Greg Mankiw.
Mankiw, citing a Wall Street Journal story about newly identified genetic markers for those destined to live to a ripe old age, outlined the dilemma in a recent blog post that, in typical economist-speak, presented it as a set of "interesting economic questions":
- Will insurance companies start offering better life-insurance rates to those with these markers?
- Will they require annuity purchasers to take this test and offer the long-lived worse rates?
- If insurance companies do not use these markers, perhaps because of regulation, will the availability of these tests cause the markets for life insurance and annuities to unravel because of increased adverse selection?
- In light of the above considerations, what should public policy be toward insurance companies using these tests?
- To the extent that public policy is motivated by utilitarian concerns, should there be redistribution based on the outcome of these tests?
- If so, in which direction should it go? Away from those who are long-lived and can work a long life, or toward them, as they have longer periods of old age and retirement to finance?