Ontario is proposing a change to the Ontario Human Rights Code aimed at protecting people's genetic information from being used by insurance companies and employers. This would allow more people to have genetic testing done, for health or research purposes -- testing they would possibly not do if they had to disclose the test results to insurers.
Supporters of the change in the Code refer to insurers as discriminating against those applying for coverage on the basis of an individual's genetic traits. And since scientists are still a long way from figuring out what the direct health implications of various genetic traits may be, the possibility for discrimination on the basis of inaccurate assumptions may indeed have a concrete basis.
The proposed privacy regulations sound like a positive move for society -- a policy slam dunk. But, one can expect the insurance industry to oppose such legislation with some fairly logical and fundamental arguments. They will argue that within this possible legislation, there is a great risk of "unintended consequences." And they'll be right.
The insurance mechanism is dependent on being able to group like risks into underwriting classes and then price them according to the expected costs they bring to their pool. Today, young drivers pay more than mature drivers for car insurance. Smokers pay more than non-smokers for life insurance. This is based on huge data pools showing connections between certain personal traits and ultimate claims (either as to timing or size of claim).
We expect more frequent or larger claims from young drivers than from mature drivers. Actuaries call this actuarial equity and the overall process 'fair' discrimination (similar to prohibiting drinking until age 19). These principles have been tested many times in the courts and virtually always upheld. If and when genetic evidence creates the same irrefutable knowledge regarding health and longevity risks, insurance companies don't want to lose out on 'fair' discrimination.
Another essential element of the insurance contract is that the two parties (the insurance company and the policyholder) have and share equal information. It is easy to understand that a person who knows he or she is very sick would be more apt to apply for insurance (and larger amounts thereof) than a person who knows he or she is very healthy.
For the contract to be fair, the insurer must be allowed to gather an equal understanding of the risk the applicant is going to bring to the insurance pool. Otherwise, poorer risks will cause claim payouts to be larger or to be paid earlier, thus raising the average claim cost and inevitably raising the premiums to be paid by all. Every applicant for insurance must disclose all known relevant information for the contract to be fair and for all policyholders to pay a price for their coverage that is fair for them. This is the good faith part of the contract and is essential.
Insurance companies cannot print money. All claims and expenses are paid by the premiums collected from the group of policyholders who have agreed to share the overall risk with the other members of their risk pool. If claim costs go up, so must premiums for all policyholders in the pool in the future.
Are there other alternatives?
Canada has abandoned private insurance as an alternative for paying for access to physicians and hospitals in favour of a single payer system (federal-provincial governments via the Canadian taxpayer); the cross subsidization of healthy Canadians paying the healthcare costs of unhealthy Canadians is how the system currently operates. However, for access to drugs, homecare and such things as life insurance, most Canadians continue to rely on private insurers.
So, while changing the Human Rights Code may sound like a logical slam dunk, an unintended consequence could be the very serious erosion of one of the basic tenets of insurance which could endanger its wide availability.
Obviously, we have two schools of thought on genetic testing and its inherent privacy. Both arguments have logical foundations. We need to start a full and open dialogue around the very real issues that these arguments create. We have the time before genetic testing becomes overly popular and commonplace. Let the conversation begin.
Robert L. Brown is an expert advisor with EvidenceNetwork.ca and a Fellow with the Canadian Institute of Actuaries. He was Professor of Actuarial Science at the University of Waterloo for 39 years and a past president of the Canadian Institute of Actuaries.
