September 29, 1995

Dianne Feinstein, California.  co-chair Connie Mack, Florida.  co-chair

Testimony of:

Harvie Raymond

Vice President, Health Insurance Association of America

In Summary The Insurance Industry spokesman, Harvie Raymond testified that legislation precluding insurance underwriters from gaining access to genetic information, where available, would create an imbalance in the bargaining position between insurer and insured. He stated that he knows of no insurance company that is requiring genetic testing, but believes the relationship between insurer and insured in the context of health insurance must be based upon equality of information by the parties, especially in the context of individual health insurance policies, and finds no basis for creating an exception for genetic information.

Full Audio .au (8 Mb) / .ra (1 Mb)

I am Harvie Raymond, Assistant Vice President of the Health Insurance Association of America (HIAA). The HIAA represents over 200 of the nation's leading health insurers and managed care companies, that serve tens of millions of Americans. I am pleased to have the opportunity to participate in this hearing on genetic testing and genetic information.

HIAA strongly supports the guaranteed availability and renewability provisions contained in the Kassebaum bill (S.1028) that apply to employer-sponsored group coverage. Health plans should not be allowed to deny coverage to employers who want to purchase a policy, and once covered, employer's should be able to renew their policies, except in cases of fraud, misrepresentation, or non- payment of premium. All eligible employees should be offered coverage, regardless of their health condition. This provision, called "whole group coverage," requires that employers determine which employees are eligible for health coverage on a basis unrelated to health status or medical claims experience. Similarly, insurers should not be allowed to exclude any otherwise- eligible employee or dependent from coverage under a group policy.

HIAA also supports the availability of health insurance to every individual. Reforming the market for individually purchased health insurance requires careful balancing between increased accessible to some may result in making it less affordable for everyone in the individual market. This, in turn, could lead to an increase in the number of uninsured Americans.

Over the next few minutes I hope to explain to you why private medical information, including genetic information, is vital to health insurance carriers. No company we know of is requiring genetic tests. Nor do we know of a company specifically asking for genetic test results. But companies believe they should not be denied access to the results of genetic tests.


To our knowledge, insurers and Insurance Departments alike have received few complaints regarding genetic testing. However, when discussed in the popular press, the issues of insurability and confidentiality are on the list of potential concerns.

Regarding confidentiality, the insurance industry has a good and long reputation of addressing and protecting confidentiality of our insureds. Medical information used in underwriting requires authorization and informed consent from the applicant and the release of the information to attending physicians or other sources is only done with the applicant's written permission. All of this is required by law. We are aware of few consumer complaints relating to the confidentiality of information.

Regarding uninsurability, it is important to note that genetic tests are a positive medical development that will assist consumers. The vast majority of test results are likely to confirm the improbability of sickness, disability or death. Information on an individuals susceptibility to an array of diseases can be useful in identifying what health related behaviors to avoid and pursue. These lifestyle behaviors and other information can assist in appropriate medical management.

HIAA member companies provide a variety of insurance products that are classified by legislation or regulation as "health insurance." At the state and federal levels, this includes: medical expense insurance; managed care approaches, such as HMOs and PPOs; disability income products; and a variety of supplemental and specialized products, such as long-term care insurance, Medicare Supplement, specified disease, hospital indemnity, dental, vision, and accident-only coverages. Unfortunately, many do not understand these statutory or regulatory distinctions. The insurance industry is built upon a basic insurance principle - the ability to appropriately and accurately evaluate risks and in turn, price the product. If insurers are restricted in gathering risk-related information, the financial solvency of the industry could be threatened.


Most people think that "health insurance" is coverage that pays for doctor bills, hospital bills, lab tests, or x-rays. medical expense insurance is a more accurate term. While such products are available as either group or individual insurance, most medical expense insurance is provided through employer-sponsored group coverage. Only about ten to fifteen percent of the insured population has individual medical insurance. this is important because individual coverage is a focal point of debate on genetic issues and privacy.

The problems in the individual market are complex. Individuals know their own prospects for needing medical services, and this influences their decision whether or not to purchase health coverage. Those who buy individual health insurance pay the entire premium out of their own pockets, without an employer subsidy. The decision to purchase coverage directly correlates to an individual's health status.

If insurance carriers are required to accept all individuals, those who have existing medical problems are more likely than those who are not to avail themselves of the opportunity to buy it. As a result, the average cost for people in the individual insurance pool will rise, driving up premiums for individual health insurance, including those who currently have coverage. This will prompt some individuals--most likely those who are healthier--to drop coverage because they can no longer afford it. The loss f healthy lives from the pool causes premiums to spiral upward and, within a short time, makes individual coverage unaffordable for thousands more. The notion of each person deciding whether to purchase individual health insurance based on his or her own knowledge of their health status and the likelihood of their future need for health care services is known as "adverse selection."


Access to information is necessary if health plans are to identify individuals who are likely to develop a serious illness or disease. Early identification will facilitate individual medical management of diseases that are expected to be prolonged, expensive, or require specific interventions, such as advanced technology, specialized facilities or professional expertise.

Early intervention, such as the use of centers of excellence, is beneficial to the insured, the provider and the insurer. While the disease or illness may not be prevented, early knowledge of the potential problem allows monitoring, development of a medical management protocol, and coordinated efforts between the individual and the health plan to achieve the best outcomes.


The use of the personal medical information requirement of insurers is centered around underwriting or risk selection processes. Remember that most medical expense health insurance is employer- sponsored whole group coverage. This does not involve the evaluation of an individual's health status or health history.

Carriers, however, who provide disability income, long-term care and supplemental coverage through individual policies legitimately need to underwrite in a voluntary market. Underwriting is the initial evaluation by the insurer of those factors which have been actuarially determined to have an affect upon the expected losses insured by a particular product. Among the chief concerns for insurers is the possibility of adverse selection.

Adverse selection may occur when an individual knows he or she is going to become sick or die prematurely. The individual then has a greater incentive to buy more insurance and to, in turn, withhold information from the insurer.

Adverse selection can only occur when one party has more information than the other. If neither the purchaser nor the carrier know that the individual is likely to develop a genetic disease, adverse selection cannot occur. For this reason, it is important for an insurer to have the right to ask about tests that may have been performed.

The underwriting process protects the consumer as well as the insurer. The underwriting process assures us that premiums are financially prudent and adequate to enable the insurer to meet its contractual obligations over the longer term. Personal medical information is necessary to fairly determine rates and coverage for disability income, long term care and supplemental insurance. Adverse selection is devastating to an insurer, especially in the disability income market. First, the claim liability is frequently long term. Second, disability income is typically sold as a noncancelable contract, which means premiums cannot be raised during the lifetime of the insured. Perhaps it is stating the obvious, but it is important to understand that in situations where adverse selection occurs, there is a one-to-one claims ratio. That is, one disability claim for each insured.

Because all diseases and medical conditions have a genetic component, the prohibition of disability and supplemental insurers' right to underwrite on the basis of genetic information is the same as denying the right to underwrite on the basis of any other medical information. If this occurs, the disability income and supplemental insurance market as we know it will cease to exist. We do not believe the need for such a fundamental restructuring has been established.


Insurance companies also have a need for information during the claims processing phase, during which the insurer requires access to a significant amount of medical information. At the basic level, information is needed to determine the nature of claims expense, provider information, and detail of treatment sufficiently to accurately and promptly adjudicate the claim. These questions include what medical service were provided, by whom, for what reason, and at what cost.

The insurer must determine that the services were medically necessary, were contractually covered, and that the charges were reasonable. In addition, the administration of coordination of benefits may require carriers to have access to information, including information that would be shared between insurance companies, again with appropriate authorization from the insured. These programs assist in keeping premiums as low as possible.

In addition, managed care techniques, such as utilization management, are employed to assure that appropriate and necessary treatment and care are provided. For many claims, this requires access to personal medical information by those within the insuring organization or retained by third party utilization management firms. These valid business needs for personal health information should not be compromised.


Finally, HIAA and its member companies believe that a discussion of genetic testing is appropriate. Genetic testing is an important developing medical tool that holds exciting promise.

Genetic testing is in its infancy, and no one, not insurers, not regulators, not even the geneticists, knows exactly where or how this science will evolve over the next fe years or decades. We cannot pick up a newspaper or magazine without discovering an article on a new advancement in the field. to develop a regulatory position on the use and distribution of this information is to do so with only part of the story. Without all the facts, we cannot make wise decisions.

The insurance industry, like the medical community, is reacting to these changes. We are not currently using DNA-based genetic tests because the medical community is typically not using DNA-based genetic tests. When the medical community does begin using the tests, insurers will be at a disadvantage and at financial risk if they do not have access to the same information s applicants.

Over time, only those with this information wold purchase the product, claims would increase dramatically and, ultimately, the product would be unaffordable for the remainder of the population and would lead to insurer insolvencies.

As I have said, the industry has been working with the medical community to balance the issues of affordability and accessibility. This process is ongoing and is expected to evolve as the science evolves.

I would be happy to respond to questions or expand on anything that I have covered.

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