Scientists are gradually identifying the many genetic variations that affect health risks. As the number of known variations increases and as the cost of genetic testing falls an increasing number of people will decide to undergo genetic testing to learn more about their health risks. It seems likely that genetic variations will be found that influence the risks for almost all diseases.

When individuals can learn much more about their personal genetic risks for a variety of illnesses they will in many cases respond by making different choices for medical insurance. Many of those faced with greater genetic risks will respond by trying to buy more medical insurance and those faced with fewer risks tend to buy less medical insurance. This will cause a large change in the medical insurance industry regardless of what regulatory changes are adopted in response. These changes will happen in any country that has private medical insurance. While the life insurance industry will also face changes the scope of this essay will restricted to medical insurance.

Logically speaking there are 4 main scenarios for knowledge about genetically derived health risks as they affect medical insurance:

• First, the individual and the insurance company both know very little about the individual's DNA sequence. This describes most of history up until this point.

• Second, only the insurance company knows the health risk information from an individual's DNA.

• Third, only individuals know their own genetic health risks.

• Fourth, both the individual and the insurance company know the individual's genetic health risks.

The first possibility describes where things have stood for most of the history of medical insurance up till now. However, since there are already a number of testable genetic health risk factors this has already begun to change in the direction of the other 3 choices.

The advantage of the first possibility is it literally makes medical insurance possible. The medical insurance industry and applicants have nearly equal ignorance of the health risks of medical insurance applicants. Everyone has a motive to buy medical insurance because no one knows whether they might fall ill. This provides the revenue to pay for those who do develop an illness.

The second logical possibility is unlikely to happen much in practice. Once personal DNA sequencing becomes affordable its likely that individuals will choose to have themselves tested. However, it is conceivable that some people won't want to know what their DNA sequence is or what risks they face from their DNA sequence. At the same time an insurance company, if allowed by regulatory agencies, might in the future insist on a tissue sample for DNA testing as part of an application for medical insurance. That way the medical insurance company can create a more accurate picture of the applicant's health risks. This possibility puts an individual who has an excellent low risk genetic profile at a disadvantage vis a vis an insurance company because the company can charge him a premium that is average for all people even though he's at below average risk and he will not know that in theory he ought to qualify for a lower rate.

The eventual debate will be between the third and fourth possibilities. Should insurance companies be allowed to know the genetically caused health risks of insurance applicants? That question looks set to become the cause of a large political battle in many nations. As genetic testing becomes cheaper and as it advances to cover a larger number of genetic locations most people will have their DNA tested in order to learn about their genetically caused health risks. So the most important question in the debate about medical insurance is going to boil down to the question of whether medical insurance providers will have the right to find out the medically important genetic variations of each applicant as part of the application for medical insurance. The insurance companies will want this information to decide whether to grant coverage and if so what premiums to charge and terms to offer.

What happens when many genetic risk factors become known and genetic testing becomes cheap and widely available? This will change the decisions that individuals make about their medical insurance. The insurance industry will be greatly affected by this change regardless of whether it is allowed access to the genetic test results of individual medical insurance applicants. Lets look at the two mostly likely scenarios.

If a government passes legislation that denies insurance companies access to the results of genetic disease susceptibility tests then individuals will still get tested and find out their genetic risks. People at greater risk will tend to buy more insurance and people at lesser risk will tend to buy less insurance. So the people who will cost the insurance companies to the most will rush to get lots of coverage and therefore will cost the medical insurance companies more than they do now. At the same time the people who face the least risk will spend less on medical insurance. So medical insurance companies will get less money from a group that currently pays in more than they draw out in benefits. The result is that with rates kept the same the revenue for the insurance companies will drop while their costs will rise.

Employer provided health plans will suffer similar problems. Someone who knows they have a greater genetic health risk will choose jobs that have fancier medical insurance plans. People at low risk will be more willing to be self-employed and buy their own medical insurance with more limited plans with higher deductibles and lower premiums. Such low risk people will also be more willing to take jobs that come with less or no medical insurance.

The general trend therefore will be that high risk individuals will tend to buy more insurance while the low risk individuals will tend to buy less. If current premium levels were kept the same then the total amount of revenue flowing to the insurance companies would decrease while their outlays would increase (since high risk people would tend to have more insurance than is they do now on average). The insurance companies would have to raise rates across the board in order to survive. Under this scenario some customers will be priced out of the market.

If the insurance companies are allowed to know genetic profile of each insurance applicant and are allowed to set rates based on genetic risk profiles then people with greater risk of illness (especially for illnesses that are expensive to treat) will have to pay higher medical insurance premiums. Under this scenario the lower risk people will pay less for the same amount of coverage than they would under the scenario where the medical insurance companies are allowed to know the genetic risks of applicants. More low risk people would buy coverage under this scenario because their premiums will be more affordable.

Of course, the rates for really high risk people will be too high for many of them to afford. In some cases the insurance companies will decide they will not even offer coverage.

An insurance system only works because people don't know how much risk they face. If risks can be accurately calculated for groups but not for individuals then insurance works. Lots of people pay in since all payers think they are at risk. To the extent that any payers can learn they are at less risk they become less willing to pay in. If they can know that they are at no risk at all for a particular threat they would have no need to buy any insurance to deal with that threat.

Just how much insurance rates (and even the availability of insurance) will change depends on how much health risks can be calculated from genetic information. It also depends on how much the knowledge of the health risks can be used to reduce those risks.

Just because some people will turn out to have high risks for certain illnesses will not necessarily be a reason for an insurance company to deny them coverage. In some cases there will be ways to manage the increased risks. For high risk depending on the nature of the risk there are alternatives that insurance companies may offer:

• Some high risk people will be offered accident coverage only.
• Other high risk people will be offered medical insurance that has exemptions where their highest risk illnesses are not covered. This will be similar to pre-existing illness exemptions on some policies available today.
• Required periodic testing for specific disorders as a condition for issuance of a policy for high risk individuals for disorders. There may be an increased premium to cover the testing and to treat the disease should it arise.
• Required preventative treatments as a condition for issuance and continuation of a policy. It is highly likely that, for instance, a variety of compounds will be found that reduce the risk of some types of cancers (eg by up-regulating liver detoxification enzymes) and some of those compounds may work especially well in people who are at heightened risk for the disorders. Gene therapies will be developed that can reduce risks as well. So someone with, for instance, a higher risk for colon cancer might be required to undergo colon gene therapy to make the colon cells less likely to become cancerous.
• Required dietary and other lifestyle changes. The problem with this type of requirement is that it can be hard to enforce. So unless an insurance company has a way to monitor compliance this approach is not likely to be used. Still, in some cases blood tests will be capable of detecting noncompliance with medical insurance terms. One might be required to get periodic blood or other testing to detect whether a particular type of food has been consumed.

It seems difficult to predict exactly how medical insurance will change. It depends on how much genetic variations contribute to health risks, how quickly treatments come along that can cancel out the harmful effects of high risk variations, how expensive those treatments will be, how rapidly the genetic tests become available, and how various factions mobilize to fight over this issue in each political jurisdiction.

There is a bright side: knowledge of how genetic variations contribute to disease incidence will greatly accelerate the rate of advance of biomedical science and technology. Much more effective treatments will be developed for all illnesses. Gene therapy will eventually allow parents to change their progeny's genes so that future generations will have fewer genetically caused health risks.