We develop a theoretical analysis of two widely used regulations of genetic tests, Disclosure Duty and Consent Law, and we run an experiment in order to shed light on both the take-up rate of genetic testing and on the comparison of policyholders’ welfare under the two regulations. Disclosure duty forces individuals to reveal their test results to insurers, exposing them to a discrimination risk. Consent law allows them to hide any detrimental information, resulting in adverse selection. The experiment results in much lower genetic tests take-up rates with Disclosure Duty than with Consent Law, showing that subjects are very sensitive to the discrimination risk. Under Consent Law, take-up rates increase with the adverse selection intensity. A decrease in the test cost, and in adverse selection intensity, both make it more likely that Consent Law is preferred to Disclosure Duty.
Consent Law, Disclosure Duty, Personalized Medicine, Test; take-up rate, pooling health insurance contracts.;
- C91: Laboratory, Individual Behavior
- D82: Asymmetric and Private Information • Mechanism Design
- I18: Government Policy • Regulation • Public Health
David Bardey, Philippe De Donder, and Cesar Mantilla, “How Is the Trade-off between Adverse Selection and Discrimination Risk Affected by Genetic Testing?: Theory and Experiment”, TSE Working Paper, n. 17-777, March 2017, revised July 2019.
David Bardey, Philippe De Donder, and Cesar Mantilla, “How is the Trade-off between Adverse Selection and Discrimination Risk Affected by Genetic Testing? Theory and Experiment”, Journal of Health Economics, 2019, forthcoming.
Journal of Health Economics, 2019, forthcoming