Article

How is the Trade-off between Adverse Selection and Discrimination Risk Affected by Genetic Testing? Theory and Experiment

David Bardey, Philippe De Donder, and Cesar Mantilla

Abstract

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.

Keywords

Consent Law, Disclosure Duty, Personalized Medicine, Test; take-up rate, pooling health insurance contracts.;

JEL codes

  • C91: Laboratory, Individual Behavior
  • D82: Asymmetric and Private Information • Mechanism Design
  • I18: Government Policy • Regulation • Public Health

Replaces

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.

Reference

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.

Published in

Journal of Health Economics, 2019, forthcoming