Buying Insurance Based On Your Genetics

Robert Cooke-Deegan knows exactly how to scare insurance companies. When he discusses the results of his study, titled "Genetic Testing for Alzheimer's and Long-Term Care Insurance," with industry executives, they become "heated," he says. "They say that this could put them out of business!"

What Cooke-Deegan and his fellow researchers discovered is that people who take a genetic test to find out if they have traits that lead to Alzheimer's are five times more likely to purchase long-term care insurance, which would cover most of their expenses if -- or in all probability when -- they need years of nursing home care. It's like taking out a million-dollar life insurance policy the day before you know that you're going to die. The stock market would call it "trading on insider information."

Selling more insurance should be good for the industry, except insurers that market long-term care (LTC) insurance don't ask about an applicant's “doomsday genes.” The American Association for Long Term Care Insurance offers free insurance quotes, but its website says it is “truly sorry” that you will not be able to buy LTC insurance if you're currently in the throes of Alzheimer's or dementia. Its application, however, asks nothing about gene testing.

Insider information

Our genetic makeup determines who we are: eye and hair color and height. We inherit our genes from our ancestors, who pass on to us both their strengths and a predisposition to certain diseases.

If a mother is diagnosed with breast cancer, oncologists are likely to recommend that her children undergo a BRCA gene test to determine if they, too, are predisposed.

The same is true with the ApoE or Alzheimer's gene. There is no cure for the 5 million Americans diagnosed with Alzheimer's, and the annual cost for their care is $200 billion. For LTC insurers and the medical system that bears this cost, it is truly the doomsday gene. The one-in-eight elderly Americans who live with this disease have a 75 percent chance of ending up in nursing care, according to Cooke-Deegan's study. And recent data from AARP puts the annual cost at $88,000.

Those who are diagnosed are more likely to purchase long-term care insurance when they learn the hard truth. But it's becoming more difficult. The LTC insurance industry itself is weak and ailing under the burdens of expensive claims. As the cost of eldercare skyrockets, many of the biggest LTC insurers, such as Prudential, have left the market, according to A.M. Best.

Genworth recently said that it was temporarily suspending its sales of long-term care insurance in California, which represents 12 percent of its market, while it seeks approval of a new product that is “priced to balance the needs of our consumers with our desire to achieve long-term profitability."

On the same page?

Insurance is predicated on the assumption that only a certain -- and usually small -- percentage of policyholders will actually make claims. But genetic testing tips the seesaw in favor of customers likely to use their LTC insurance, which could cause their insurers to drown. As Cooke-Deegan points out, insurance companies have reason to be afraid.