Innovation Futures: How much would you pay for Solexa?

Innovation Futures, a prediction trading venue, has starting betting on Solexa (Nasdaq:SLXA).   Traders are asked to judge the size of Solexa’s market cap as it will be at the end of the trading day on June 6th 2005.  Currently the futures market finds a 39% probability that the market cap will be between $320 and $330 million.

Solexa Developments

Solexa and Lynx Therapeutics have completed their merger.  Solexa is now up and running on the NASDAQ with the ticker SLXA.  They are developing technology that promises to bring down the cost of sequencing.  They recently completed their first full genome sequencing job using their new "DNA cluster" technology.

H.R. 1227

Genetic Information Nondiscrimination Act of 2005 was indeed introduced to the House on March 10th as H.R. 1227.

UK Public Opinion on Insurer Access to Test Information

According to one recent survery, UK public opinion is split approximately 50/50 on whether insurers shoud have access to genetic test results when applying for life and health insurance.  Aggregate data show a slight preference for no insurer access.  Interestingly, the subgroup with a family history of inherited disease tends to be more in favor of insurer access than those without a family history.  A presentation at Imperial College London by Alan Tyler summarized the data with the following figure (click to enlarge):

Disclosure_info_genetics_insurance_2003_1During the same presentation Alan also noted that opinions in the UK were not mixed on the question of universal pricing of insurance.  There is a "blanket rejection" of the idea, suggesting a preference for premiums based on actual or perceived risks instead.  In essence this is a rejection of the "principle of solidarity" and a preference for the "principle of mutuality" as defined elsewhere.


Alan Tyler, "Industry Research" Joint public meeting of the HGC and GAIC, Imperial College, London. July 13, 2004.

Two Principles in the Debate Over Genetics & Insurance

The UK has been particularly active in exploring the issue of genetics and insurance.  The Human Genetics Advisory Committee (HGC) was established in 1996 and filed the report, "The Implications of Genetic Testing for Insurance," shortly thereafter.  They have put a wealth of information on the web over the past decade too.

Two principles at work in the debate over access to genetic information by insurers are the "principle of mutuality" and the "principle of solidarity."  These principles differ according to whether genotypes are pooled or separated according to individual risks.  The application of these principles has very different political results too.  The principle of solidarity underpins the social insurance model, aka universal coverage; whereas, the principle of mutuality is more in-line with the private, market-based model. 

Principle of Solidarity:

"Social insurance schemes operate according to principles of solidarity and equality. Individuals contribute a sum to the insurance pool which is not explicitly linked to their actual level of risk. In social insurance systems, any claim which is made on the insurance fund is met from the pool, and may be based on an entitlement arising from contributions (e.g. incapacity benefit in the U.K.) or may be related to the individual’s level of need (e.g. income support in the U.K.). Even in the former case there may be a significant degree of redistribution implied, especially in systems with flat-rate benefits and earnings-related contributions. Social insurance programmes based on solidarity principles emerged in many developed nations in the 20th century, following pioneering developments in some countries in the 19th century. In many countries (although not particularly in the U.K.) these schemes are increasingly proving to be unaffordable, and are subject to major structural reforms, often involving the introduction of a greater role for complementary provision through private sector institutions or agencies."

The Principle of Mutuality:

"Those who make provision for their life and health risks using private commercial insurance encounter a very different system, generally based on the principle of mutuality. The workings of private commercial insurance are, of course, very familiar to actuaries. It suffices here to recall that each person should pay an insurance premium which is commensurate with his or her actual or perceived level of risk. The higher the risk brought by the proposer the higher the premium, and there is no assessment either of ability to pay or of the adequacy of benefit entitlement in relation to need (unless the amount being purchased appears unreasonably high for their circumstances)."

C. D. Daykin, D. A. Akers, A. S. Macdonald, T. McGleenan, D. Paul and P. J. Turvey. "GENETICS AND INSURANCE — SOME SOCIAL POLICY ISSUES" Presented to the Institute of Actuaries, February 24, 2003 & to the Faculty of Actuaries March 17, 2003.

Insurance and Genetics in the UK

From the UK:

"PEOPLE with a family history of breast cancer,
Alzheimer’s and other serious diseases will be given a five-year
financial reprieve next week when insurers extend their moratorium on
the use of genetic tests to set premiums…The moratorium, which prevents insurers from using the results of
genetic tests to increase premiums, was due to run out in November next
year. After negotiations with the Department of Health, however,
insurers have decided to postpone using genetic tests until after 2010"

"Insurers to postpone genetic testing until 2010" Times Online, March 10, 2005.


Resources:

UK Genetics and Insurance Committee (GAIC)…scroll to bottom for various presentations.
Second Report, January 2004, on genetics and insurance by the GAIC.
Read the Moratorium document here.

Heriot-Watt University’s Genetics and Insurance Research Centre (GIRC)

Genetic Testing and Adverse Selection in Insurance Markets

One of the challenges the non-discrimination bill will face in the 109th Congress is negotiating the potential impact on the insurance industry, as similar legislation did in the 108th Congress (scroll down).  Specifically, whether the non-discrimination bill will result in adverse selection, or the situation where insurance companies can’t cover claims because more people with above average risk buy more coverage.

This recent issue of Health Affairs contains an article that takes a closer look at the relationship between genetic testing and the insurance markets.  The authors of this article attempt to "gain a better understanding of the extent to which genetic testing precipitates adverse selection or discrimination, or both, in insurance markets."   They followed a group of 148 individuals that had taken part in a clinical trial of genetic testing for Alzheimer’s disease.  They found that the individuals that tested positive for APOE-e4, an allele that increases the risk for Alzheimers by 2 to 15 fold, were 5.76 times more like to change their long-term care insurance than others.  The authors conclude by saying:

"Policymakers who are attempting to balance consumers’ concerns regarding potential genetic discrimination against insurers’ concerns that the withholding of genetic test results would make insurance markets unprofitable should proceed with caution.  Our findings imply that the potential for adverse selection may vary considerably by insurance market, thus making it difficult to design a public policy that works in all instances…[P]olicymakers…need to balance considerations regarding consumers’ rights to protect themselves from uncontrollable health risks with the insurance industry’s adverse selection concerns that could affect product affordability."

Cathleen D. Zick, Charles J. Mathews, J. Scott Roberts, Robert Cook-Deegan, Robert J. Pokorski and Robert C. Green. "Genetic Testing For Alzheimer’s Disease And Its Impact On Insurance Purchasing Behavior" Health Affairs, 24(2): 483-490.

Non-Discrimination Bill Introduced to House?

The Coalition for Genetic Fairness has filed a press release stating that the Genetic Information Non-Discrimination Act of

2005 will be introduced to the House tomorrow.  Their website says it will be introduced on the 16th.  The sponsors of the bill are said to be Representatives Judy

Biggert (R-IL), Louise Slaughter (D-NY), Bob Ney (R-OH), and Anna Eshoo (D-CA).