Scandinavian Working Papers in Economics

HERO Online Working Paper Series,
University of Oslo, Health Economics Research Programme

No 2002:10: Genetic testing and repulsion from chance

Michael Hoel (), Tore Nilssen (), Jon Vislie and Tor Iversen ()
Additional contact information
Michael Hoel: Department of Economics, Postal: University of Oslo, P.O. Box 1095 Blindern, NO-0317 Oslo, Norway
Tore Nilssen: Department of Economics, Postal: University of Oslo, P.O. Box 1095 Blindern, NO-0317 Oslo, Norway
Jon Vislie: Department of Economics, Postal: University of Oslo, P.O. Box 1089 Blindern, NO-0317 Oslo, Norway
Tor Iversen: Institute of Health Management and Health Economics, Postal: University of Oslo, P.O. Box 1089 Blindern, NO-0317 Oslo, Norway

Abstract: A central theme in the international debate on genetic testing concerns the extent to which insurance companies should be allowed to use genetic information in their design of insurance contracts. This issue is analysed within a model with the following important feature: A person's well-being depends on the perceived probability of becoming ill in the future in a way that varies among individuals. The authors show that both tested high-risks and untested individuals are equally well off whether or not test results can be used by insurers. Individuals who test for being low-risks, on the other hand, are made worse off by not being able to verify this to insurers. This implies that verifiability dominates non-verifiability in an ex-ante sense.

Keywords: Health insurance; isurance contracts; genetic testing; genetic information

JEL-codes: D82; I11; I18

17 pages, June 29, 2009

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