Voluntary pooling of genetic risk: A health insurance experiment

Abstract Scientific and technological advances increasingly allow for better tailoring of health insurance plans to individual health risk profiles. This development questions the sustainability of health plans that feature strong cross-subsidization across different health risk types and health behaviors. An important observation is that the willingness to cross-subsidize risks in health plans might depend on whether the risk is uncontrollable by individuals, such as genetic risk, or modifiable via health behaviors. This paper provides the results of an experiment on the willingness to pool genetic risk in health insurance. Subjects’ overall health risk has an assigned, uncontrollable genetic risk part that differs across individuals as well as a behavioral risk part, which can be reduced by costly effort. Participants can decide between a pooling, community-rated group insurance scheme and an insurance with a fully individually risk-adjusted premium. In the experimental variation, the group insurance scheme either includes behavioral risk or separates it out via individual premium discounts. Although we observe social preferences for pooling, only a low level of actual genetic risk pooling emerges across the experimental conditions. This is due to both large heterogeneity in social preferences across subjects, and the dynamics of the willingness to pay for group insurance in the different experimental markets.

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