Health Care, Ethics and Insurance

Tom Sorell Ltd, Tom Sorell

• Publisher: Routledge
• Year: 2002
• eBook ISBN: 9781134715084
• Topic: Philosophy
• Subtopic: Philosophy History & Theory

This volume is an exploration of the ethical issues raised by health insurance, which is particularly timely in the light of recent advances in medical research and political economy. Focusing on a wide range of areas, such as AIDS, genetic engineering, screening and underwriting, new disability legislation and the ethics of private and public health insurance, this comprehensive and sometimes controversial book provides an essential survey of the key issues in health insurance. Divided into two parts, the first considers the ethics of underwriting, risk assessment and the acceptance and refusal of insurance risk by insurers. Discussing the unjust treatment of high-risk applicants, the authors identify sources of unfairness to both parties of the insurance contract, indicating how reasonable trade-offs can be made. The second part considers the argument for a mix of public and private insurance for acute and long-term care, offering recommendations for changes in the balance of social insurance, and discussing the shift toward long-term contracts in private health care and pension insurance.

Part I
THE ETHICS OF UNDERWRITING

1 THE FREEDOM TO UNDERWRITE

Spencer Leigh

In the commercial world, an essential requirement of completing a contract is an agreement between the parties as to its nature and scope. Each person is deemed to be equally able to assess the value of the bargain offered. Hence the maxim ‘let the buyer beware’ (caveat emptor). This does not apply to life assurance, as the proposer may know more about himself than the insurer could possibly discover. The information could relate to health, habits, occupation, family history and financial standing. Therefore the law imposes on the proposer the duty of ‘utmost good faith’ (uberrima fides). In my view, only a fool or a rogue would disagree with this principle. Furthermore, the risk selection procedures used by life offices have been accepted by doctors and by the public for many years. Nevertheless, various groups want us to make concessions for social and medical reasons. The rights of the individual are being championed everywhere, and so it is unrealistic for offices to hope for Freedom to Underwrite as we approach the year 2000. Who is right—the critics, or the industry?

For a peaceful life, the easiest option is for insurers to give in to the critics. However, that could cost the industry dear. As I hope to demonstrate, the Freedom to Underwrite is not something to relinquish lightly. The Freedom to Underwrite is being eroded as a result of AIDS lobby groups, regulations regarding genetic testing and legislation over disability. And who knows what else is around the corner? In what follows I try to be objective, but I know that my training disposes me to side with the insurers.¹

DEFINING THE FREEDOM TO UNDERWRITE

Until the mid-1980s the general public paid no attention to life underwriting. Since the advent of AIDS, life underwriters have come under the spotlight. We have become the subject of newspaper editorials, and there was even a private member’s Bill to limit our powers in 1994! We should be proud that we have such a high profile but we must be sure that we can defend our position.

Many of the issues raised by the question of the Freedom to Underwrite are easy to see from two sides. Usually they involve drawing the line between equity and equality, and—let’s face it—life assurance underwriting is about discrimination, although we call it ‘selection’. ‘Discrimination’ is a word with very negative connotations today, but a distinction should be drawn between fair and unfair discrimination. Fair discrimination is where a proposer’s risk has been properly evaluated and is reflected in the premiums. Unfair discrimination is when equal risks are not treated equally. Such action is always unreasonable but fair discrimination is essential to good underwriting practice. A life office should strive for an unbiased assessment of the risk. It is sound business practice that the premiums charged should relate to the risk an individual brings to the fund.

In the early 1980s, before the advent of AIDS, there was total freedom to underwrite. A life office could do what it wanted, and this was manifest in three ways:

• Proposals. On its proposal forms, a life office could ask whatever it considered relevant. Up to the mid-1960s, offices asked proposers about their ethnic origins and even charged so-called racial extras. They based them on such facts as an Indian’s expectation of life being less than an Englishman’s, although no one had figures for Indians living in England. Following the Race Relations Act 1968, offices removed the additional premiums from existing contracts and resolved not to charge them for new proposals. It was a minor infringement of the Freedom to Underwrite at the time, but I doubt if the extras were needed in the first place.
• Medical evidence. An underwriter could request whatever medical evidence he thought was necessary, usually a report from the GP (a medical attendant’s report or MAR) or a medical examination report (MER). Again, there were no restrictions regarding the questions on those forms.
• Underwriting decision. An underwriter could make whatever decision he thought was appropriate—ordinary rates, a rating, postponement of cover or outright declinature.

In various ways, there have been challenges to:

• The questions on proposals and supplementary forms.
• The questions on MARs.
• The questions on MERs.
• The decisions made by underwriters.
• The exclusion clauses put on policies.

As will be seen, the AIDS lobby has won one victory, admittedly not a substantial one, and many interested parties are attacking the Freedom to Underwrite. In the climate of the late-1990s, with sympathy for the rights of the individual at an all-time high, life offices could alienate many of the public by demanding the Freedom to Underwrite. Even if they believe they have right on their side, they have to be very careful about how they present their arguments.

The various threats to the Freedom to Underwrite are not exclusive to the UK and they have been raised with different emphases and different outcomes in many other countries. However, comparison between one country and the UK can be made only after considering all the relevant facts, as the provision of insurance, existing legislation and medical practice can vary considerably. Thanks to the National Health Service, everyone in the UK is assigned to a GP and, as a result, we are able to request MARs, a facility that exists in few other countries. In the US it is common practice to use private investigators to check out claims for non-disclosure: in the UK they tend only to be used in connection with the more dramatic potential frauds.

Pressure groups, however, may take the most favourable solution from thirty or forty countries and display it as a model. I may sound xenophobic, but Great Britain is a major player on the world stage in insurance, and I find it odd that we should be asked to follow countries that we would not dream of following in anything else. Even following the US has its problems, and a cautious note was added by Dr Robert Pokorski, the Chief Medical Officer of North American Reassurance/Swiss Re in the US and an important voice of the industry in the debate on genetic testing. When talking to UK life underwriters early in 1995, he said, ‘Everybody follows us and the danger is that we are going to do something really stupid.’ Ultimately, however, it must be recognised that the UK may be affected by legislation from the EU.

AIDS The advent of AIDS in the mid-1980s caused new problems for life offices. Not only did they have to consider what action to take; they had to consider what criticism they might receive from AIDS pressure groups. From the start, there was criticism of the questions on the proposal which asked applicants to disclose details of previous HIV tests and whether they had been counselled for HIV. The wording that offices followed in the early 1990s was along these lines:

• Have you ever been personally counselled or medically advised in connection with AIDS or sexually transmitted diseases?
• Have you ever had an HIV/AIDS test? If so, please give details, dates and results.

The word ‘personally’ was included at the request of the AIDS pressure group, the Terrance Higgins Trust. They argued that everyone in the UK had been counselled for HIV by having leaflets through their letter boxes and so would have to answer ‘Yes’. Strictly speaking they may have been right, but the criticism smacked of their desperation at the sight of any questions about HIV status on insurance proposals.

The question itself identified those who were HIV positive, if they told the truth, and it also helped to identify those who were at high risk. In essence, if someone was having regular HIV tests, he or she might be following a life style which could lead to AIDS. An office might request a medical examination and its own HIV test in such cases. There was a difference of emphasis here, as the Terrance Higgins Trust thought that regular HIV testing was more a sign of social responsibility than of promiscuity.

It is hard to avoid emotive language, but someone may have an HIV test for entirely ‘innocent’ reasons. To cover this, life offices added the words: ‘To enable us to process your application as quickly as possible, please indicate whether the test was for routine screening (e.g. blood donation, antenatal, employment) or for any other reason and give details, including the date and the result.’ If, for example, a female said she had an AIDS test during pregnancy and the result was negative, the underwriter would disregard the information.

In the early days of AIDS, one office declined two proposers who had had HIV tests, solely on the grounds that they had had a test. This mistake cost the industry dear, as the view was formed that life offices were refusing cover to all those who had had HIV tests. This led to the ABI stating that individuals would not be refused cover or charged more solely on the basis of negative HIV tests.

That is true. I know that my own office has never refused anyone life insurance solely as a result of previous HIV tests. Why should we? It does not make sense, as we want to accept as much business as practicable. However, the question may reveal someone who is at high risk from AIDS. As a spokesman for Commercial Union bravely put it, ‘The vast majority of people who go for a test do so because they feel they have put themselves at risk in some way. If they are liable to engage in high risk activities, then we believe that it should be taken into consideration.’

The question about the AIDS risk was sensible and businesslike, but the public continues to dislike it. Some doctors, AIDS lobby groups, led by the Terrance Higgins Trust, and the Consumers’ Association argued for a change to the question. The curious view was formed that some people who were at risk might decide against an HIV test because they might want life assurance in the future and would thus have to declare it on a proposal. It seemed to me that they were all complaining on behalf of somebody else, because in all the years that the issue was raised I never came across anyone to whom this applied. Besides, it is always possible to have an HIV test anonymously and, at the time of a claim, a life office could never establish that the proposer knew he was HIV positive.

The unlikeliness of their complaint can be seen when it is taken out of the AIDS arena. You could not imagine anyone saying, ‘I’ve got chest pains, but I won’t have an ECG because I may have to declare it on a life assurance proposal in the future.’ The public thinks very little about insurance.

Nevertheless, it was considered that the attitude of insurance companies to those who had undergone an HIV test had been a deterrent to people taking tests in the first place. The ABI disputed this and in 1991 they jointly sponsored a survey with the Department of Health. The report, AIDS and Life Insurance, was published by HMSO and it concluded that ‘it is definitely the case that there are some people who are put off taking an HIV test because of the questions on insurance proposal forms’. I would not disagree with that—there must be some people, however misguided, and maybe only a few, who would be put off having an HIV test for this reason. The report commented on the size of the problem, ‘We are confident that in percentage terms it will be very small, probably considerably less than 1 per cent.’ This was good news for the industry—effectively, the proposal questions made no difference to the decisions of over 99 per cent of the population. However, in gross numbers ‘it would certainly be in the thousands, possibly in the tens of thousands’.

That final remark undid the good work of the survey. Virginia Bottomley, then Minister of Health, described the results as ‘worrying’ and said that such questions could be hindering the government’s attempts to halt the spread of AIDS. The newspapers, with a disregard for numeracy, ran headlines like ‘AIDS questions puts off thousands’. The trade press, which should at least have been supportive, ran negative stories: the industry was shooting itself in the foot, and an onslaught on the AIDS question was inevitable. The Terrance Higgins Trust referred to the ‘disgraceful practice’ and The Times (13 November 1993) said, ‘Many people have been discouraged from taking an HIV test for fear that, irrespective of the result, it will disqualify them from obtaining life insurance.’ It appeared that the big bad insurance companies were making unreasonable requests of their clients.

In 1994 Lord Jellicoe introduced a private member’s Bill in Parliament which would have compelled insurance companies to change their ways. The question would simply ask a proposer whether he or she was HIV positive. If the Bill were to be debated in the House, the situation could be grim for the industry. Consider how the provisions of the Criminal Justice Bill, also a private member’s Bill, were amended on the floor of the House. Who could say what amendments would be tabled, and, in view of various insurance scandals, the industry was short of politcial friends. Any MP who said, ‘The industry is doing a good job and no legislation is necessary’, would have been howled down.

Parliamentary time is always at a premium and Ministers are always wanting to reduce the agenda. Therefore the Department of Health discussed Lord Jellicoe’s Bill with the ABI to see whether some quasi-legislation could be agreed. From January 1995 the ABI recommended to offices that proposals should not request details of HIV/AIDS tests unless the result was positive. In effect, this was quasi-legislation, and the revised question was:

Have you ever been tested positive for HIV/AIDS or Hepatitis B or C, or have you been tested/treated for other sexually transmitted diseases, or are you awaiting the result of such a test?

All members accepted the position. Personally, I felt the question was convoluted and I did not see the purpose of bringing Hepatitis B or C into the equation.

The Times (15 December 1994) was delighted. In an editorial it stated,

In many beneficial respects, the deterrents to testing for HIV are at last being reduced. Primary amongst them used to be the insurance companies’ attitudes to those who had undergone a test, whatever the result. To discriminate against the socially responsible was as insulting as it was counter-productive. Now, after years of pressure, the insurers have agreed to ask only whether an applicant has been tested positive.

A little of the Freedom to Underwrite had been lost. Offices could no longer find out whether someone had had regular HIV tests. On the other hand, in the media there was nothing but praise for the change.

During the course of the debate I heard two highly individualistic ways of determining a suitable question, neither of which, I am sure, would have been acceptable. One was ‘Are there any factors in your life which might put you at risk of HIV infection?’ This is too subjective: someone could be having the time of his life every night and yet believe, quite erroneously, that he was not putting himself at risk—e.g. AIDS happens to older men. Hence the question could be answered honestly, ‘No’. Similarly, I have heard it suggested that an office should ask, ‘Are you prepared to take an HIV test?’ This was a gloriously Catch-22 question. Anyone who answers ‘No’ should be asked to go for one.

If you score a point you try again, and so the change on proposal forms is not going to be the end of the matter. Ivan Massow, an independent financial adviser whose company specialises in gay clients, wrote in Financial Adviser (9 February 1995): ‘When I opened an office in Edinburgh, the city seemed a monument to pompous, self-righteous propriety that housed some of the most vindictive life assurance underwriters. They sat in their emerald castles and passed judgment on the promiscuous behaviour of homosexual men.’ One of Ivan Massow’s arguments is that the industry does not know what it is doing. The Government Actuary has told offices that the recommended projection of AIDS deaths contained some safety margin. Ivan Massow said in Money Marketing: ‘It would seem that everything that its smug underwriters have predicted has turned out to be totally incorrect.’ Going by my own experience, only a handful of proposers have ever complained about the AIDS question on proposals, but several have objected to the lifestyle questionnaire. This is a series of questions relating to the sexual orientation of a proposer and his or her partners, and it could be that those who complain have most to gain by not completing it. As a result of this, a homosexual in a stable relationship with a negative HIV test is likely to be charged an extra premium of around £3 per annum for each £1,000 sum assured.

Surprisingly, there has not been wholesale criticism of the HIV test itself, provided that there has been proper counselling. Occasionally policyholders refuse to have an HIV test, but they usually relent. I was surprised when the Terrance Higgins Trust even suggested a lowering of the automatic HIV test limits as a trade-off for a change in the question.

The AIDS debate has occasionally gone outside its boundaries and shown the direction that industry criticism is going. Baroness Gardner of Parkes in the House of Lords (1 December 1994) said,

On health grounds, I think it wrong that anyone should ask whether a patient has had any negative test of any type, whether it is a test for breast screening, or a chest X-ray or any other sort of test. Surely it must be good that a person should be screened for a condition rather than have that held against him when applying for insurance.

This is a misguided view, because the underlying reason for the test is surely important, and the negative test may not guarantee there is no disease. Taking it to the limit, we might end up with just one question, ‘Are...

Table of contents

• Cover Page
• Half Title Page
• Professional Ethics
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of tables
• List of contributors
• Acknowledgements
• Introduction
• Part I The ethics of underwriting
• Part II Public or private provision?
• Index