Genetic Testing and Insurance Prices. Suppose the likelihood that a person will get disease X is determined in large part (but not exclusively) by his or her genes. Initially, it is impossible to determine who carries the gene for the disease, and many people spend $500 on special health insurance to cover the costs of treatment for the disease. Suppose scientists uncover the gene responsible for the disease and develop a simple test for the gene.
a. Suppose the government passes a law that prevents insurance companies from getting the results of a customers genetic test for X. Will the new price of X insurance be greater than or less than $500?
b. Suppose insurance companies have access to the results of genetic tests and they require all customers to get the test. How will the insurance company change its price of X insurance?