One genetic test now enables people to gain information about their future risk of Alzheimer’s disease, a condition that frequently results in the need for long-term care. This is a test for a variant of apolipoprotein E, or APOE. People inherit one of three genetic traits from each of their parents: APOE2 (e2), APOE3 (e3), or APOE4 (e4). Having two e3 traits is most common and represents average risk of developing Alzheimer’s disease. Having at least one e4 trait increases a person’s risk of developing Alzheimer’s, and having at least one e2 trait reduces it. A person who has two e4 traits (one from each parent) has a greatly increased risk of developing Alzheimer’s disease.

Anticipating the future impact of genetic testing, Congress passed the Genetic Information Nondiscrimination Act (GINA) of 2008. This act makes it illegal for health insurers and employers to discriminate based on the results of genetic testing. However, it does not address long-term care, disability, or life insurance. Thus, determining whether the information provided by APOE genotyping might affect long-term care insurance markets provides an example of consumer and insurance industry behavior in markets that are not subject to the nondiscrimination law.

This paper examines the role of genetic testing as it applies to the market for long-term care insurance, focusing on propensity for Alzheimer’s disease and effects on consumers’ and insurance companies’ behavior. We examine the long-term care insurance market and explore the reasons why so few consumers purchase this coverage. We conclude by considering the likely effect of the availability of APOE testing on consumers and insurers in the long-term care insurance market, assuming four different scenarios.

Second, most people do not understand the cost of long-term care, especially the nonfinancial burden imposed on caregivers.^6,7 Third, three of ten people who reach age sixty-five experience sudden death and never use long-term care, while some using long-term care for only a few months would not receive the benefits of insurance because of benefit triggers and deductibles. ⁴ Fourth, Medicaid may crowd out, or cause people not to buy, long-term care insurance.⁸

Fifth, a sizable portion of the population has neither sufficient wealth to protect nor income to pay long-term care insurance premiums.⁹ Sixth, the structure of policies themselves (benefits denominated in dollars per day, inflation risk of purchasing insurance for an event that is probabilistically far away, increases in premiums for everyone when insurance companies face insolvency, denial of applications)^10,11 reduces purchase rates.

The APOE genetic marker has been consistently shown to be associated with risk of Alzheimer’s disease.¹³ Because 75 percent of people developing this disease eventually move to a nursing home, this makes APOE a plausible genetic marker to use to identify those at risk of future long-term care use.¹⁴ We tested whether APOE genotype independently predicts actual nursing home placements in a community-based sample, the Piedmont Health Survey of the Elderly. Further, we analyzed whether participants in the second REVEAL clinical trial reported being more likely to purchase long-term care insurance upon finding out they had an variant of APOE that increased the risk of Alzheimer’s disease. In this way, we provide evidence of how well APOE predicts actual long-term care use, as well as how a selected sample of consumers respond to receipt of information about their APOE genotype.

The Piedmont Health Survey of the Elderly is a population-based survey of a community cohort of people age sixty-five and older; it is designed to investigate physical, psychological, and social functioning.¹⁵ Participants lived in five contiguous counties (one urban, four rural) in the North Central Piedmont region of North Carolina. A baseline interview in 1986–87 was followed by three additional in-person interviews and four telephone interviews; the last in-person interview was in 1996–97. Six years after baseline, blood was drawn from consenting subjects, and APOE genotype was assessed using standard procedures.¹⁶ The number of subjects with useable genotyping for this study was 2,089.

We used individual APOE genotype as a predictor of moving to a nursing home from study inception (1986–87 in home interview) until 31 December 2006. People with at least one e2 trait and no e4 trait (n = 308) were hypothesized to be at low risk for moving to a nursing home; those with at least one e4 trait (n = 578) were hypothesized to be at high risk; and those with two e3 traits (n = 1; 113) were hypothesized to have average risk. The group with two e3 traits served as the comparison group in all analyses. People who had one e2 trait and one e4 trait (n = 90) were excluded from analyses following the normal convention in the literature.¹⁷ We also controlled for self-reported age, sex, marital status, and race, and we estimated a logistic regression model that identified the effect of APOE on the likelihood of moving to a nursing home.

The REVEAL study^18,19 is a series of multisite randomized clinical trials designed to assess the impact of APOE genotype disclosure on first-degree relatives (that is, adult children, siblings) of people with Alzheimer’s disease. In each of the study protocols, genetic counselors provide education, APOE genotyping, and disease risk information to interested participants, who are then followed up to a year after risk disclosure to determine its psychological and behavioral impact. In the initial trial (n = 162), we found that people who were told they had at least one e4 trait were more likely than those who did not have an e4 trait to report changes in long-term care insurance after receiving this information.¹

Exhibit 2 outlines potential responses in the private long-term care insurance market to different scenarios regarding the availability of APOE genotype information for insurance applicants. These scenarios illustrate the range of potential responses to the use of genetic testing in a market that is not regulated by the 2008 nondiscrimination law. They assume varying degrees of knowledge about results on the part of consumers and insurers.

If APOE genotyping remains fairly uncommon and “under the radar” of long-term care insurance underwriting, it might not perturb current practice. If APOE testing becomes more common, however, then policymakers will confront a choice between actuarial fairness and fairness as embodied in GINA, if it were expanded to long-term care insurance. If the proportion of the population insured rose from less than 10 percent toward one-third, then it seems plausible that a more robust and sustainable private insurance market could exist, aided by use of APOE testing to assign actuarially fair premiums. This would require public acceptance of actuarial fairness as being the correct policy goal. If, however, the policy goal is more in line with fairness as embodied in GINA, not risk stratification according to genetic risk, then a major policy intervention would be needed to increase long-term care insurance rates, such as a mandate to purchase long-term care insurance or a subsidy larger than that provided by current tax credits.

A reform option that was under consideration in December 2009 during the national health reform discussion, the Community Living Assistance Services and Support (CLASS) Act, would create a public long-term care insurance plan that would provide limited community-based long-term care benefits (on the order of $75 per day, on average, in 2009 dollars). People would be automatically enrolled when they began working, and there would be no underwriting, but they could opt out. One would expect such a plan to have adverse selection risks, but the degree to which this was true would depend upon employees’ opt-out behavior. The Congressional Budget Office (CBO) says that it will take a premium on the order of $123–$146 per month to make the CLASS Act self-financing. People would have to pay in for five years before they could claim benefits, which would differ based on disability levels, and private insurance companies could offer wraparound policies that would cover long-term care costs above those paid for by the CLASS provisions.