On April 24, 2008, The Economist news magazine published an article entitled, “Gattaca! Gattaca!” in reference to a 1997 movie of that name, in which a genetically inferior man takes on the identity of a superior one to qualify for space travel. The article concerned the Genetic Information Non-Discrimination Act, or GINA, being legislated in the United States.
At the time of writing, there is a strong possibility that GINA will become law soon. If passed, the bill would prevent the use of genetic test results in activities ranging from hiring to insurance. Companies would not be able to selectively hire based on genetic profile, and insurers would not be able to discriminate different people to limit insurance coverage or to charge different rates based on genetic tests. The author fears that it would lead to the collapse of private insurance. The argument is that genetic testing technology will provide information that will be helpful in assessing a person’s risk profile, and that the technology will become ever more precise. The author foresees one or both of the following outcomes: a market overrun with adverse selection or the insurers choosing not to cover many medical conditions that are strongly influenced by genetics. The latter outcome would be ironic since the goal of the legislation is, according to its title, non-discrimination.

Required:
Focus on the medical insurance aspect and ignore the employment implications of the above. Explain how adverse selection problems will lead to the collapse of private medical insurance.