State Probes Transamerica’s Test for Cancer : Insurance: Agency says it is concerned that applicants may not be aware of the experimental blood test.

The California Department of Insurance on Thursday opened an investigation into Transamerica Occidental Life Insurance Co.’s use of an experimental blood test to screen life insurance applicants for cancer.

Deputy Insurance Commissioner Tom Epstein said he is concerned that Los Angeles-based Transamerica is using the test to discriminate against applicants, an allegation that the company has denied.

“We want to make sure people are giving informed consent to the tests . . . and that an unapproved test in itself is not used to deny coverage,” Epstein said.

Epstein said that Transamerica has already complied with a preliminary request for documents. He said the department intends to make a more thorough request in the next few days.

The department’s action was triggered by a story about Transamerica’s testing program in Thursday’s editions of The Times. The report said that Transamerica had used the experimental test--which has not been approved by any governmental or medical entity--on 50,000 applicants over the last two years in an effort to determine how well the test works.

In a one-sentence statement Thursday, Transamerica confirmed that it had been in contact with Epstein. The company called The Times story inaccurate, but provided no details.

Transamerica has said that it requires people applying for large amounts of insurance to sign forms consenting to tests for “tumors,” not cancer specifically. Applicants are not told that the test is experimental, and most applicants never learn the result.

Transamerica has said that in most cases it does not use the test to determine whom it decides to insure. Blood samples that test positive for cancer are put through a series of more conventional backup tests to confirm the results, the company has said.

The procedure is different with former melanoma patients, who are denied insurance if they test positive for cancer on the experimental test, known as a tumor marker.

Transamerica is believed to be the only major insurance company to routinely use tumor markers to screen insurance applicants.

The test is believed to detect cancer in its earliest stages, long before it can be picked up through X-rays or physical exams. Transamerica has tracked policyholders who have taken the test to see how many have developed cancer.

The company has also attempted to track the 161 applicants denied insurance, without much luck.

Speaking at a gathering of life insurance medical directors in 1991, Transamerica’s chief medical director, Dr. James A. Ryan, said: “Follow-up letters have been sent to (applicants’) attending physicians but the response rate is low thus far.”

Transamerica’s use of the test, developed by a Santa Monica doctor, is controversial within the medical community.

Dr. Sheila Taube, a scientist with the National Cancer Institute, said the test was unreliable. “It is inappropriate to use this test for screening,” she said. “It could never pass as a valid screening tool.”

Epstein said that as part of his inquiry, he would look into the relationship between Transamerica and Osborn Laboratories, the medical testing company performing the tests. Transamerica owns 30% of Osborn, which has an exclusive option to market the test to the insurance industry.

Epstein said he wanted to be certain that the relationship between the two companies was “appropriate.” He said he could not be more specific. “Right now, we are just assembling facts to see whether anything is inappropriate here,” he said.