In the April 3 issue of JAMA, UPenn PRC Director Kevin Volpp, MD, PhD, and Jonathan S. Skinner, PhD, the Dartmouth Institute for Health Policy and Clinical Practice, discuss how research about behavioral economics in health care is useful when considering the challenges of replacing the Affordable Care Act.

Noting that “incentives to encourage healthy individuals to sign up for health insurance can be described as either carrots or sticks”, Volpp and Skinner observe that “the first principle from behavioral economics research is that carrots do not work nearly as well as sticks.”  Research suggests that individuals tend to favor immediate gratification over long-term consequences, which is why young adults historically are less inclined to enroll in insurance plans and why many people are frustrated paying premiums for coverage they may never use.  Volpp and Skinner note “health insurance is an 80-20 proposition; 20% of enrollees account for 80% of costs. If the least healthy patients can be moved off of the exchanges, this will allow for a substantial decline in premiums on the exchange for the 80% healthier people who remain” and that lowering health insurance premiums would make a difference.