How to Solve Obamacare’s Youth Enrollment Problem

When the first Obamacare enrollment numbers were released, there was nervousness that only 24% of those signing up were in the important 18 to 34 age category. Those who initially signed up through the Affordable Care Act tended to be older and potentially less healthy, and that kind of population didn’t bode well for premiums—or the law’s economic viability. So the question at hand was this: How do we get more young people to enroll?

Currently Obamacare uses financial penalties to get people to sign up. The result is either resentment or just plain avoidance. Young people in particular are upset because they know they’re paying for their elders. But a new quantitative science, called social physics, shows us that the key isn’t just to make it in their economic self-interest, but to make doing so benefit their own circle of people.

Social physics is a new quantitative science that not only describes how networks of people behave, but also accurately predicts patterns of human behavior and influences those patterns. It harnesses big data to radically change our ideas about why people decide to change their behavior, and how new ideas reach them and move them.

For instance, in one community experiment, my MIT research group offered people financial rewards for healthier behavior. The result was a small improvement, but one that disappeared as soon as the experiment ended. However, in a second community, we gave people rewards only when their neighbors or members of their workgroup improved. The improvement was up to eight times greater, and, perhaps just as important, the pattern of healthier behavior continued even after the experiment’s money ran out.

What explains the difference? Social network incentives raise community awareness and create social pressure to work together. Individual incentives are just that: They engage only the individual and miss the power of community engagement. When people interact in small groups, the ability to punish or reward peers is effective at promoting trusted cooperative behavior.

The social physics approach to getting everyone to cooperate focuses on changing the connections between people rather than getting individual people to change their behavior. Social network incentives act by generating social pressure around the problem of finding cooperative behaviors; people experiment with new behaviors to find ones that are better. The social pressure generated is a function of the cost of the behavioral mismatch between the behavior of the individuals, the value of the relationship, and the amount of interaction. All this means that the most effective network incentives should be focused on the people who have the strongest social ties and the most interaction with others.

You can also use social physics in online environments. For instance, with colleagues at the Swiss Federal Institute of Technology, we encouraged  buddy groups within a digital social network around energy use: When someone saved energy, then gift points were given to his or her buddies. This social network incentive caused electricity consumption to drop by 17%, twice that seen in earlier energy conservation campaigns and more than four times more effective than the typical energy reduction campaign. Just as in the health experiment, behavior change was most effective when it leveraged the strength of the surrounding social ties.

So how can the Obama administration use social physics to increase outreach to young people ahead of National Youth Enrollment Day on Feb. 15?

The simplest example would be to offer discounts to young people in workgroups or in the local neighborhood—but only if everyone signs up. If you offered each person $5 a month if everyone were to sign up, it would be a real topic of conversation among young people. If you offered $50 up front, it would be something they would have to do, because otherwise they would be ostracized by their peers—even though $50 is less than $5 per month. Using social physics, rather than economics, could drive young people to sign up in droves.

What Obamacare Means for Corporate Retiree Insurance Coverage

The news that Time Warner and IBM are changing retiree health-insurance benefits has some claiming the moves are proof that the Affordable Care Act (ACA) is drastically eroding the employer-based health-insurance system it promised to preserve and increasing costs for retired corporate workers in the process.

In truth, corporate America was already looking for ways to trim health-insurance costs, particularly for retirees, long before Obamacare came along. The benefit decisions announced by IBM and Time Warner have little direct relationship with the health care law and will not, as some have suggested, leave retirees without any insurance.

The changes at IBM relate to supplemental health benefits for retirees who already receive Medicare through the federal government. Rather than administer these additional benefits for company retirees over 65, IBM will direct former employees to a Medicare-specific insurance exchange, or marketplace, and subsidize the cost of this extra coverage. Retirees will have to participate in choosing their supplemental plans, but will ultimately have more options, according to IBM. Time Warner, the parent company of TIME, will give retired employees too young to qualify for Medicare subsidies in order to purchase coverage on their own through private exchanges that are separate from the public insurance exchanges that will open Oct. 1 as part of the ACA.

Nationwide, companies have been making similar changes for many years. According to the nonpartisan Kaiser Family Foundation, in 1988, 66% of companies with 200 or more employees that offered insurance benefits to active employees also offered retiree health benefits. By 2008, two years before the ACA became law, the figure had dropped to 29% and is currently 28%, according to Kaiser. In 2009, a year before the ACA was signed, Xerox eliminated supplemental health benefits for retired workers who qualified for Medicare. The decision drew a lawsuit from retirees, but a federal judge ultimately ruled that the group had no legal claim against the company. “It had nothing to do with Obamacare,” says James Marino, a lawyer for the Association of Retired Xerox Employees, which filed the lawsuit.

Although Obamacare is not directly responsible for corporations cutting back and altering benefits for retirees, the law won’t do much to slow this trend. In fact, it could indirectly increase costs for companies that might, in turn, look to retiree benefits to cut spending. The law sets a minimum floor for what medical care health-insurance plans must cover. Although many corporate health-insurance plans were grandfathered in and exempted from complying with these requirements, the exemption disappears if companies make significant changes to their health-insurance offerings, which is common. Architects of the law say it will reduce the growth of overall U.S. health care spending and costs for individual medical treatments and procedures, which could reduce costs for employers, but it will be years or even decades before this promise can be evaluated on the merits.

And with the law’s public health-insurance exchanges scheduled to launch in just a few weeks, companies can point to them as viable alternatives to company-sponsored retiree coverage. Retirees in their late 50s and early 60s who don’t yet qualify for Medicare and are generally sicker than their younger counterparts currently face some of the highest health-insurance premiums in the individual marketplace. Under the ACA, insurers will no longer be able to charge these people higher rates based on health status, but the law does allow premiums to be set by age. Insurers will be able to charge the oldest enrollees in any given health plan three times as much as the youngest enrollees.

Still, for similarly aged retirees without any subsidies from their former employers — like those who worked independently or for small businesses — the Obamacare exchanges, which will offer public subsidies to low- and middle-income Americans without job-based coverage, could give the first real chance at finding affordable health insurance.