a gargantuan 17.1 percent of GDP, the U.S. spends
more than any other country in the world on
healthcare. Germany, which registers in as the second highest, only spends at a
GDP rate of 11.3 percent.
This pernicious issue, highlighted in a 2002 Harvard Business Review article entitled
“Let’s Put Consumers in Charge of Health Care,” has arguably become the biggest barrier to
successful reform. As a result, the everyday consumer continues to wrestle with
myriad questions tied to the cost of care, including the following:
- If I’m seriously injured in a
bicycling accident, what if my insurance company declines coverage for my
- Are insurers really committed to my care needs, or are
they simply out to make a profit?
- What if the insurance company that I have coverage with collapses
and cannot cover my expenses?
Amid these concerns there is a growing belief
that a new insurance model is needed, one that allows consumers greater
leverage in holding insurance providers accountable for their end of the
Trailblazing a New Blockchain Solution
Entrenched in this prevailing narrative are many startup
companies that believe they have solutions to these knotty issues. Among them
is Tides, a distributed network of peer-to-peer insurance that seeks to
place the power of health back into the hands of consumers and their care
Traditional insurance companies function in a for-profit,
monopolistic manner with a focus on maximizing revenue and shareholder value as
opposed to delivering affordable premiums and access points to quality care. In
other words, the economic incentives are diametrically opposed to that of the
Tides intends to disrupt this prevailing health insurance delivery
model by providing an alternative to insurance monopolies. Here, consumers will
have a mechanism for self-organizing into “pools” that collect premiums and
distribute claims. Members will be afforded the flexibility to choose their
level of insurance and pricing based on their individual needs.
Within this peer-to-peer network model, all of the basic workings
of an insurance company are decentralized. In other words, functions such as
actuarial, claims processing and underwriting are done by a network of workers.
Self-organizing pools of people set their own governance on
aspects of their insurance, such as the coverage, limits and terms. There is no
company that has an incentive to raise premiums and deny claims or obscure
rules under fine print. All functionaries are only incentivized to be accurate
All of this runs contrary to the centralized insurance systems
that dominate today’s markets and cause distortions based on asymmetric
information, misaligned incentives and regulatory and political wrangling,
among other issues. The effect of this is dramatic increases in premiums, care
delivery access barriers and quality of care concerns.
More importantly, no centralized or third-party authority can
arbitrarily increase consumer premiums or deny claims. There will also be
complete transparency with no hidden costs associated with administering
copays, deductibles or extra fine print costs. All insurance stakeholders will
be incentivized to be accountable, open and efficient.
The Vision of Tides
In an interview with Distributed.com at the HLTH — The Future of Healthcare conference held in Las Vegas this month, Chandra Duggirala, MD,
and co-founder of Tides, spoke about his perspective.
“As a physician, I look at
healthcare from many different angles — from a provider perspective and from an
insurance claims perspective,” he said. “So I’ve seen the entire spectrum of
how providers, patients and payers look at insurance and can tell you that the
current system doesn’t work for any of those three.”
He shook his head in
disbelief when describing the common practice of there being a 50-times
difference in price depending on the type of insurance contract or payer. Even
more astounding, Duggirala pointed out, is that no one knows what the rates for
“Imagine walking into a
Best Buy store and leaving with a TV without knowing the price,” he said. “Then
six months later you get a bill for anywhere from $1,000 to $50,000. That’s
what we have in healthcare. We plan to play a part in fixing this.”
The aim of Tides is to
return to the roots of insurance through a completely peer-to-peer model where
a bunch of people come together to share the risk.
“We will use smart
contracts so that when an event happens it triggers a payout that’s verified
and validated and the claim is paid,” Duggirala said. “The pool is administered
by a pool administrator with actuarial and claims processing work performed by
the decentralized network.”
The co-founder and COO of
Tides, George Burke, added that “TIDES” tokens will be the currency fueling
stakeholder incentivizes. He said that if you don’t consume what you put in
with respect to care expenses, you get your money back at the end of the term.
Burke believes this new
model will hold high appeal for the healthiest and youngest people who cannot
find a health plan, in a state like California, for instance, for under $200 a
“That’s insane,” Burke said. “We see so many gig workers and freelancers
who, despite being a major part of growing the U.S. economy, are the most
disenfranchised when it comes to finding a health plan.”