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Can Blockchain Solutions Disrupt the Health Insurance Market?

Two words best describe the current state of our U.S.  health insurance system: a mess.

As spiraling costs for the delivery of care continue to garner attention, many believe that insurance companies, not consumers, control the landscape.

At 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 care?
  • 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 bargain.

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 providers.

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 customers.

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 and cost-efficient.

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 care are.

 

“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 month.

 

“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.”

PayPal Creates Internal Blockchain Token for Employee Reward System

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