Health Care Sharing: Unleash the Power of Social Payments
If I had told you five years ago that teenagers would someday use their cellphones to summon strangers via the internet and then hop into their cars for a ride, would you have believed me? Would you have believed that parents would actually prefer their kids get rides with strangers, as an alternative to the possibility of an irresponsible friend taking the wheel?
From ride-sharing applications like Uber to home-sharing apps like Airbnb, the sharing economy has reshaped our world, and traditional industries like healthcare are finally starting to follow suit. While Americans once had to rely on sprawling, centralized health insurance companies for their medical needs, they can now benefit from a new model: health care sharing, built on a peer-to-peer distributed network and funded by social payments.
It’s no secret that insurance companies are heavily regulated at the local, state, and federal levels, and the demands of policy compliance, combined with overhead, represent significant costs. Even as insurance strives to be more affordable, the current business model simply doesn’t allow for it.
Health care sharing, on the other hand, is a revolutionary and far more efficient medical financing and payments model. Based on a biblical principle and originating in the faith community, health care sharing has rapidly grown to be a proven and credible replacement for expensive health insurance and is now expanding into secular communities as well. In fact, with the latest tax reform plan passed at the end of 2017, it’s now even easier for new groups, faiths, associations, and cultural tribes to form their own health care sharing organizations. Simply put, health care sharing has disrupted the health insurance industry and has democratized medical financing, allowing all communities access to high quality care.
The Sharing Economy Is Reshaping Our Society
An intersection of emerging technologies, new social norms, and innovative entrepreneurs are the catalyst for a sharing economy that is making tremendous contributions to our economy and our world every day. It’s now possible to share rides, lodgings, workspaces, and much more with the click of a button. Websites like GoFundMe and KickStarter have made it easy for any scrappy entrepreneur with an excellent idea to get the necessary funding to build a product people want. The sharing economy is projected to be worth $20.4 billion by the year 2020.
The sharing economy is so powerful because it uses technology and peer-to-peer principles to bridge the gap between supply and demand, without the need for middlemen who profit unnecessarily. Similarly, the pioneers behind health care sharing knew that cutting out the middleman in health care would have a tremendous impact on the ability of Americans to meet their medical needs in an affordable way. Thus, health care sharing merges the efficiency and utility of emerging technologies with the power of peer-to-peer networks, to create better and more robust medical financing options for individuals and communities.
What Is a Peer-to-Peer Network?
In the traditional sense, a peer-to-peer (or P2P) network is a computing model that splits tasks between nodes, or “peers”, in a system. The benefit is that each individual peer only needs to be as strong as the average workload. When a single peer is overtaxed, it can rely on a helping hand from another peer, making the overall system far more efficient.
Peer-to-peer networks share the same concept as the old saying, “Many hands make light work.” Perhaps the best example of the power of P2P Networks is Bitcoin’s blockchain technology. As a distributed application that lives on tens of thousands of nodes, today it has more processing and computational power than 10,000 of the world’s largest banks. Likewise, in the last two years Ethereum’s distributed block chain has grown the processing power of its P2P Network beyond that of Google. The greatest societies function based on P2P principles: members (nodes) contribute to help advance the interests of the community and the greater good. The same holds true for health care sharing, and we will discuss below how applying P2P concepts to health care, and coupling them with social payments, can make medical financing exponentially more efficient — and more emotionally rewarding.
How Social Payments Function Similarly to P2P Networks
”Social payments” refer to the use of social media platforms, such as Facebook Messenger or Venmo, to transfer money to and from accounts between friends, peers, individuals and even businesses, as opposed to traditional methods like credit cards, cash and checks. In addition to the peer-to-peer (or account-to-account) transfer of funds, these platforms enable users to append personal messages and communications to these payments, thus adding a layer of social interaction and familiarity to otherwise impersonal transactions.
Thus, these social payments are more convenient and personal than traditional methods of payment, allowing users to transfer funds with little friction, from peer-to-peer, as well attaching meaningful messages and context. Even with a central authority managing the system, users aren’t beholden to the rules of a single faceless entity with unlimited power. For example, unlike a bank, a Venmo user likely won’t charge a late fee to his or her Aunt Sally if she needs extra time to pay back a loan. And when Aunt Sally does send her payment, she’s able to attach a note, “Sorry, I meant to send this last week, I hope you are well.”
Health Care Sharing Combines Social Payments with the Power of P2P Networks to Replace the Need for Insurance
Considering the unique benefits of health care sharing and its rapid growth in recent years, some might be wondering why it hasn’t been the standard all along. This is because this kind of sharing has only become practical relatively recently. The ability to unleash the power of P2P Networks through distributed technologies, along with the rapid adoption of business concepts that democratize traditional institutions, is a relatively new technological and social phenomenon. Before such innovations, health care consumers were forced to rely on a centralized, hierarchical health care industry business model that has generated tremendous wealth for shareholders throughout the 19th and 20th centuries. Given the technology at the time, centralizing power and control in a single “node” in the system made sense, because only large, centralized entities like health insurance companies had the capital reserves necessary to manage the catastrophically expensive potential risks inherent in healthcare, which most individuals, then and now, cannot afford.
While traditional health insurance has worked to an extent historically, consumers today find themselves at the mercy of a few big players in the insurance industry. With the help of modern technology and changing social norms, medical financing and the risk of catastrophic medical events can instead be distributed throughout a peer-to-peer network, thus eliminating the need to deal with a single company and its profit motive. Like the massive processing power that’s been aggregated into Bitcoin’s P2P network, health care sharing members are able to finance medical payments, manage catastrophic risk, and build greater capital reserves by connecting a collective of tens of thousands of individually-held balance sheets. And like Ethereum, Health Care Sharing Organizations are able to leverage these P2P principles, and their members’ willingness to contribute their own personal resources, to build community capital reserves greater than traditional insurance companies over short periods of time. The end result is a medical financing model that works better and feels better than insurance.
The centralized nature of the traditional health insurance model is what makes it so ineffective for health care consumers. The insurance companies make all the rules, facilitate the process, and finance health care as they see fit, to benefit themselves and their need for profit. Alternatively, health care sharing reconfigures this dynamic by decentralizing the system so the rules, process, and financing of health care are designed for the benefit of the community, quite often by the community itself.
Insurance Works, But Insurance Companies Don’t Work For You
The founding principles of health insurance are perfectly logical. Given a large enough group, a monthly contribution from every member can grow to cover the occasional large need from a small number of claimants, as well as the administrative costs of operating the system. However, if insurance companies can properly price these contributions (called “premiums”) and pay as few claimants as possible, then significant profits are possible. The centralized insurance model is incentivized to price premiums as high as the marketplace will bear and to pay as few claimants as the government will allow.
Unfortunately, profit margins for health insurance companies and high-quality health care for you are in direct opposition.
This conflict of interest becomes clear when it’s time to make sure you or another family member receives the highest-quality care. As far as your insurance company is concerned, your medical costs mean less profit for them, and like any other company, insurers will always be motivated to earn greater profits. This means they have every incentive to limit the amount paid out in claims, and they achieve this through a variety of methods, including setting high deductibles to ensure that all customers pay a significant amount of money before receiving any value for their premiums.
Worse still, government regulations related to medical loss ratios, the percentage of premiums an insurer spends on claims and expenses that improve healthcare quality, actually push insurance companies to raise their premiums to avoid being driven from participating in certain markets.
Health Care Sharing Is The Next Logical Step for The Health Care Industry
In contrast to a centralized traditional insurance model that makes risk part of a company’s profit formula, health care sharing functions on the principle of distributed risk. Risk is distributed across a network of members who share a collective moral commitment to allocate a small amount of their personal funds each month to pay the medical bills of others in the community. Unlike health insurance, health care sharing involves no power brokers, profit motive, nor incentive to avoid paying the medical bills of its members. Additionally, health care sharing members enjoy the benefit of knowing that their money is going to meet the needs of another member, rather than the pockets of an insurance company. Being a part of a close-knit organization with the specific goal of helping one another, combined with the collective reserve capital of a P2P network, is what enables health care sharing to work better and feel better than insurance.
Removing the profit motive, as well as the excessive commissions of insurance brokers and agents, means that members can make smaller monthly contributions to their health care sharing community, while still effectively diffusing the risk burden. Although there is still a personal responsibility structured similarly to a deductible, it is often significantly smaller than the typical insurance deductible.
Insurance companies fulfilled a specific need during a specific era, but as the American healthcare system struggles to keep up with increasing costs and insurance companies fail to offer reasonable alternatives, it is increasingly clear that a P2P distributed-network model, funded by social payments and without a profit-driven middleman, is the next step forward for the healthcare industry.
Health Care Sharing Conquers Insurance Payments with Social Payments
To understand the advantages of peer-to-peer health care sharing, it’s critical to know that it’s more than an abstract theory; it’s a functioning system proven to save money and transform how people pay for their medical needs. Today, more than 1.5 million American participate in health care sharing networks. The trend is now international, with the launch of Zhongtopia, a health care sharing network in China that has grown to 10 million members in just two years. The key benefits of the health care sharing model include decreased overhead costs, increased transparency, increased efficiency, increased customizability, and the elimination of the conflict that exists between health insurance companies and policyholders throughout the claim-filing process.
We’ll dive into the specifics of how health care sharing works in the next section, but first, here are four core benefits of health care sharing that traditional insurance can’t match:
- It makes health care much more affordable, because there are no profit expectations. Traditional health insurance companies exist to increase revenue and decrease expenses to grow profits. There are only a few methods to consistently accomplish this: raise premiums, deny claims, and restrict access to high-quality care wherever needed to generate profit.
- It is not insurance, which exempts health care sharing organizations from the intense regulatory pressures and cost burden of the traditional insurance model. There are no mandated plans, no coverage that members are forced to carry as a result of regulation.
- Health care sharing organizations satisfy the Affordable Care Act’s individual mandate (to be eliminated in 2019 by recent tax reform, but still in effect as of 2018), so members are exempt from its penalties and taxes without having to enroll in any unwanted plans.
- Perhaps best of all, health care sharing gives members the personal satisfaction of directly aiding others in their community through social payments. Through the Sharable ConnexTM digital platform, for example, members can see who helped pay for their medical bills and communicate their thanks and best wishes.
How Peer-to-Peer Health Care Sharing Organizations (HCSOs) Work
Health care sharing is easier to use than traditional insurance, but in order to ensure an exemption from health insurance regulations, the payment process and overall organization of health care sharing must operate in a specific way:
1. Health Care Sharing Organization Group Formation
When forming a peer-to-peer sharing organization, members have the unique opportunity to gather together as like-minded individuals in communities of faith, ethnicity, or other shared cultural values, associations, and affinities. Members have the freedom to draft their own sharing guidelines and operational policies that best align with their specific medical interests.
The recent repeal of the ACA’s individual mandate (passed in the 2017 tax reform bill) will make forming a new sharing organization easier than ever. For the first time since 2009, large groups, associations, and even companies are free to form their own sharing organizations with the specific aim of providing affordable health care to their members.
As a pioneer of the modern health care sharing model, Sharable provides the technological foundation and consulting expertise to help organizations build and operate high-performing sharing networks.
As a nonprofit, each health care sharing organization is required to create and follow a set of bylaws specifically designed to serve the needs and interests of the community. Faith-based organizations may pledge to follow specific biblical principles for instance or agree not to cover certain medical procedures. Some health care sharing networks empower members with voting rights to make major guidelines changes in regards to the medical services that the community with share.
3. Personal Responsibility
All health care sharing networks require members to be personally responsible for a “first dollar” portion of their medical bills. For example, some sharing organizations specify an annual sharing responsibility, which functions similarly to a deductible. Some require a member to pay a “first dollar” on every medical bill similar to a co-pay or co-insurance amount. This emphasis on personal responsibility helps incentivize members to seek only the care they need and to shop for less expensive care.
Health care sharing organizations do charge an administrative fee to fund the services they provide to members, including negotiating lower costs with providers and member-to-member matching. Unlike insurance companies, however, sharing organizations do not add a profit margin above their administrative costs.
4. Member-to-Member Matching
Members deposit a fixed amount into their accounts each month, and the HCSO matches these deposits to the discounted medical bills. The amounts of the bills (but not the health condition being treated) are then published along with the matched member deposits in a location visible throughout the community, such as Sharable’s digital platform.
5. Member-to-Member Fund Transfer
The HCSO seamlessly transfers share deposits into the sharing account of the member with the medical bill and then makes a payment to the medical provider on the member’s behalf. Transfers and the flow of funds are always visible to all members on Sharable’s platform, so members get the satisfaction of seeing their social payments directly helping others in their community. Just like on Facebook Messenger or Venmo, members can append messages to their payment transfers, sharing words of encouragement, gratitude, or prayer.
Member & Peer Matching Becomes as Easy as the Click of a Button
As the above model indicates, health care sharing provides all the benefits of a community driven by care instead of profit, combined with the power of group purchasing, modern technology, and social payments, to create a system that easily handles medical bills and leaves members feeling better, physically and emotionally. This might sound too good to be true, but given the peer-to-peer nature of health care sharing and the advancements in technology, sending and receiving payments among members of a sharing organization really is as easy as the click of a button.
The only barriers to health care sharing in the past have been the limitations of technology. With modern infrastructure, however, companies like Sharable can now equip communities with digital platforms, like Sharable ConnexTM, specifically designed to meet their health care sharing needs.
The Importance of Community
As the name implies, health care sharing relies on the formation of a sharing organization to secure affordable, high-quality health care. In the sharing model, all participants are driven by a common purpose: to get the best health care possible and the best health outcome, for every member of the community, instead of lining the pockets of an insurance company and its shareholders. This means sharing organizations are uniquely positioned to find the ideal balance between cost to their members and value of care offered.
The shared humanity of health care sharing gives it another advantage over traditional health insurance. Since the members of health care sharing organizations usually share a commitment and connection to a faith, an ethnicity, an association or some affinity, it’s reasonable to expect that they will generally work in the best interests of the group as a whole. As financial professional Kaenan Hertz so aptly stated, “If you have a group of people who know each other” and are willing share their funds then “this means they have faith in each other’s ability to keep losses down to a minimum, benefiting everyone financially.”
Health Care Sharing Replaces Corporate Profits with Shared Humanity
Consider an average American family of three. As a young family, they typically need less health care, but as they get older, they see their premiums rise. All along the way, they’re at the mercy of insurance companies that can, in addition to rising premiums, set high deductibles. Over a 25-year period, they will lose a staggering $1,200,000 of their personal net worth through expensive insurance premiums and the loss of investment returns on the savings that they would have generated, had they participated in health care sharing.
Now consider the same average family, as members of a health care sharing organization. They enjoy all the benefits detailed in the previous sections, and over that same 25-year period, have spent just $285,000 for health coverage.
Health care sharing is so much more affordable because the group’s goal is to keep members healthy, rather than to create profit for insurance companies. Health care sharing makes it easy for families and individuals to manage the cost of their medical needs, without an insurance company siphoning funds off of the top.
Health Care Sharing: It Feels Better & It Works Better.
People are gravitating toward health care sharing because it’s been proven to work better, and because it makes them feel better. Not only is health care sharing more affordable than health insurance, but people value the personal aspect of sharing costs with others they know and care for. This unique method of financing health care democratizes access to care and allows people to easily share their resources, adding a sense of humanity often absent from the cold and calculating world of health insurance. There’s no reason for our health to be held hostage any longer by corporate greed. Technology has evolved and society is ready to evolve along with it towards a healthy and humanity-driven era of peer-to-peer healthcare sharing.