While the title might be clickbait, the idea that Bitcoin may save healthcare may not be too farfetched. There’s a company that believes it can. That company is Crowd Health.
We are starting a Bitcoin “Crowd” full of just Bitcoiners (generally young, healthy, and care for their bodies almost as well as they care for their cold wallets). You will fund health expenses for only Bitcoiners. We need 1000 to start. Read more here https://t.co/mJ8iDI4GXe pic.twitter.com/DuZ7mI1H4M— CrowdHealth (@JoinCrowdHealth) April 7, 2022
Who is Crowd Health, and why do they think Bitcoin will save healthcare?
Who is Crowd Health?
When you visit Crowd Health’s website, they are quick to remind you that they are not a health insurance company. Most of the reason why has to do with the red tape surrounding regulation, but some of it is also due to novelty. Something bold in the world of traditional healthcare coverage.
Crowd Health is not an insurance company, but rather a “Healthcare crowdfunding” platform – hence the word “crowd” in their name. Their goal is to “enable you to live boldly without the fear, and emotional distress, related to health care bills. No doctor networks. No huge monthly premiums. No annual deductibles. No surprises.”
That goal alone says a lot about the challenges of healthcare today.
Crowd Health is a new take on an old model. The company is digitizing the healthcare cost-sharing model that has been around for tens of years. The healthcare cost-sharing model is often associated with religious organizations. The goal of this model is to bring together a community of like-minded individuals and families to share in the cost of covering each other’s healthcare expenses.
Crowd Health’s model works much the same.
A member signs up for a plan based on the size of their family where they contribute a set monthly amount into a “Health Funding Account,” less a $30 monthly administration fee (this increases to $150 for the family plan). The monthly contribution amounts start at $255 and increase to $695 for a family up to eight. This is significantly more affordable than the average monthly premiums for traditional health insurance coverage of ~$644.
Similar to a traditional health insurance plan, Crowd Health members are responsible for a portion, in this case, $500 of any healthcare event. Instead of calling this a deductible, Crowd Health labels it as a “Commitment.” After the initial “commitment” the remainder is submitted to be “crowd-funded” by the other members, which they call the “Crowd”.
The Crowd then votes to approve them within 72 hours according to the company. This is where the “we are not an insurance company” line makes things interesting. The Crowd, just like a traditional health insurance company can deny covering a healthcare event. This ultimately leaves the member responsible for the cost of those “unfunded” healthcare expenses.
Those in the Crowd receive a “Generosity Score” for the healthcare events they help fund. This generosity score becomes tangible social proof of your contribution and commitment to the community. This score reflects your participation in crowdfunding events and can help your chances of approval for your healthcare expense submissions.
Given that Crowd Health is not an insurance company when members seek out care, they present as “uninsured”. This designation allows them to negotiate self-pay or cash pay prices for pre-scheduled healthcare events. They do this through the use of “Care Advocates” that work with hospitals and healthcare providers to negotiate the prices for these procedures. Crowd Health also shares in the “savings” from these negotiated rates.
There’s a lot more to this, including restrictions on the types of healthcare events that the Crowd will cover, such as cosmetic surgery. There are also limits on the amount of healthcare expenses the Crowd will fund annually. You can learn the details in their Member Guide.
What does this have to do with Bitcoin?
Well, Crowd Health just released a new crowdfunding healthcare plan that is all about Bitcoin. Instead of keeping your monthly contributions to the plan in fiat currency, they convert them into Bitcoin.
But why? Let’s start with a quick lesson on what Bitcoin is.
What is Bitcoin?
Bitcoin is a decentralized digital currency invented by pseudonymous developer Satoshi Nakamoto in 2008 and introduced in his seminal whitepaper. Bitcoin is decentralized because it doesn’t rely on a single central bank or authority to set monetary policy like other fiat or traditional currencies. Instead, it relies on a public ledger system or Blockchain that records all transactions transparently.
These transactions are verified by nodes, which are a peer-to-peer network that uses cryptography to validate that transactions are accurate. In exchange for the verification, “miners” earn Bitcoin or digital currency as a reward for their efforts.
Unlike many cryptocurrencies, Bitcoin has a limited supply. There will always only be 21 million Bitcoins ever mined. Since its launch in 2009, the current supply of Bitcoins in circulation is ~18.925 million, which leaves a bit more than 2 million Bitcoins still to be mined. The expectation is that the last Bitcoin will be mined in the year 2140.
Given its limited supply and relatively scarcity with ~90% of all Bitcoins that will ever exist already mined, the price of Bitcoin has increased substantially over the last 13 years it’s been in circulation.
Bitcoin is often described as “digital gold”. Given its similarities to physical gold in terms of scarcity, limited supply, inflationary hedge, and perceived value, the comparison is appropriate.
Back to Crowd Health – why have member store contributions in Bitcoin?
To me, there are three main reasons – ease of use, appreciation potential, and yes, novelty.
Let’s start with ease of use. As I wrote in Healthcare and Web3 – Hope or Hype? the beauty of using Web3 tools is the ease of transactions. There’s something magical that happens when you complete your first transaction in the crypto world. It’s seamless and feels completely frictionless. Yes, Bitcoin may not be the fastest blockchain out there at ~5 transactions per second, but it’s still relatively quick compared to more traditional mediums of financial exchange.
As the chart above shows since its inception Bitcoin has appreciated by 29,000%. As many of us are painfully aware, we’ve seen a sharp decline in crypto prices, including Bitcoin recently. While I firmly believe in the long-term viability of cryptocurrencies and web3 in general, there will undoubtedly be variability in the price, sometimes that variability will be wild. With variability comes the possibility of appreciation and given the highly inflationary environment, we are in currently, Bitcoin may be a good hedge to traditional currency.
It’s important to note that not all of a member’s contributions will be converted and held in Bitcoin. The company states that 25% of the funds in a member’s account will remain in fiat currency. The main reason for this is to not have to sell any Bitcoin to fund the initial $500 contribution for a healthcare event and other smaller healthcare expenses that wouldn’t be submitted to the Crowd for funding.
Lastly, one can’t ignore that there is a novelty factor to all of this. The past few weeks aside, crypto and web3 at large are still exciting and full of possibilities. Offering a novel healthcare coverage product backed by a novel currency may seem like a marketing play, and perhaps it is, but it’s innovative.
Bringing It Home
If you’ve been reading The Deductible for any length of time, you know that I am incredibly excited about the future of healthcare given the possibility and promise of web3. While the Bitcoin-backed healthcare coverage product that CrowdHealth is offering may not usher in a revolution in the way we pay for healthcare, it is a step in the right direction.
Healthcare companies like Crowd Health alone may not be enough to save healthcare, but its thinking and innovations like this that will eventually get us closer to that goal. We are still so early.