TLDR: Health Insurance DAOs are a way to decouple Health Insurance coverage from employment, provide members more customized coverage options while developing a network of communities.
Current Reality
Just like much of healthcare, Health insurance is broken.
Health insurance today is anything but seamless. Patients face tight enrollment windows, the hassle of obtaining pre-authorizations and being limited to a network of providers. Not to mention the challenges of reimbursement for care and ensuing battles for when already-delivered care is denied.
The current model for health insurance coverage is often coupled with employment. Plans come in various flavors of coverage with deductible ranges, coinsurance cost-sharing, and stipulations for seeking care. Coverage options are usually limited to a few choices hand-picked by an organization’s insurance broker.
How these plans are paid for can be complicated. Your employer pays the majority of the monthly premiums while you cover your smaller share. It’s a model that’s become the norm but leaves patients with limited choices. If you decide to leave your employer, you lose your current insurance coverage. You’ll need to re-enroll in a new plan either with your new employer or seek out a plan on an exchange.
It’s no wonder that Net Promoter Scores for Health Insurance providers were a dismal average of 20 out of 100 in 2020, and for some fell as low as -1.
But what if there was another way?
It’s time to decouple health insurance from employment. It’s time to think of coverage, as a community of members who have more choice, flexibility, portability, transparency, and ultimately lower cost to the patient.
It’s time to rethink the concept of health insurance through the lens of Web3.
Enter the DAO
DAOs, or Decentralized Autonomous Organizations, are organizations run by their members. Members vote on initiatives and make decisions on how the DAO operates. Think of them as the democratization of a corporation in which shareholders have complete control, and each of them has a say. It’s the Web3 version of the LLC.
So how does this all work?
I’ve been dabbling a bit with NFTs, with mostly disappointing results, except for one.
At the beginning of 2022, I purchased a Leisure Membership NFT in LinksDAO. I was fortunate to be on the whitelist for the initial mint, which allowed me to buy the NFT before the next day’s public sale. It was a concept that intrigued me and brought together two of my interests – golf and Web3.
It’s a fascinating story, much of which is still to be written, but the summary is as follows.
LinksDAO is a DAO of like-minded individuals who came together to purchase a golf course. Not just any golf course, but one of the top 100 in the world. Membership in the DAO is based on the ownership of an NFT, which was sold as a way for the DAO to raise capital. Capital that will be used to purchase the course. The total money raised by the initial mint was $11.5MM, a tidy sum for a newly formed entity in a nascent concept.
How is this different from other organizations?
Well, from idea inception to NFT mint, it took a total of 14 days and brought together a community that was non-existent just days before. That’s the speed of Web3 and the power of community.
LinksDAO is more than just a novel way to raise funds. It’s a community of 15,000 members who backed a cause they were passionate about. We/they did it in a way that allowed us to have a say on the strategic direction of the DAO. With no central authority.
Yes, there are, what could be called administrators that did the initial legwork to get the DAO setup. But for all intents and purposes, the DAO is decentralized.
One example is a recent vote by members on a potential charity initiative. With secondary sales of LinksDAO NFTs, a royalty is earned by the DAO. It’s a single-digit percent earned on each secondary sale and a way for the DAO or NFT creator to earn a perpetual recurring revenue stream.
A proposal was put up to a vote whether or not to donate all proceeds from secondary sales to a specific charity. Not surprisingly, the vote passed unanimously by a fully engaged and excited community within a few hours
Ok, great, but how does this apply to healthcare?
Health Insurance DAOs
It’s a novel way to think about insurance coverage. It’s all there – capital, members, networks, and communities.
Let’s walk through what this could look like for health insurance.
A Health Insurance DAO can be formed to provide insurance coverage to patients under the care of a “network” of providers. The DAO can create an NFT that provides buyers access to the network as members. With that access, members can purchase coverage based on their healthcare needs.
The NFT can hold each member’s plan coverage information and benefit details. Those details are stored securely on the blockchain. The sale of those NFT purchases funds a treasury to cover the cost of care for the community.
Members of the DAO can choose from a variety of coverage options based on their predicted use of care. You can tailor your coverage to your healthcare needs. The coverage you chose could also flex with your life stages. Single and healthy? There’s a plan for you. Getting ready to start a family? The DAOs got you covered. No longer will you pay premiums for the care you don’t need or use.
The Health Insurance DAO could further be divided into various Risk Pools or tranches that could be customized by use, demographics, or other risk-based factors. This customization would allow not only for more predictable usage measurement and prediction but also build and strengthen the community within that tranche of members.
When care is rendered to a member of the community, the Health Insurance DAOs treasury picks up the cost based on the coverage chosen. A seamless, transparent, and frictionless reimagining of health insurance coverage built around community, rather than corporations.
What does this all look like in practice?
A New Hope
Derive.Health is decentralized health insurance. The organization utilizes the DAO framework to build a health insurance network that allows its members to design coverage plans and vote on coverage options while being incentivized by their token $DERIV.
Derive is leveraging the 100-year-old model of health share plans but adding a Web3 lens to an already proven concept. It’s not a new idea, but we now have the tools to democratize, incentivize, and drive change in the healthcare space for the first time.
It’s a perfect illustration of many of the components of Web3 coming together to change the way we view healthcare coverage.
Bringing it Home
Healthcare needs help and a fresh look at the components that make up the life cycle of care. Health Insurance is a massive component of Healthcare decision-making on how, who, and when care is provided and received. By decentralizing health insurance coverage via Health Insurance DAOs, we have an opportunity to align incentives, decouple coverage from employment and ultimately drive down the cost of care.
The tools and frameworks born out of Web3 might just be the way to do that.