Standards for Health Insurance Policies (SHIP)

1. Introduction

Imagine a world where contracts and agreements between parties could get settled by a system of computers in microseconds! 

  • The interpretation of the agreements would be standard: the same pre-conditions would result in the exact same outcome. 
  • The speed of settling agreements or disputes would be less than a second, not hours, or days, or months, or years. 
  • Outcomes of settlements or disputes would follow the rules / guidelines laid out in the agreements, with better accuracy
  • The possibility of influencing the clearing house, or the contract settlement party to act with bias would vanish. Further, there would not be any conflicts of interest.
  • The speed of human endeavour would increase by orders of magnitude: it would not be limited by the rate determining step of slow contract settlements / enforcements. 

That is the promise of smart contracts, in other words, a way for contracts to get settled by computers. While a lot of work has gone into the field of smart contracts, Vitraya chose to implement smart contracts in the field of health insurance settlements. 

Health Insurance settlement systems in most parts of the world are ridden with a number of challenges: slowness, low accuracy, massive cost. The WHO estimates that the cost of health insurance administration is ~10% of global healthcare spending. That would peg the cost of the Health Insurance settlement system at $800 Billion. That is more than the annual defence spending of the G8, and also more than the GDP of Vietnam!

The goal of automating health insurance contract settlement must begin with creating standards for health insurance policy contracts. Insurance policy clauses are a free for all, and with seemingly infinite degrees of freedom: one particular policy mentioned the term “reasonable costs” eight times, and the word “etc.” ten times, without defining what reasonable or etc. means. While it may or may not not be intended, what reasonable really means is “at the pleasure of the insurer”. Another policy calls itself a “comprehensive policy, but defines that the term comprehensive does not cover any damage caused by water or flooding. 

2. Why is a standard necessary

In creating standards for a health insurance policy contract, we restrict the degrees of freedom that policy designers can exercise. The objective of restricting the degrees of freedom is to enable predictability of contracts, thus doing away with vagueness, confusion, and subjectivity. 

Once a set of standards have been defined, it is possible to create mathematical algorithms that can apply the rules and clauses covered in the policy to an insurance settlement. This, along with the standard diagnostic reports, standard medical procedures, and standard bill formats will enable computers to take over the job of adjudicating and interpreting insurance claims. 

By creating this standard, Vitraya aims to – 

  1. Create a framework for the degrees of freedom that policy designers can exercise in defining new policies
  2. Standardize insurance policies and ensure policy clauses are consumer friendly
  3. Create an auto-adjudication / settlement system that will 
    • Enable health insurance settlements real-time
    • Create predictability of insurance settlements, thus benefiting the insurer / payer, the hospital / provider, and the patient
    • Create automated frameworks and processes through which the counterparties in health insurance can negotiate with each other and agree on the rules of the settlement. The counterparties of health insurance are insurer/ payer, hospitals/provider, patient, regulators. 

3. Digital standards in insurance 

There have been some attempts at creating an electronically settle-able standards for insurance contracts. The ACORD standard is one such attempt. However, substantive efforts for creating such a standard for health insurance has not emerged yet. The FHIR standard and Medical Markup Language (MML) are some attempts to create standards for healthcare, but they do not extend to enabling insurance settlements. 

It is in this context that Vitraya took on the task of creating a digital Standard for Health Insurance Policies (SHIP). This is also against the backdrop of a call for innovation towards creating a clearance and settlement system by the National Health Authority (NHA) of India and the Insurance Regulatory Development Authority of India (IRDAI). SHIP is the first piece of creating a smart contracting system for health insurance. One of the SHIP standards is a markup language that the NHA refers to as the Policy Markup Language, or more specifically the Health Insurance Policy Markup Language (HIPML).

Our work therefore, is the first publicly available, open source standard for health insurance anywhere in the world. It is a basic framework and can be extended/modified by insurers/developers to suit the policy and industry contexts specific to their region. 

In the coming weeks and months, we will be making a number of releases. These releases will include – 

  • enhanced version of HIPML
  • tools to convert policies from English to HIPML and HIPML to English
  • tools for software developers to write and read health insurance policies in HIPML

4. Why are we making the SHIP and HIPML standards open source?

We believe that making the standards open source will accelerate the adoption of digital contracts and automated adjudication in health insurance. We believe that this will also serve to create a real use smart contracts in action. 

Link to context about SHIP and HIPML

Link to HIPML specification