Modern health insurance policies descended from accident and disability insurance programs developed in the mid nineteenth century. Organizations, called mutual assurance associations, formed with the intent of protecting workers and their families from the often-devastating financial effects of a debilitating accident or injury on the job.
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These mutual societies were mostly non-profit groups that collected premiums and passed benefits along to their members; railway workers, ship builders and others engaged in difficult and often dangerous physical labor. In the early 1860s, private insurance companies sprang up offering similar services.
One of the very first private insurers, still in business today after more than 150 years, is the Traveler’s Insurance Company. The Traveler’s began by providing insurance protection for individuals who earned their living “on the road.”
These were traveling salesmen and others who risked life and limb by journeying across America in the days before convenient long-distance public transportation became commonplace. Today, Travelers Insurance offers a wide variety of personal and business insurance protection.
When was the first health insurance policy written?
The first group disability insurance policy was purchased by an American employer in 1911. The first employer sponsored hospitalization plan began in 1929 and was organized by teachers in the Dallas, Texas area and created at the Baylor University Hospital. This early version of a health maintenance organization covered members’ expenses at only this one Texas hospital.
Also in 1929, The Ross-Loos Clinic was founded in Los Angeles, California, which is widely considered the first HMO. Also in California, Henry Kaiser (1882 – 1967) founder of Kaiser Shipyards, Kaiser Steel and Kaiser Aluminum, organized hospital and medical care for his workers, thus founding the Kaiser Permanente organization.
These ideas became even more popular among hospitals during the Depression, when all facilities were suffering from declining revenues. The Baylor Hospital plan was a precursor of later group plans including the Blue Cross organizations. Eventually physicians and other private practitioners jumped on the bandwagon, offering pre-paid surgical and medical benefits.
The “Blues” were originally not-for-profit organizations sponsored at local hospitals (Blue Cross Groups) or by doctors and other medical care providers (Blue Shield Groups). Blue Cross and Blue Shield groups provided service benefits, and not the payments or reimbursements to policyholders that we often see today.
In 1934, the General Tire Company purchased the first group medical plan, issued by the Equitable Life Assurance Society, today known simply as the Equitable. From these early roots, employer sponsored health insurance programs grew tremendously, though until 1954 these benefits were considered to be taxable income by the IRS!
Who regulates and controls health insurance?
The primary responsibility for insurance regulation falls on individual state insurance departments. Each state determines which insurance providers will be licensed and controls which insurance programs are acceptable for sale in their jurisdiction.
Aren’t there a number of federally controlled or mandated programs?
Yes! In the 1960s, the federal government created both the Medicare and Medicaid health insurance programs. Medicare, for adults 65 and over, is administered directly by the federal government and connected to the Social Security retirement program, which deducts Medicare premiums from recipients’ monthly benefit checks.
Medicaid is a program designed to protect the lowest income Americans. However, while a federally mandated program, Medicaid is administered separately by each of the 50 United States. The qualifications and benefits of Medicaid may vary from state to state just as private insurance programs will differ depending in which state you are applying.
What about more recent health care reform?
It has been the goal of our federal government to insure that all citizens have at least basic health care coverage. In the sweeping Health Care Reform Act of 2010, many changes to the U.S. health care system were initiated and many more will take effect in the years to come.
What are some of the benefits of the 2010 Act?
- More consumer rights and protections
- More choices for those denied coverage or those who have no insurance. These provisions include a PCIP plan for adults with pre-existing conditions and the extension of coverage for children to age 26 (under a parent’s policy).
- More value for each dollar spent as insurance companies now have limits on what they can budget for administrative expenses.
- An end to maximum policy limits
- More services for children and the elderly
- More tax benefits for businesses who offer health insurance to their employees
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