What is the History of Health Insurance in the United States?
Just the Essentials...
- Health insurance as we know it began in the United States in 1929.
- Blue Cross Blue Shield was formed in 1932 and was the first non-profit healthcare organization to offer health insurance plans.
- As healthcare improved and medical knowledge expanded in the United States, health insurance costs rose.
- Health insurance today can be incredibly expensive.
- Comparison shopping can help you find health insurance coverage that’s both effective and affordable.
What's the history of American health insurance?
So, what exactly is the history of health insurance in the United States? They aren’t super-easy to pinpoint as there is no real date to identify the beginnings of the concept. There is, however, a point that first demonstrated the benefits of health insurance and set the foundation of what eventually became the modern health insurance system.
What is considered to be the first modern group health insurance plan was formed in 1929. Education administrator Justin Ford Kimball developed what was known as a sickness fund for teachers in the Dallas Independent School District. Kimball would take over Baylor University Hospital in Dallas, and when he gained access to their books, he saw that many patients were unable to pay their bills.
With patients unable to pay their bills, Baylor was losing money. Because it was losing money, Baylor was in serious trouble. Many hospitals around the country were in financial trouble for the very same reason.
“The citizens of Dallas were in financial straits. They were unable to face the costs of paying hospital bills. At the same time, Baylor was in desperate need of money. Its hospital was badly overdrawn. It owed more than $1.5 million.” - Justin Ford Kimball
To help teachers in financial trouble pay their bills, Kimball would offer them a “hospitalization policy.” Under this policy, teachers would get two weeks of paid hospital care for 50 cents a month. The policy was a hit.
Thanks to Kimball’s efforts, a new industry was born. Read on to learn how one man’s efforts would single-handedly change how we pay for healthcare.
The Formation of Health Insurance in President Roosevelt’s “Progressive Era”
Health insurance in its earliest form predates Kimball’s “hospitalization policy” concept. In the early 1900s, President Theodore Roosevelt sought to reduce the influence of manufacturing, transportation, and oil firms that had outgrown themselves during the Industrial Revolution. In the states, lawmakers were trying to find ways to shorten the work week, fight child labor, and deal with workplace injuries.
It could be argued that early workers’ compensation insurance enacted by 32 states between 1910 and 1915 provided the earliest base for what became known as health insurance. Workers’ compensation was widely supported by organized medicine, as doctors believed that injured workers would come to them for care, and then the doctor would be paid by a workers’ compensation fund. However, employers had a different plan in mind.
By the late 1910s, lumber and mining companies in the Midwest and the Pacific Northwest began working with physicians to develop contracts for employee care. This early form of health insurance was somewhat similar to the plan that Justin Kimball would develop for Dallas teachers in 1929. Both plans would go on to become the basis of one of the biggest modern health insurance companies in the country.
The History of Health Insurance Starts with Blue Cross Blue Shield
As the 1920s crossed into the ‘30s, Kimball’s concept began to gain traction. It spread throughout Dallas first, and then across the country. In 1933, E.A. van Steenwyk, an executive in Minnesota, started identifying his hospital care program with a blue cross. Other hospital care groups across the United States followed suit, and in 1939, the Blue Cross symbol was officially adopted by the American Hospital Association (AHA) as a national emblem for care plans that met specific guidelines.
The Blue Shield came out of the Pacific Northwest lumber and mining camps. Turn-of-the-century employers who wanted to provide medical care for their workers paid physicians a monthly fee to secure services. This led to the creation of “medical service bureaus,” groups that would serve as the basis for the first Blue Shield plan, which was developed in California in 1939.
The Development of Modern Health Insurance
Health insurance as a concept gained traction as the Great Depression took hold of the United States. It was nearly impossible for many Americans to meet everyday expenses, and paying the costs related to medical care for illnesses or accidents was a major hardship. The introduction of 1935’s Social Security Act and unemployment compensation brought the need for comprehensive health insurance to the forefront for many legislators.
As World War II rolled in with the mid-1940s, employers and employees were facing the harsh realities of wage freezes. As a result, employers began developing benefits packages in lieu of wage increases that included group health insurance. As you could imagine, health insurance was a very desirable benefit.
In 1949, the United States Supreme Court would rule that, as part of the Taft-Hartley Act, employers would be required to bargain on welfare issues. This would lead to the spread of prepayment concepts and health insurance throughout the nation. As a result, Blue Cross and Blue Shield plans would spread rapidly throughout the nation as well.
Until the Blue Cross and Blue Shield plans helped popularize the concept of health insurance, most commercial insurance companies never gave it a second thought. As health care costs began to rise with the times, commercial insurance companies saw the demand for affordable health insurance and, in turn, saw a lucrative business. This led to commercial insurance companies changing their practices in order to offer health insurance plans to individuals and families.
By 1963, Blue Cross and Blue Shield were no longer the only health insurance companies around. More than 900 companies had started to write comprehensive health insurance plans.
Health Insurance Today
19 years later, in 1982, Blue Cross and Blue Shield would merge to become the biggest health insurance provider in the country. Over time, individuals and families would have more choices than ever before when it came to affordable health insurance coverage, thanks to companies such as:
- United Healthcare
- Kaiser Permanente
As more individuals and families sought health insurance for treatment costs, both healthcare costs and insurance premiums would balloon. This would result in insurers placing restrictions on who could obtain health insurance for many reasons, such as pre-existing conditions. For example, if you had an existing health condition such as diabetes or asthma, many private health insurance companies could either charge you higher premiums for health insurance or deny you altogether.
Health insurance reforms would abolish a company’s right to refuse you health insurance because of pre-existing conditions as of March 2010.
The signing of the Affordable Care Act (ACA) at that time would again open access to affordable health insurance to millions of Americans who had gone without. Though Americans have better access than ever to health insurance plans, high premium costs and deductibles tend to dissuade many from purchasing.
High premiums make purchasing health insurance especially tough for the senior population. The development of Medicare during the administration of Lyndon B. Johnson aimed to provide seniors with an affordable government-controlled health insurance option.
However, rising premiums – especially those of privately-provided Part C and Part D plans – have made it tough for seniors to even afford certain Medicare Advantage or Prescription Drug plans.
In the modern health insurance marketplace, comparison shopping is the best way to find affordable health insurance plans that meet your needs. Thanks to the internet, it’s easier now than it has ever been to find health insurance plans that offer stellar benefits at affordable prices.
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