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When did health insurance start in the USA?

“To sum it up…”

  • Health insurance, one of the most hotly debated political topics in the US, began in 1929
  • Blue Cross Blue Shield was formed in 1932 and was the first non-profit health group to offer health plans
  • As health care improved and medical knowledge expanded rapidly in the US, so did the cost of health insurance
  • Today, health insurance can be very expensive. Comparison shopping can help you find coverage that’s both effective and affordable

There is no exact date that identifies the start of health insurance in the United States. However, there is a significant point that demonstrated the benefits of health insurance and set the foundation for the health coverage which has developed over time.

The first modern group health insurance plan was formed in 1929. The plan was pretty straight-forward. Teachers in Dallas, Texas entered into an agreement Baylor Hospital. The teachers wanted the hospital to provide room and board as well as medical services. In return, the teachers would pay a monthly fee to the hospital. As a result of the agreement, the teachers received basic medical care in return for paying a fee.

However, this policy was limited to a small number of participants, according to the NueroSurgical.Com website.

Over the next two decades, several large life insurance companies step into the health insurance arena in the 1930s and 1940s. These companies offered various levels of basic services.

Read on to learn how health insurance started in America. When you’re finished, enter your zip code to compare free quotes on multiple policies from top providers!

Early Days of Health Care


The popularity of the health insurance programs increased with a major milestone taking place in 1932. It was in that year that two non-profit health organizations identified as Blue Cross and Blue Shield began offering health plans.

The two organizations provided different types of coverage. Blue Cross plans provided coverage for hospital services. Blue Shield covered physicians’ services.

Today, the Blue Cross name is used by an association of health insurance plans throughout the United States. This organization is a major part of the country’s health insurance industry.

The two plans were successful because they could negotiate with doctors and hospitals to get prices for service discounted. As a result of the discounts promised by the doctors and hospitals, Blue Cross and Blue Shield promised an increased volume of patients and prompt payments.

The Creation of Health Insurance


However, before the formation of the Blue Cross/Blue Shield programs, several other steps leading to the formation of health insurance were taking place.

Before the birth of the medical services taken for granted today, early hospitals were poorhouses. They were places where the indigent went to die.

However, the discovery of effective treatments such as antibiotics developed along with a revolution in medical education led to greater concern about health care. With those changes, historian Melissa Thomasson at the Miami University of Ohio stated that with the “new” approaches, hospitals were marketing themselves ” places to have babies.”

Professor Thomasson added that in the early part of the 20th century, hospitals could focus on happy outcomes.

Development of Health Insurance


Health care became much more effective and expensive. Clean hospitals, educated doctors and increased pharmacological research cost money. People soon started to seek professional care when they were ill, instead of either using ineffective home remedies or ignoring the problem. However, despite the increase use of the advancing medical options, the general public did not schedule annual checkups or seek help for illnesses that did not appear to be life threatening.

Over time, health care became much more effective, and as might be expected, expensive.

Clean hospitals, educated doctors, and true pharmacological research cost money. The people became willing to or care when they were really sick. However, it was not yet common to see the doctors for precautionary checkups or survivable illnesses.

By the late 1920s, hospitals began to realize that a large number of beds were not be utilizing for overnight stays. The hospitals wanted to attract people who were not necessarily needed critical care. Instead, they wanted to attract those patients who could benefit from bed rest, a regime of medicines and have professional staff members monitoring of their conditions. They wanted people who were not deathly ill, but ill enough to benefit from hospital care.

Improved Health Care Leads to Health Insurance

The availability of health insurance was a major milestone for the development of health care.

• The first insurance plans began during the Civil War. The earliest ones only offered coverage against accidents related from travel by rail or steamboat. While providing limited coverage, this plan started the movement for more comprehensive plans that covered all types of illnesses and injuries.

• The first group policy giving comprehensive benefits was offered by Massachusetts Health Insurance of Boston in 1847.

• Insurance companies began to issue individual disability and illness policies around 1890.

Health care became much more effective and more expensive. Clean hospitals, educated doctors, and true pharmacological research cost money. People displayed a willingness to pay for care when they were really sick. However, in those early days, it was not common for people to visit the doctor for wellness checkups or survivable illnesses.

Taking Steps to Provide Quality Care to More People


The idea of Universal Health Care was proposed during the Administration of President Bill Clinton, which was not adopted. Most recently the nation has seen the enactment of subsidized health care through the Affordable Care Act or Obamacare. However, the cost for the program has exceeded estimates, and many insurance companies are declining to participate.

Today there are ongoing debates regarding the continuation of market-based plans, universal heath care and guaranteed coverage supplemented by the federal government (Affordable Care Act or Obamacare.)

In addition, the creation of Medicare, during the administration of President Lyndon Johnson, established a separate system of government controlled and partially funded (participants pay a relatively small premium) program for senior citizens and other people with special needs.

While the nation does enjoy top-level health care, many people are not being reached, and the cost is continuing to increase.

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  1. http://www.neurosurgical.com/medical_history_and_ethics/history/history_of_health_insurance.htm
  2. https://en.wikipedia.org/wiki/Blue_Cross_Blue_Shield_Association