Health Insurance History

How We Got to Now: A Brief History of Employer-Sponsored Healthcare, by David Rook on Aug 17, 2015

Before the 1930s, the American public largely paid its own way where medical costs were concerned. With the exception of a few industries, employers by and large had little motivation to provide health coverage.
 Americans who worked in dangerous professions like mining, steel, and railroads had access to company doctors in industrial clinics or union-operated infirmaries. Though this was not healthcare as it exists today, these company-sponsored clinics were some of the earliest precedents of businesses becoming involved in their employees’ well-being.

After his election to the presidency in 1932, Franklin D. Roosevelt chose not to pursue universal healthcare coverage. Several factors influenced his decision, not the least of which was major opposition from the American Medical Association. Roosevelt toyed with the idea of nationalizing healthcare as part of his plan for Social Security. However, he was a politically astute man, and he realized that tying universal health coverage to the Social Security Act might doom both initiatives to failure.

Of course, Roosevelt's decision left unresolved the pressing need of many Americans for some way to deal with healthcare costs. In the grips of the Great Depression, many were hard pressed to find money for essentials like food and shelter. Healthcare often fell by the wayside for families working to access the basic necessities of life.

Into this environment came the beginnings of private health insurance, with Blue Cross and Blue Shield plans paving the way for private insurers to begin crafting plans to meet the needs of the growing market. Still, at this stage, employers were not generally in the picture, and these original health insurance offerings were purchased almost exclusively by individuals.

Once America became embroiled in World War II, there was great concern that rampant inflation would threaten America's military effort and undermine its domestic economy. The concern was valid, as Americans had witnessed what inflation had done to war-torn Germany, devastating its economy and giving rise to Hitler's regime.

To combat inflation, the 1942 Stabilization Act was passed. Designed to limit employers' freedom to raise wages and thus to compete on the basis of pay for scarce workers, the actual result of the act was that employers began to offer health benefits as incentives instead.

Suddenly, employers were in the health insurance business. Because health benefits could be considered part of compensation but did not count as income, workers did not have to pay income tax or payroll taxes on those benefits.

Thus, by 1943, employers had an increased incentive to make health insurance arrangements for their workers, and the modern era of employer-sponsored health insurance began.

 

https://www.griffinbenefits.com/employeebenefitsblog/history-of-employer-sponsored-healthcare

Comments

Health Insurance doesn’t work, because providers have no incentive to lower costs and that won’t happen until people pay their own healthcare expenses.

Norb Leahy, Dunwoody GA Tea Party Leader