Then and Now: The Evolution of US Health InsuranceEver been curious how health insurance began? I began researching to find the origin of modern day health insurance. Here is what I found out. 

1798 - Congress established the US Marine Hospital Service for seamen. Services at this hospital were funded by mandatory deductions from the salaries of the seamen. 

1847 – Massachusetts Health Insurance of Boston offered a group policy giving comprehensive medical benefits for a monthly or annual premium.

1861 to 1865 – (Civil War Era) Injury and accident coverage was available when traveling by train or steamboat. 

1866 – Sixty organizations were offering accident insurance not limited to train or steamboat travel.

1890 – Organizations began adding sickness coverage to the accident policies. Almost all hospitals were non-profit and founded by religious organizations or the wealthy. 

1900 – Hospitals began charging for services - the beginning of our modern-day hospital systems.

1909 – Railroads began providing employees with medical insurance programs.

1910 - Mail-order retailer, Montgomery Ward, offered what is now considered the nation’s first multi-employee health insurance policy. It paid a total annual benefit of nearly $29.00 to ill or injured employees.

1911 - The first employer-sponsored group disability policy was issued. This disability policy offered to replace wages lost due to an inability to work but did not cover medical expenses.

1918 - In California, a proposal to create a statewide insurance program was placed on a ballot but failed when put to a vote. 

1919 – An Illinois study found citizens lost four times more wages due to sickness than the amount they spent on the illness. People began purchasing “sickness insurance” to replace their wages rather than health insurance to cover costs of medical treatment.

1920 - General Motors contracts with Metropolitan Life to insure 180,000 workers.

1929 - The first modern group health insurance plan was formed in Dallas, Texas when a group of 1500 teachers contracted with Baylor Hospital for room, board and medical services in exchange for a monthly fee. The first Health Maintenance Organization (HMO) was formed for Los Angeles’ Department of Water and Power employees providing a wide range of health care services at a set rate. The American Hospital Association was created when community hospitals organized with each other to offer hospital coverage and to reduce competition, leading to formation of Blue Cross 

1932 – The first private hospital coverage plan, Blue Cross of Sacramento, California offered the choice of healthcare providers and aided in reimbursement to providers for the treatment of low-income patients.    

1935 – An assortment of Blue Cross/Blue Shield plans were available in 13 states. These plans negotiated reduced rates with doctors and hospitals making their plans very profitable. 

1939 – The beginning of Kaiser Foundation Medical Care Plan:  Construction and dam workers for the Kaiser Construction Company had premiums voluntarily deducted from their paychecks to cover healthcare expenses.  The money was sent to a holding company that in turn paid the money to an on-site Kaiser doctor. This “company” contracted doctor provided care for the workers and their families.   

1940 - Wage freezes during wartime were imposed by the government. Unable to attract workers by paying more, employers instead improved their benefit packages to include health and disability insurances hoping to entice prospective employees. 

1941 – Nearly 12 million of the nation’s population of 132 million had some form of health coverage. Commercial insurance companies enter the health market based on the idea that the insured are employed and thus likely to be young and healthy.  Commercial carriers charged higher rates for sick and elderly patients. 

1942 – Congress makes employer-provided health care tax deductible for employers. 20% of the US population (26 million people) were enrolled in group hospital plans. Kaiser Foundation medical care plan expanded to Kaiser shipyard employees.

1945 - Strong unions began bargaining for better benefit packages including employer-sponsored health insurance.  Kaiser Health Plans opened for community participation.

1949 – Deductibles were introduced for the first time. Liberty Mutual introduces Major Medical Insurance to protect individuals against extended illnesses or catastrophic injuries. 

1950 – Fifty percent of the US population was covered by health insurance. One-third of the US population was covered by employer-provided plans which had become an expected part of their employment benefits package. 

1951 – Nearly 80 million people in the US had at least basic health insurance. Over 100,000 individuals and their dependents had Major Medical Insurance.

1954 - Disability benefits were included in social security coverage for the first time. Over 60% of population have some type of hospital insurance.

1957 – Vision care began being offered.

1958 – 75% of Americans had some form of health coverage.

1959 – Dental benefits began being offered.

1960 – The total number of people enrolled in health insurance plans was over 142 million.  32 million of these had major medical insurance.  There were over 700 insurance companies in the US. 

1965 – Over 70% of the general population had health insurance but, unfortunately only half of all seniors had health care coverage but often had to pay increased rates based on their age and health history.  Private insurance was generally unaffordable or simply unavailable to many such as the poor, unemployed and the elderly.  The Kerr-Mills Act provided matching funds to states assisting patients with their medical bills.

1965 – President Lyndon B. Johnson signed Medicare and Medicaid programs into law creating publicly run insurance for the elderly and poor.

1968 - Employer-provided group life and health insurance plans cover more than 2/3 of the labor force.

1980 – The cost of health care rose rapidly forcing many employer-sponsored group insurance plans to switch from “fee-for-service” plans to the more cost-effective “managed care plans.” 

1986 - 156 million people had Major Medical Insurance 

1988 – 75% of American workers with employer-sponsored health insurance had traditional, indemnity or a fee-for-service plan. 

1995 - Most Americans with health insurance were enrolled in managed care plans. 
Medicare covered 39.5 million people and Medicaid covered 37.5 million.

2000 - Medicare and Medicaid account for 32% of all health care spending. Healthcare spending was nearly $1.2 trillion dollars. 

2002 - Nearly 82 million young and middle-aged Americans were uninsured for some portion of the year.  These individuals were directed to Medicaid for coverage.

2005 – Healthcare costs were nearly $2 trillion dollars – up 73% as compared to 2000. The annual premium for health insurance for a typical family was nearly $11,000 (25% of the median annual salary).  Families struggled to pay medical premiums as well as their portion of medical bills (co-payment and deductibles). More than 6 million families were uninsured. Fewer small companies were offering health insurance benefits.  Of these companies, nearly one-third of them were not offering to help pay the insurance premiums. 

I hope you found this interesting. I certainly did.

Daily Dose HQ