July 2013
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History of health insurance

History of health insurance

According to the Yale Journal of Medicine & Law, the U.S. life insurance system was established in the mid-1700s; however, the earliest forms of health insurance did not emerge until 1850 when the Franklin Health Assurance Company of Massachusetts began providing accident insurance to cover injuries related to railroad and steamboat travel. But it still was decades before the first modern health insurance plans were formed.

Following are some highlights from a timeline at www.pbs.org tracking the history of health insurance and the health care crisis:

  • In 1901, the American Medical Association (AMA) reorganized as a national organization of state and local associations. Membership increased from about 8,000 physicians in 1900 to 70,000 in 1910—half the physicians in the U.S. This period marked the beginning of "organized medicine."
  • During the early 1900s, railroads were the leading industry to develop extensive employee medical programs.
  • In 1913, the American Association for Labor Legislation organized the first national conference on "social insurance."
  • During the 1920s, reformers supporting health insurance emphasized the cost of medical care instead of wages lost to sickness; the relatively higher cost of medical care was a new and dramatic development, especially for the middle class.
  • In 1928, General Motors signed a contract with Metropolitan Life to insure 180,000 workers.
  • During the 1930s, Blue Cross began offering private coverage for hospital care in dozens of states.
  • During World War II, wage and price controls were placed on U.S. employers. To compete for workers, companies began to offer health benefits, giving rise to the employer-based system currently in place.
  • In 1945, President Truman offered a national health program plan, proposing one system that would include all of U.S. society; Truman’s plan was denounced by the AMA and called a "Communist plot" by a House subcommittee.
  • By the 1960s, more than 700 insurance companies were selling health insurance.
  • In 1965, President Lyndon Johnson signed Medicare and Medicaid into law.
  • In 1973, President Nixon renamed prepaid group health care plans as health maintenance organizations—also known as HMOs—with legislation that provided federal endorsement, certification and assistance.
  • During the 1980s, there was a shift toward privatization and corporatization of health care.
  • During the 1990s, health care costs rose at double the rate of inflation; expansion of managed care helped to moderate increases in health care costs; and federal health care reform legislation again failed to pass in Congress.
  • During the 2000s, health care costs continued to rise; Medicare was viewed by some as unsustainable under the present structure and needing to be "rescued"; and changing demographics of the workplace led many to believe the employer-based system of health insurance will not last.

To view the complete timeline on the PBS website, click here.

For more information regarding the history of health insurance and universal health care, click here and here.


This Web exclusive information is a supplement to Prepare for compliance.

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