History of Health Insurance

Health insurance has not always been a part of the American medical system. In fact, medical insurance is a relatively new phenomenon compared to other financial services in the US. Life insurance was first initiated in America in the mid 1700s, but the first "accident insurance" plan was not introduced until 1850, and health insurance as we know it today was not offered until the 1930s. From the earliest plans to current trends in insurance reform and recent health insurance scams, health insurance has dramatically in a fairly short time. [1]

1800s to 1930s

The first form of medical insurance offered in the US was a product called accident insurance, issued by the Franklin Health Assurance Company of Massachusetts. Accident insurance was first offered in the 1850s and was specifically directed at travel injuries. At this time, most Americans did not receive medical care in hospitals, but were treated at home by family physicians.

Until the 20th century, when medical technology made significant advances in the US, many Americans distrusted the quality of medical treatment in hospitals. The earliest forms of health insurance did not cover the costs of medical care, which were minimal for most families. Instead, these plans compensated workers for their lost income when they were sick or injured.

In the late 1800s and early 1900s, important discoveries in medicine like the development of X ray technology and the identification of disease-causing organisms increased the public's trust in the health care system. The demand for medical care grew to such an extent that by the 1920s, the demand for physicians exceeded the number of qualified doctors. In 1929, Dr. Justin Ford Kimball of Baylor University in Texas introduced a medical insurance plan called the Baylor Plan to allow teachers at the university to pay their physicians' bills.

In the 1930s, hospitals began to offer their own health insurance plans. By 1939, hospital coverage had merged under a single plan introduced by the American Hospital Association (AHA). Plans that met the AHA's standards were designated with the Blue Cross symbol. Blue Cross became an organization in its own right in 1960. These early Blue Cross plans were considered nonprofit organizations, with tax exempt status. At the same time, commercial health insurance plans were introduced by private companies.

1940s to Present

In the 1940s and 1950s, the demand for health insurance increased significantly. During World War II, the number of employer-sponsored programs began to rise. In order to attract employees during the war, when wages were restricted, employers offered health insurance as a benefit. Employers that offered health insurance were allowed to deduct these costs from their taxes, which encouraged more companies to offer these benefits. At this point, employer-sponsored health insurance became more widespread than individual health insurance.

In the 1970s, advances in medical technology caused health insurance costs to rise. In an effort to control costs, managed health care was developed. The Health Maintenance Organization, or HMO, was introduced in the early 1970s to counteract the rising costs of medical treatment. In the managed care paradigm, which still exists in the present, care is coordinated by a primary doctor, who determines whether a patient requires specific services and refers patients to specialists within a provider network.

As health insurance premiums continue to rise, insurance has become unaffordable for many businesses and individuals. Although many Americans still receive health coverage through their employer, many companies have reduced medical benefits or no longer offer health insurance as part of their benefits package. Recent health reform regulations will hold health insurance companies accountable for the increases in premiums and may make affordable health care accessible to a larger number of Americans.

[1] http://www.yalemedlaw.com/2009/11/the-history-of-medical-insurance-in-the-united-states/ 09/05/2011

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