Before the development of health insurance, patients would pay all their health care expenses out-of-pocket, for whatever costs their providers charged them. The first health-related insurance policies in the U.S. were in the form of disability insurance in which people would contribute to a pool that would pay them their lost wages in the event that they did become disabled. Health insurance in its modern form (paying for medical care and hospital expenses) first took shape in 1929, when Justin Ford Kimball, vice president of Baylor University’s hospital system allowed teachers to buy into a plan that would offer them 21 days of care a year for $6. This was the first Blue Cross health plan (which still exists today).

History of Blue Cross/Blue Shield

There are a few events mentioned in this paper which were instrumental in the creation of the modern employer-based insurance system in the U.S. today:

1. The Stabilization Act of 1942, signed by President Roosevelt, prevented the alteration of wages and prices, in order to stem the potential of hyper-inflation during the wartime period. As employers could no longer recruit and retain employees by way of increased wages, they began offering them health insurance (health insurance was deemed a ‘fringe benefit’ and was not regulated under the act. 

2. In 1954, the Internal Revenue Service made it clear that employer contributions to healthcare plans were tax deductible, and would not be counted as taxable income for employees. This meant that employers and employees would not be taxed on the value of health benefits. 

3. Mass union support of employer-sponsored health insurance. Initially, most unions were wary of employer-sponsored health benefits as they often administered their own plans. This changed throughout the 50s and 60s, when unions widely began to fight for more generous health insurance plans from their employers

These three events were particularly influential (especially the tax incentive) in both employers and employees adoption of these plans.

Origins and Evolution of Employment-Based Health Benefits

The Kaiser Family Foundation publishes a yearly survey of employer health benefits which is excellent. Their report contains 14 sections and is very detailed. They cover costs, coverage, eligibilities, market shares, funding, cost sharing, and other practices.

KFF Employer Health Benefits Survey

The history and mechanics of Employer-Based Insurance

The U.S. Healthcare System— Employer-Based Insurance

Mar 17, 2021 • 3 blocks

en.wikipedia.org

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www.ncbi.nlm.nih.gov

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kff.org

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