History of Health Insurance

Medical cost has become very pricey and the United States did not always have health insurance. There are millions of people uninsured and its causing a heated debate in the United States. But does anyone know the history of health insurance and how it came about or even how has it become a big issue in the United States? The American life insurance system was established in the mid-1700s. But health insurance did not merge until 1850 when the Franklin Health Assurance Company of Massachusetts provided accident insurance for those who got hurt due to railroad and steamboat travel.

From this, insurance for all types of sickness evolved but the first modern insurance plans werent formed until 1930. Health insurance took a while to come about because back then medical technology was not very advanced and hosptials were regarded as unreliable institutions. During that time insurance was mainly used to compensate for those who were unable to work due to sickness rather than the medical bills. To help ease the healthcare problem, Baylor Hospital in Dallas created a system which eventually became Blue Cross to help people pay their hospital bills.

As science, medicine and hospitals became more sophisitcated and more successful the prices of medical care gone up because people no longer stayed home when sick or injured they actually turned to hospitals. In the late 1930’s Blue Cross Insurance started gaining ground to protect doctors interest and payments. The success of Blue cross and Blue Shield encouraged other insurers to enter the health care market. These private insurers charged based on age, gender, health status and pre-existing medical conditions and ended up insuring the healthiest people and avoiding the sickest ones which meant more profit for the company.

Blue Cross and Blue Shield had no choice but to follow their lead. Then came World War II and the shortage of labor which encouraged employers to provide health insurance and the government to provide tax incentives to do it. Now that employers were given health coverage it became a bigger problem to the elderly and the poor who were the ones who needed health insurance the most. After the elderly would retire from work they lost their insurance. The government soon after came about medicare and medicaid which helped the elderly and the poor with medical expenses.

The government agreed with the legislators that they would reimburse for the elderly and poor medical expenses at their usual rate. The bill was passed in 1965 and consisted of two parts, one for the hospital services and other for doctor services. In the 1970s and 1980s, more expensive medical technology and flaws in the health care system led to higher costs for health insurance companies. Responding to higher costs, employee benefit plans changed into managed care plans, and Health Maintenance Organizations emerged.

Managed care plans are unique in that they involve a particular network of healthcare providers that have been verified for healthcare quality and that have agreements with the insurer about price and related issues. HMOs were originally primarily nonprofit, but they were quickly replaced by commercial interests, and managed care only succeeded in temporarily slowing the growth of healthcare costs. In 1993 President Bill Clinton proposed a universal healthcare system but it was rejected by Congress.

Some developments in health insurance took place in the 1990s. The Mental Health Parity Act and the Health Insurance Portability and Accountability Act which were both passed in 1996. However, ever since the failure of Clinton’s proposal, the health insurance system has never been fundamentally restructured. In the United States today there are still millions of people without health insurance, about 15. 3% of population according to the U. S. Census Bureau. Our health insurance clearly still needs to be reformed.

But before proposing ways to solve the current health care problem it is important to know the history of health insurance in the United States. The history explains how we got into this crisis. it reveals how premiums became dependent on risk, and how workplaces became the primary suppliers of health insurance. Once we understand the origin of the system’s problems, hopefully we will have better insight on how the healthcare crisis can be resolved. Andrea Medina Medical Insurance July12, 2013.

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