The Origins of Health Insurance
Health insurance and its costs seem all to common to individuals today, but the concept of health insurance didn't always exist. The first type of modern health insurance plan did not appear until after the turn of the 20th century. It was at this time that companies that provided life insurance polices began to enter the market for health insurance. Health care has progressed into the system of health care that we have today.
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Group Health Plans
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The first group health plans were offered from groups called Blue Cross and Blue Shield during the Depression. These groups were formed from the American Hospital Association and American Medical Association. Blue Cross was formed so that hospitals would not compete with each other by offering prepaid care to patients. Blue Shield was formed with the help of federal legislation that enabled it to form groups without the need for insurance reserves. Each group negotiated with each other for discounted contracts to provide services.
Employee Benefit Plans
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An employee benefit plan began to appear during the late 1940s and the early 1950s when strong unions began to bargain for better worker benefits. One type of benefit that unions bargained for was tax-free employer-sponsored health insurance. During World War II the federal government passed the Wage Stabilization Act of 1942. This act prevented companies to offer increased wages but allowed them to use other type of incentives. One type of incentive that employers began to offer as a benefit was health care.
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Government Programs
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Insurance programs designed to cover health care costs began to grow during the 1950s. This included the addition of disability benefits to Social Security in 1954. In 1965 the federal government created Medicare and Medicaid. Medicare was designed to provide hospital insurance and subsidized insurance for citizens age 65 and older. Medicaid was a program that was developed to provide care for people with low incomes. This was a federal-state program in which the income varied from state to state.
Managed Care Plans
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During the 1970s and 1980s managed care plans such as health maintenance organizations began to grow in popularity. These type of organizations helped to keep medical costs in check by contracting with doctors for their services for a set fee. The passage of the Health Maintenance Organization Act of 1973 (see Resources) required employers with 25 or more employees to offer HMO options that were federally certified.
Legislation
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Congress passed legislation in 1996 called the Health Insurance Portability and Accounting Act (HIPAA). This act helped employees maintain health care when changing jobs, having been separated from their jobs or becoming self-employed. When an individual had coverage under a previous group health insurance plan, he could not be denied coverage when switching to a new group or individual health insurance plan.
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