Health Insurance Product Development

Health Insurance began to develop as a product during the civil war.

Health Insurance originated as a way for guild members to support one another in medical crisis. As medical care advanced and became more expensive, insurance companies and governments around the world saw a need that must be filled. The health insurance that was developed in the late 1800s to fill this need became big business in the United States in the mid-1900s, and it has continued to be a major economic field ever since. The competitive nature of the insurance market requires companies to constantly work to update their services and develop a better product.

Origin of the Product

The first health insurance program was developed by members of craftsman's guilds during the medieval period in Europe. Guild members would pay into a "sick fund." This fund would pay for medical care, help support dependent family and pay funeral expenses for guild members who became ill or were injured. The "Iron Chancellor," Otto von Bismarck, created the first national health care system in 1883 when he established a national "sick fund" based on the guild institution. By 1912, most of Europe had followed his lead and developed similar health insurance for the masses.

First American Policies

The first insurance plans in the United States surfaced during the Civil War in the mid-1800s. These plans protected only those who were injured as a result of train or steam boat accident. Just before the turn of the century, the railroad offered employees medical coverage. These coverages were purchased through insurers and are the first known cases of health insurance being bought and sold as a product.

Public Failure

Multiple attempts have been made to take insurance out of the private arena, making it a government service rather than a corporate product. In 1912, Theodore Roosevelt campaigned on a platform that included requiring health insurance for industry. This issue resurfaced in 1915, and the 1920s. National Health insurance was proposed as part of the New Deal of the 1930s and the Fair Deal of the 1940s, but it failed to become part of the final legislation in each case. In 1965, Medicare and Medicaid were signed into law by President Johnson creating publicly funded insurance for the poor and elderly, but this coverage had major gaps, and many that were covered by the government plant still carried private insurances. Attempts at creating a National Health Insurance resurfaced during Nixon, Reagan and Clinton administrations, but all attempts failed. The failure of the U.S. Government to create a public option has necessitated the development of private insurance.

Early Product

Initially health insurance only provided for hospital care. The first modern group health insurance was formed in America in 1929 when a group of teachers in Dallas Texas and Baylor Hospital contracted a set price for medical care, which was paid by way of a monthly fee. These "Prepaid Medical Plans" became extremely common during the Great Depression, when hospitals needed the regular income, and consumers needed affordable medical care. In 1932, Blue Cross and Blue Shield was developed by the American Hospital Association. Blue Cross was designed to benefit all hospitals by reducing competition, and to benefit individual patients by making hospitalized care affordable.

Product Expansion

Because of the success of the Blue Cross plan, commercial health insurance companies began offering health insurance during the 1940s. Doctors realized the potential damage hospital coverage could do to their business, and feared that insured patients will seek medical services at the hospital instead of at the doctor's office. These concerns drive physicians to become involved in the insurance business, resulting in the expansion of health insurance to cover all medical expenses rather than solely hospitalization. By the 1960s, more than 700 insurance companies were offering health insurance policies.

Modern Product Development

Since the inception of Blue Cross and Blue Shield, the number of services provided by insurers has increased greatly. The competitive nature of the market, and the changing face of medical technology, forces companies to constantly work to develop their product. This product development has led to prescription coverage, psychiatric care, preventative coverage, and nurse hot lines supported by insurers, among other benefits.

References

• Northern California Neurosurgery Medical Group: The History of Health Insurance In The United States
• Economic History Services: Health Insurance In The United States
• PBS: Healthcare Crisis- Healthcare Timeline
• National Public Radio: History of Tinkering Helps German System Endure
• The Henry J. Kaiser Family Foundation: Focus on Health Reform