Health insurance (formally referred to as “accident or health and disease”) is one of the main or general lines of jurisdiction (LOA) defined by the National Association of Insurance Commissioners (NAIC) in the Unified License Standard (ULS).
By the end of 2021, an estimated 138682 licensed medical insurance agents worked in the United States. The Institute of Insurance Information (III) also reported that by 2021, life and health insurance companies had employed more than 900000 people. In contrast, only 600000 carriers reported in III were engaged in property insurance and casualty insurance.
No matter what you say, between insurance companies and insurance agents, brokers, MGA, MGU and any other abbreviation we forget, welfare sales is a big business in the United States, More than one million people have played a role in obtaining these important insurance products for the whole country. As health benefits account for a large part of the insurance industry, we think it is a good thing to have a deep understanding of its history, current situation and potential future.
Although compliance is often our problem, this blog will pay more attention to history. If you are worried about some legal actions, please check our previous series of articles to understand the medical insurance compliance of employers, medical insurance companies, medical insurance institutions and brokers. On the other hand, if you want to skip the good part, simply manage license compliance and recommend manufacturers, please see how AgentSync can help.
Part I: History of American medical insurance
First medical insurance
As we think today, medical insurance began in the 1930s during the Great Depression. Before that, there was not much “health insurance” to pay for medical expenses. Today we call it income insurance for the disabled.
Because the medical technology is not very advanced, the actual cost of obtaining medical care is relatively low. Before the 1920s, most operations were performed at home, so there was little need to pay for hospitalization. People are more worried that if they can’t work due to illness, they will miss their wages. Therefore, “disease insurance” products began to appear to help people pay the living expenses when they could not obtain income due to disease or disability.
Another early form of health insurance is the so-called “disease fund” These funds are either set up by banks to pay medical expenses to members, or in the case of industrial disease funds, set up by employers to benefit workers. Disease funds arranged by financial institutions first appeared (around the 1880s), followed by industrial disease funds, which remained popular throughout the 1920s. The concept of the Industrial Disease Fund also plays a role in the labour movement, and then organizes health care through trade unions.
Early workers’ compensation insurance
Medical insurance has been associated with employment for most of the history of the United States, which may not be surprising, because work has a dangerous history and is one of the most common forms of injury before the era of automobiles, public transport and airplanes.
At the beginning of the 20th century, if the employer was negligent, when the employee was injured at work, the employer had the legal obligation to pay the medical expenses. However, there are three ways to exempt employers from their obligations:
Require employees to take risks as part of their work
The injury claim is due to the negligence of other workers, not the negligence of the company
Require the injured person to be responsible for the accident at least
Around this time, the workers’ rights movement was rising, and the states were introducing new laws to reform child labor. Limit the duration of the work week, and solve the frequent injuries in the workplace and the consequent litigation. Therefore, the workers’ compensation law was introduced.
Workers’ rights activists support the new law, which puts the economic responsibility of injured workers on the employers rather than workers. At the same time, employers believe that the law will enable them to take care of injured workers at a lower overall cost, without having to appear in court regularly.
In 1908, Congress passed the Federal Employers Liability Act (FELA), which is the first federal law similar to workers’ compensation. This law only applies to railway and federal trade employees. Only when the employer is found to be at least partially responsible for the accident, can the wage be paid. However, when paid, benefits outweigh insurance that compensates contemporary workers.
Between 1910 and 1915, 32 states passed the Workers’ Compensation Insurance Act, allowing employers to purchase insurance through the state. Although not mandatory (today in most states), employers who purchase compensation insurance for workers through their states can avoid civil liability for accidents, At the same time, it still provides medical care and compensation for injured employees, and spends less money to bring a lawsuit in court.
The first nationwide medical war in the United States
By the 1920s, many European countries had developed some form of nationalized health care for their citizens. In the United States, similar movements flourished in the first decades of the 20th century, but failed. Researchers attributed the failure of the US nationalized medical system to a variety of reasons, including:
American doctors represented by the American Medical Association (AMA) oppose “compulsory nationalization of medical treatment” This is largely due to what doctors saw when workers began to apply for compensation. In other words, in order to control the cost, the employer signed a contract with his own doctor to treat the trauma on the spot, which had a negative impact on the family doctor’s business. Doctors are generally worried that if medical insurance is popularized nationwide, this trend will cause them to be unable to set costs for themselves.
The disease fund is “set up by employers, trade unions and fraternity organizations” and provides services to about 30% to 40% of non-agricultural workers working in the United States. With these funds, we can provide the benefits that Americans think are most needed (instead of wages, not health care). The disease fund and its supporters have proved to be a powerful lobby against global health care.
By the 1930s, commercial medical insurance began to be attractive. For more information on this, see below, but the business insurance plan does not like the idea of the government health care system.
For more than 100 years, universal health care or compulsory nationalization has been the topic of debate in the United States. This idea was supported by presidents from Theodore Roosevelt to Franklin Delano Roosevelt to Harry Truman. However, every time, from the AMA to the disease fund to the modern medical insurance industry, everyone’s political lobbying has obviously defeated this legislation.
Start commercial health insurance and employer-funded health insurance plan
Before the Blue Cross and Blue Shield, United Health Care or citizenship, a group of school teachers in Dallas cooperated with Baylor University Hospital to “advance” their health care at the price of 50 cents per month per person. This model is largely regarded as the first modern commercial hospital insurance plan, and has directly developed into an organization called Blue.
Cross that you may have heard of. In return for paying 50 cents a month to each teacher, the school system guarantees that its teachers can stay in hospital for 21 days free. As you can imagine, the number of teachers who actually need to be hospitalized will be far less than the number who will pay for the plan, so the hospital will have the financial capacity to maintain the final agreement.
The emergence of this new model is mainly due to the beginning of the Great Depression. For example, the monthly income of Baylor University Hospital has dropped sharply, because the number of affordable patients is becoming less and less, and more and more dependent on “charitable care” In order to bring stable cash flow to the hospital, Justin Kimble, the administrator of Baylor University Hospital, put forward an idea to let “members” or (more likely) their employers “prepay” services through monthly small premiums.
Such plans are all over the country. Soon, the employer not only reached an agreement with a specific hospital, but also reached an agreement with a geographically centralized hospital team, who sought instructions from the American Hospital Association (AHA) to accept or reject the agreement.
It is important to note that according to the design, these original forms of medical insurance do not include doctors. Under the guidance of AMA, doctors refused to participate in this particular system because they thought it was not in their interests. Looking back on the early workers’ compensation plan, doctors believed that most of them would not be cared for, making room for a few selected people, and involving any type of third party would affect their ability to charge reasonable fees for services. Therefore, they set up their own association as a response: Blue Shield.
The idea behind the Blue Shield is to focus on the priorities of primary health care organizations, so that the Blue Cross model cannot be imposed on family doctors. At the same time, doctors noticed that the coverage of the Blue Cross Hospital was becoming more and more widespread, and global health care was back in the political discussion. They decided to organize their own medical plan association rather than risk the Blue Cross Medal supported by the United States Aviation Administration or the United States government doing so for them.
Although the Blue Cross and Blue Shield plans claim to be prepaid care plans rather than insurance plans, the New York State Insurance Commissioner requires that they be different. In 1933, New York defined it as a package insurance, similar to life insurance and P&G insurance. This means that the insurance regulations are now applicable to Blue Cross and Blue Shield, although the state legislature has enacted some new laws that allow Blue Army to be a non-profit organization rather than a for-profit insurance company for a period of time.
In addition, although certainly inspired by the formation of the National Blue Cross and Blue Shield Plan, the origin of the insurance company later known as Caesar’s Permanent Insurance Company is similar to that of Baylor University Hospital. In 1941, Henry J. Kaiser worked with Dr. Sidney R. Garfield to create prepaid medical care for his shipyard workforce. In 1945, Caesar’s permanent health plan was officially established and quickly spread to California and other regions. At the peak of the Second World War, when their demand for labor reached its peak, Caesar’s “Shipyard” health insurance plan provided insurance for more than 190000 people in California, Washington and Oregon.
Development of employer-funded commercial insurance and health insurance plans
By the 1940s, medical insurance plans became more and more popular. But at the beginning of this century, they have not become the main component of employee compensation as they are today. In fact, although it is difficult to really quantify, researchers estimate that by 1940, about 9% of the American population had “some form of private medical insurance”.
In 1943, all this changed because of a decision of the War Labor Commission, which declared that the benefits provided by employers to employees (such as medical insurance) were not included in “wages” This is very meaningful because the government imposes wage and price restrictions on almost everything to prevent wartime inflation. During the Second World War, the labor market was tense, and the company struggled to maintain production to meet the war effort and daily civilian needs, competing for workers, but could not raise wages to support their recruitment. But if medical insurance is not regarded as “salary”, it is!
Employers began to provide health insurance plans to help workers have more money in their pockets without increasing wages (and breaking the law). This, together with more and more union employees and new favorable tax laws, made employer-funded medical care exempt from tax, making the 1940s and 1950s a period of substantial growth in medical insurance. By 1960, it was estimated that more than 68% of the United States population had some form of private health insurance: this increase exceeded the figure in 1940.