How Health Insurance Became Employer Responsibility?
Perhaps your assessment of today’s health insurance industry aligns with the view of Dr. Elizabeth Rosenthal.
“Imagine if you paid for an airplane ticket and then got separate and inscrutable bills from the airline, the pilot, the copilot, and the flight attendants. That,” Dr. Rosenthal wrote in American Sickness, “is how the healthcare market works.”
How We Got Here
The first glimmer of group health insurance were “sick benefit” programs that unions, benevolence societies and like organizations offered in the late 19th century. Medical costs weren’t significant, given the state of medical science at the time, so sick benefits were designed primarily to hedge against lost wages.[i]
Health insurance designed more specifically to pay medical bills appeared about a century ago. Hospitals in Texas, most run by charities, began offering services on a pre-paid basis. In 1929, the first employer-sponsored plan appeared when what was then Baylor University Medical Center offered the Dallas teachers union $6 per year, or 50 cents per month coverage of a 21-day hospital stay that included all services (normally $5/day). Concurrently the “deductible” was also birthed as the teachers’ coverage omitted the initial five days.
Pre-paid healthcare was extended to workers in certain industries throughout the following decade, particularly laborers at major construction sites such as the Grand Coulee Dam and the Colorado River Aqueduct. Henry Kaiser, a leading industrialist of the day, spearheaded these arrangements which coalesced into the Kaiser Permanente Health Plan, patriarch of today’s HMOs and PPOs.
Ingenuity Caused by War
The outbreak of World War II codified employer-sponsored health insurance. In an attempt to avoid an eruption of hyperinflation similar to what Germany experienced during and following World War I, Congress passed legislation[ii] in 1942 allowing the president to freeze wages and salaries of even private-sector employees.
Health Care Insurance by Nick Youngson CC BY-SA 3.0 ImageCreator
Unable to increase pay, business looked for other ways to recruit and retain workers; presto: employee health insurance. This benefit would soon come tax free with even greater tax advantages being added in 1954.[iii]
Employer-provided health insurance might have been a short-lived phenomenon had President Harry Truman had his way. President Truman proposed a national healthcare plan in 1945 but, with strong opposition from the American Medical Association, the proposal never came to a vote in Congress. (see our recent blog post: Inspire Confidence in Your Expertise by Mastering ‘Medicare for All’ Argument.)
What Does More, Costs More
Advances in medicine expanded its capabilities thus increasing the overall expense of health care, and ultimately making health insurance more expensive. The Kaiser Family Foundation (KFF) has tracked health care spending since 1970[iv], comparing its growth to the overall economy and dissecting it into pertinent segments.
Employment and Health Benefits: A Connection at Risk[v], a scholarly work published by The Institute of Medicine Committee on Employment-Based Health Benefits in 1993 made a statement that has clear stood the test of time:
“On almost every front, the thrust in the United States is still expansionist—the uninsured want basic protection, the insured want restrictions on coverage eased, and researchers, providers, and entrepreneurs devise new technologies and services that further stimulate demand for care. Hence, health care consumes a greater share of national resources each year.”
The Affordable Care Act arrived in 2010 mandating at least some minimal employer-paid coverage in companies with 50 or more employees. With the upcoming election, healthcare will take front and center again with politicians fully aware that the Common Wealth fund poll[vi] last year indicated that 48 percent were “very satisfied” and another 38 percent “somewhat satisfied” with their private healthcare coverage.
Innovative strategies such as OptiMed Gap have softened the blow of high-deductible plans, solidifying the satisfaction.
We’ve yet to see the final chapter of COVID-19, but it may become another watershed moment in the history of healthcare. That’s because in response to the crisis:
- Restrictions on telemedicine, particularly in Medicare, were lifted
- Medical research was accelerated through suspended restrictions
- Medical licensing was relaxed enabling doctors to practice in different states
- Some regulations of hospital beds and equipment were lifted
- Washing hands and social distancing have been emphasized to combat contagions.
Numerous organizations[vii], such as Americans for Prosperity, want these changes made permanent.
In an “open letter to the American people,” this 82-member coalition wrote:
“The COVID-19 pandemic has exposed how government red tape gets in the way of a rapid response and interferes with patients being able to quickly and efficiently get the care they need from those they trust.
“Much can be accomplished when governments enable medical innovators rather than constructing obstacles to their progress. The Trump administration, state leaders, and Congress, on a bipartisan basis, have waived hundreds of rules in a race to fight the virus.
“We should never go back.”
With the final chapter on COVID-19 a long way from being written, we are all left asking “how does this all end?”. For those who have been in the healthcare industry for many years, this isn’t the first time that question has been asked.