Accident insurance was first offered in the United States by the Franklin Health Assurance Company of Massachusetts. This firm, founded in 1850, offered insurance against injuries arising from railroad and steamboat accidents. Sixty organizations were offering accident insurance in the US by 1866, but the industry consolidated rapidly soon thereafter. While there were earlier experiments, the origins of sickness coverage in the US effectively date from 1890. The first employer-sponsored group disability policy was issued in 1911, but this plan's primary purpose was replacing wages lost due to an inability to work, not medical expenses.[5]
Before the development of medical expense insurance, patients were expected to pay all other health care costs out of their own pockets, under what is known as the fee-for-service business model. During the middle to late 20th century, traditional disability insurance evolved into modern health insurance programs. Today, most comprehensive private health insurance programs cover the cost of routine, preventive, and emergency health care procedures, and also most prescription drugs, but this was not always the case.
Hospital and medical expense policies were introduced during the first half of the 20th century. During the 1920s, individual hospitals began offering services to individuals on a pre-paid basis, eventually leading to the development of Blue Cross organizations in the 1930s.[5] The first employer-sponsored hospitalization plan was created by teachers in Dallas, Texas in 1929.[6] Because the plan only covered members' expenses at a single hospital, it is also the forerunner of today's health maintenance organizations (HMOs).[6][7][8]
Employer-sponsored health insurance plans dramatically expanded as a result of wage controls during World War II.[6] The labor market was tight because of the increased demand for goods and decreased supply of workers during the war. Federally imposed wage and price controls prohibited manufacturers and other employers raising wages high enough to attract sufficient workers. When the War Labor Board declared that fringe benefits, such as sick leave and health insurance, did not count as wages for the purpose of wage controls, employers responded with significantly increased benefits.[6]
Employer-sponsored health insurance was considered taxable income until 1954.[6]
In 1965, President Lyndon Johnson signs the Medicare and Medicaid legislation into effect. Since their inception, the greatest challenge to the programs has been “spiraling healthcare costs, stemming largely from innovations in medical technology and pharmaceuticals." [9] Now, as baby boomers advance toward senior citizenry, concerns about the financial sustainability of the programs frame any discussion about Medicare and Medicaid.
The debate for a public health care system in the United States has gone on for about 70 years. President Truman was the first United States president to propose a system of public health insurance in his November 19, 1945 address. This fund would be open to all Americans, but it would remain optional. Participants would pay monthly fees into the plan, which would cover the cost of any and all medical expenses that arose in a time of need. The government would pay for the cost of services rendered by any doctor who chose to join the program. In addition, the insurance plan would give a cash balance to the policy holder to replace wages lost due to illness or injury. This program was denounced as a socialist approach to medicine by the American Medical Association (AMA) and did not pass.
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