Understanding Health Insurance Costs, Pt. 2 – How We Got Here
Unlike the wheel and agriculture, health insurance is a fairly recent development in human history. But like those two earlier developments, it has become critical to our way of life. Understanding a little about how we got to where we are with health insurance in the U.S. might not only help you understand why your health insurance premiums cost what they do but give you the knowledge to affect a cheaper personal health insurance plan.
Prior to the 1890s, people simple paid for their own health care under a time-honored fee-for-service arrangement. Sometimes the fee was a dozen eggs or a couple of chickens, but nobody filled out forms or worried about co-pays, deductibles, caps and pre-existing conditions. A form of accident insurance was available, primarily for injuries related to train and steamboat travel, as early as the 1850s, but illness and disability coverage dates from about 1890. Around 1911, employer-sponsored group disability policies were issued and in 1929, a group of Texas teachers contracted with Baylor Hospital for services against a monthly fee.
Over the years, as the popularity of health insurance plans as an employee benefit grew, more and more life insurance companies began to offer the product. In the 1930, non-profit Blue Cross and Blue Shield organizations entered the market by negotiating with medical providers for discounted rates in exchange for a steady stream of clients and guaranteed timely payment. War-time wage freezes encouraged employers to offer health care perks to attract workers. By the ‘40s and ‘50s, unions were bargaining for tax-free, employer-sponsored health care. What had begun as a discretionary purchase had become an expectation and in the minds of many, a necessity.
The boom economy of the 1950s and ‘60s brought an expansion of government-sponsored health care programs, including disability benefits as part of social security. However, at the time Congress instituted Medicare and Medicaid, the majority (75%) of health care costs were still footed by the private sector. Rising health care costs in the ‘80s and ‘90s encouraged employers to switch from fee-for-service to less expensive HMOs and similar managed care programs.
Congress, under the Clinton Administration, attempted a massive health care reform initiative to guarantee health coverage for all U.S. citizens. It never passed because of concerns over costs and over-regulation, however in 1996, Congress did pass a bill requiring many employers to include psychiatric coverage in their health care packages. That same year, they also passed the HIPAA Act to protect people who lost or changed jobs from losing their health care insurance. The Bush Administration was sidetracked from health reform by war and the economy. Nine years later, a new administration is pushing hard for a complete overhaul of the nation’s health care system, but concerns remain over costs and excessive regulation.
While you’re waiting for the whole thing to sort itself out, keep in mind that even if your employer or the government takes care of your health care, there is no such thing as free health insurance. Somewhere along the line, in some form or another, all U.S. taxpayers are footing the bill. You can help contain costs by shopping for health insurance quotes and selecting a health insurance plan that meets your fundamental needs.
