There are two key concepts in group insurance: “risk is transferred from the individual to the group and the group shares the cost of any covered losses incurred by its member” (Buchbinder & Shanks, 2007). Like life insurance or homeowner’s insurance, health insurance was developed to provide protection should a covered individual experience an event that requires health care. In 1847, a Boston insurance company offered sickness insurance to consumers (Starr, 1982).
During the 19th century, large employers such as coal mining and railroad companies offered medical services to their employees by providing company doctors. Fees were taken from their pay to cover the service. In 1913, a union-provided health insurance was provided by the International Ladies Garment Workers where health insurance was negotiated as part of their contract (Duke University Library, 2013). During this period, there were several proposals for a national health insurance program but the efforts failed. The AMA was worried that any national health insurance would impact the financial security of their providers. The AMA persuaded the federal government to support private insurance efforts (Raffel & Raffel, 1994).
In 1929, a group hospital insurance plan was offered to teachers at a hospital in Texas. This became the foundation of the nonprofit Blue Cross plans. In order to placate the AMA, Blue Cross initially offered only hospital insurance in order to avoid infringement of physicians’ incomes (Blue Cross Blue Shield Association [BCBS], 2007; Starr, 1982). In 1935, the Social Security Act was created and was considered “old age” insurance. During this period, there was continued discussion of a national health insurance program. But, with the impact of World War II and the Depression, there was no funding for this program. The government felt that the Social Security Act was a sufficient program to protect consumers. These events were a catalyst for the development of a health insurance program that included private participation. Although a universal health coverage program was proposed during President Clinton’s administration in the 1990s, it was never passed. In 2009, there has been a major public outcry at regional town hall meetings opposing any type of government universal healthcare coverage. In 2006, Massachusetts proposed mandatory health coverage for all citizens, so it may be that universal health coverage would be a state-level initiative (KFF, 2013).
By the 1950s, nearly 60% of the population had hospital insurance (AHA, 2007). Disability insurance was attached to Social Security. In the 1960s, President Johnson signed Medicare and Medicaid into law, which protects the elderly, disabled, and indigent. President Nixon established the Health Maintenance Organization (HMO), which focused on effective cost measures for health delivery. Also, in the 1980s, diagnostic related groups (DRGs) and prospective payment guidelines were established to provide guidelines for treatment. These DRGs were attached to appropriate insurance reimbursement categories for treatment. The Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed to provide health insurance protection if an individual changes jobs. In 1993, the Family Medical Leave Act (FMLA) was passed to protect an employee if there is a family illness. An employee can receive up to 12 weeks of unpaid leave and maintain his or her health insurance coverage during this period. In 1994, the Uniformed Services Employment and Reemployment Rights Act (USERRA) entitles individuals who leave for military service to return to their job. Also, in 1996, the Health Insurance Portability and Accountability Act (HIPAA) was passed to provide stricter confidentiality regarding the health information of individuals. In 1997, the Balanced Budget Act (BBA) was passed that required massive program reductions for Medicare and authorized Medicare reimbursement for outpatient services (CMS, 2013b).
At the start of the 21st century, cost, access, and quality continue to be issues for U.S. health care. Employers continue to play an integral role in health insurance coverage. In 2009, nearly 57% of the population was covered by employer insurance (AMA, 2013b). The largest public coverage program is Medicare—14% of the population. The State Children’s Health Insurance Program (SCHIP); renamed CHIP was implemented to ensure that children, who are not Medicaid eligible, receive health care. The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act provided some relief from the BBA of 1997 by restoring some funding to these consumer programs. In 2003, a consumer law, the Medicare Prescription Drug, Improvement, and Modernization Act, created a major overhaul of the Medicare system (CMS, 2013b). The Act created Medicare Part D, a prescription plan that became effective in 2006 that provided different prescription programs to the elderly, based on their prescription needs. It has been criticized because it is so complex. The elderly had a difficult time understanding which plan to select. It also has not been cost effective; the cost of the program has been estimated at $550 billion. The 10-year estimated cost of this program is $1.2 trillion (Brownlee, 2007). In 2008, the National Defense Authorization Act expanded the FMLA to include families of military service members to take a leave of absence if the spouse, parent, or child was called to active military service. The 2010 ACA requires individuals to purchase health insurance by 2014. Despite these efforts, health insurance coverage continues to be an issue for the United States.