History of Health Insurance in the US

Author: Steven Robles
Published: Apr. 30, 2018

Did you know that Health Insurance in the United States is only 168 years old? Back in 1850, a firm was established out of MA called the Franklin Health Assurance Company of Massachusetts. It offered accident insurance that was limited to injuries resulting from railroad and steamboat accidents. Others jumped on the bandwagon, and by 1866 there were 60 organizations known to have offered accident insurance. Shortly thereafter, the blossoming industry rapidly consolidated. 

Insofar as coverage for sickness, early experimentation began to yield results in 1890. An employee-sponsored group disability policy issued in 1911 is the first known group plan for employees, but its purpose was to replace wages lost when a worker wasn’t able to work. It didn’t specifically address medical expenses. Nowadays, such insurance might be called disability insurance.

Prior to the introduction of insurance for medical expenses, a patient was expected to pay for all health care out-of-pocket, which today is called a free-for-service model. It wasn’t until the mid-to-late 20thcentury that the aforementioned disability insurance started to evolve into modern health insurance. Public insurance programs for those unable to afford or qualify for coverage only began its gradual expansion when private insurance was on the rise.

Regardless of the shortcomings of our present-day healthcare system, we should all be thankful that something exists: imagine paying the average $400,000 cost of a kidney transplant or $1.4 million for a heart transplant, completely out-of pocket! (Check this link out for the astronomical cost of some other transplants!)

HIAA Insurance Education (1997). Fundamentals of health insurance, Part A. Washington, D.C.: Health Insurance Association of America. ISBN 1-879143-36-4.
Buchmueller, Thomas C.; Monheit, Alan C. (April 2009). "Employer-sponsored health insurance and the promise of health insurance reform. NBER Working Paper Number 14839" (PDF). Cambridge, Mass.: National Bureau of Economic Research. Retrieved March 24, 2010.