When Were Health Care Benefits First Offered by US Employers?

  • Posted by: J. Kent Gervasini |
  • 7/2/14 |
  • 2:45 PM
When Were Health Care Benefits First Offered by US Employers?
America's employers have been providing health insurance coverage to the majority of the workforce and their dependents for many years.  These benefits have included anything from partial coverage to full payment of medical, dental, and vision care, and are sometimes part of the hiring package employers offer to eligible employees.  As the national debate on health care continues and the current system evolves, it is important to understand the historical reasons behind this practice in order to contextualize it in today's world.  A brief history of noteworthy health care issues and related policies are presented below:   
The 1940s
  • Penicillin comes into use.
  • Prepaid group healthcare begins, seen as radical.
  • During the 2nd World War, wage and price controls are placed on American employers. To compete for workers, companies begin to offer health benefits, giving rise to the employer-based system in place today.
  • President Roosevelt asks Congress for "economic bill of rights," including right to adequate medical care.
  • President Truman offers national health program plan, proposing a single system that would include all of American society.
  • Truman's plan is denounced by the American Medical Association (AMA), and is called a Communist plot by a House subcommittee.
Source: The text of the health care timeline on the PBS website, "Healthcare Crisis" http://www.pbs.org/healthcarecrisis/history.htm

World War II and the Late 1940s

The Dramatic Growth of Employment-Based Group Coverage

  • The World War II wage and price freeze encourages employers to look at employee benefits as a way to improve employee morale.
  • Tax law changes reinforces this trend by: (1) making employer expenditures for employee benefits deductible as a business expense; and (2) not taxing as income the health benefits received by an individual employee.
  • At the end of World War II, the Supreme Court concludes that the term "wages" includes health care and pension benefits; and, therefore, these benefits become legitimate items for collective bargaining under the federal labor laws.
  • As a result, group employer-based health care coverages grow dramatically. Even the Blues aggressively market group coverages to employers. In 1940, only 12 million people had health insurance. Blue Cross/Blue Shield covered more than half of the covered population and commercial group insurers covered 2.5 million people. By 1960, more than 122 million individuals have coverage and more than 100 million are covered through group commercial (55 million) and Blue Cross/Blue Shield (58 million).
Source: Appendix - Time Line History Outline of Health Care Delivery and Financing in the United States," from John G. Day, Managed Care and the Medical Profession: Old Issues and Old Tensions the Building Blocks of Tomorrow's Health Care Delivery and Financing System, 3 CONN. INS. L.J. 1 (1996-97).
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