Health Insurance - Take Two

Beyond the blues

By the mid 1930s, health insurance was all the rage. Justin Kimball, who laid the groundwork for Blue Cross, had no idea how popular these plans would become.

In only fifteen years, the?number?of insured Americans would skyrocket. From 1940 to 1955, the country went from 10% of the population having health coverage to over 60%.

This remarkable growth came courtesy of three main factors.

First, Blue Cross and Blue Shield plans were popular among enrollees and simply made sound financial sense. Technological advancements and innovations in medicine would translate into higher healthcare costs, paying for these services directly proved costly for many patients; health insurance became essential.

Second,?The 1942 Stabilization Act, intended to limit inflation and wages, curb competition for scarce workers during World War II, effectively incentivized companies to offer benefits, chief among them being health insurance.

Finally, life insurance companies like Cigna and Aetna saw opportunities in the health insurance space, and quickly entered this burgeoning market to offer their own plans.

Enter the feds

Be it teachers or factory workers, health insurance became increasingly tied to employment.?Those working for corporations were offered employer sponsored plans and the self-employed purchased (still) affordable coverage through an expanding marketplace.

By the mid 1940s however, one class of citizens quickly became the largest uninsured group in America: Seniors. Other uninsured groups included the unemployed and impoverished.

The notion of?government run?insurance began with a letter to Congress from President Harry Truman in 1945. Truman’s vision for a healthcare fund would be open to all Americans, but would not come to pass.

There would be another push during The Kennedy Administration, when a study revealed over 56 percent of Americans over the age of 65 lacked any health coverage. It became both a political and social imperative to introduce The Medicare Program; signed into law by President Lyndon B. Johnson, July 30th, 1965.?

Harry Truman and his wife Bess were the first two beneficiaries.

For a majority of uninsured Americans - not covered by Medicare or private insurance - a tandem program administered by states, Medicaid, was created to cover those facing financial hardship, as well as the disabled.

Medicare and Medicaid became the first government sponsored, administered, and funded health insurance plans in America.

Costs continued to rise

With nearly everyone covered under public or private health insurance by the early 1970s,?healthcare prices just kept rising.

Adjusted for inflation, healthcare?expenditures?per capita increased 6-fold,?from $1,832 in 1970 to $11,172 in 2018. In that same period, healthcare spending went from 6.9% of GDP or $414 Billion Dollars (adjusted for inflation) to 18% of GDP, $4 Trillion Dollars. Medicare?spending?alone has gone from $45 Billion in 1970 to nearly $800 Billion by 2019.

The first of their kind insurance plans introduced by Justin Kimball, the foundation for Blue Cross, would be an absolute steal today. Adjusted for inflation, Kimball's plan would set you back $7.50 a month, with a $65 deductible. This is a far cry from the rates employers pay today, which averages out to $12,000 for an individual and $18,000 for a family plan.

As was the case with expanding health insurance, growing prices were once again due to multiple factors.

Americans simply kept spending more on healthcare; we have higher rates of chronic health ailments, obesity, and an aging population (the?median age?went from 28 in 1970 to 39 today).

The U.S also pays more than other countries for the same drugs and procedures; this discrepancy has created yet another industry,?medical tourism. Americans regularly visit other countries including India, Singapore or South Korea for various procedures.?

For profit health insurers like Cigna, Aetna, and United increasingly insure only healthy adults and those less likely to become ill, focusing mainly on profit and less on patient care. The advent of multiple middle men, including Pharmacy Benefit Managers and Health Maintenance Organizations, have made drugs more expensive and access to care more difficult.

Other added costs, including liability insurance, research and development are routinely passed down to consumers.

By the early 2000s, health insurance was increasingly unaffordable, with many Americans deciding against purchasing coverage.

Once again, we have a substantial population of uninsured Americans.

This is the second in a three part series, you can find the first article here. Look for the third (and final) article in this series next week. For unlimited access to all my writing and other great content, consider subscribing to Medium through my link here!

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