A Brief History of
U.S. Health Insurance
Employer-Sponsored
Health Benefits — The Old Way
"Why do most Americans receive health insurance from an employer rather than purchase it themselves?"
Prior to 1945, Americans purchased health insurance plans just like they purchased life, auto, or homeowners insurance—they chose the best policy for their family, selecting only the benefits they required.
Beginning 1945, in order to circumvent wartime wage and price controls, employers were allowed to give employees and their families unlimited health benefits as "off the books" compensation. Employers received a 100% tax deduction for the cost, and both employers and employees did not have to pay wage or income taxes on the benefits. This tax loophole gave employer-sponsored health plans a 2-to-1 price advantage over individual (non-employer) insurance plans.
By 1980:
- About 80% of U.S. jobs included health benefits; and
- The cost of individual health plans had been priced out of reach for most families.
Employers originally liked employer-sponsored health benefits as a way to compensate workers, because the government paid half the cost through tax benefits. However, as the cost of medical sickness care skyrocketed, employers began slashing coverage—thereby shifting a greater burden to employees or eliminating health benefits entirely.
Today:
- Less than 60% of U.S. jobs include health benefits;
- Employers have increased the employee's share of the cost more than 50% in just the past three years; and
- Each year two million fewer U.S. jobs provide any health benefits at all.
Even if you still have employer-sponsored insurance, you really don't have much "insurance" since you lose your health benefits when you lose your job.
Last year, more than half of the 2 million U.S. families who filed for bankruptcy did so because of medical bills. Three-fourths of these families had traditional employer health insurance when they became ill—insurance they lost when they were no longer able to work.
Employer-provided health insurance doesn't provide any "insurance" for your employer, either—an employer's annual premium goes up each year by at least the amount of last year's claims.