How Health Insurers Hurt People in Pain, Part III: The For-Profit Insurance Takeover

How Health Insurers Hurt People in Pain

Part III: The For-Profit Insurance Takeover

How Health Insurers Hurt People in Pain Part II covered some of the ways that the financial motives of U.S. health insurance providers torment people in pain. It is no surprise to most that insurers are driven by financial motives, to the detriment of recipients. But it wasn’t always this way.

Prior to the 1920s the economic consequences associated with sickness were tied to the hardships of lost wages, not with receiving medical treatment (Thomasson 2003). A 1919 study found that the loss of wages was four times that of medical expenditures. Consequently, “sickness” insurance that would replace wages in the event of illness or incapacitation, and not “health” insurance for treating a condition, was more attractive to working people.

The seeds of the first formal U.S. insurance company were planted in 1903 at Baylor University Medical Center in Dallas, Texas (then called the Texas Baptist Memorial Sanitarium) (Rosenthal 2017). The hospital began offering plans to schoolteachers and others in the 1920s. These plans offset the hospital operating at a deficit while providing catastrophic coverage to people who otherwise would not have been able to afford a hospital stay if needed.

As these plans became popular, hospitals joined together instead of competing with one another (Thomasson 2003). These Blue Cross Plans, as they were later named, were promoted by the American Hospital Association and rapidly gained interest. By 1939 over three million people in the U.S. were subscribed (Rosenthal 2017).

By the late 1930s mandated national health care proposals were also gaining momentum (Thomasson 2013). The American Association for Labor Legislation previously attempted to enact “compulsory health insurance” in some states. But at the time many physicians and others opposed national health care and thwarted these efforts.

Physicians wanted to ensure that they, not non-physicians, remained in control of health insurance and pricing (Thomasson 2013). In 1939 the California Physicians’ Service introduced the first pre-paid physician coverage, and others states followed. These physician plans were eventually consolidated into Blue Shield Plans.

From the time of their inception the Blue Cross and Blue Shield plans were not-for-profit (Rosenthal 2017). All subscribers were charged the same rate regardless of age or pre-existing conditions, and it is reported that coverage was available to everyone. Although whether “everyone” included Black people, other people of color, and other marginalized people is questionable.

Health insurance being offered as an employment benefit began with World War II to attract laborers in an anemic workforce (Rosenthal 2017). These insurance plans were viewed as providing an important service for the social good, particularly to people who were low income. In turn, states granted Blue Cross non-profit corporation status, which afforded them tax-exemption and less regulation (Thomasson 2013). Legislation making employee insurance plans tax-free also prompted more employers to purchase them.

By 1955 60% of people in the U.S. had health insurance, compared to only 10% in 1940 (Rosenthal 2017). For-profit health insurance companies continued to grow in the number of companies and the size of their memberships (Thomasson 2003). These companies favored the younger and healthier, and changed rates or refused coverage depending on a person’s age or other health factors.

In the 1970s the rapidly growing health care costs in the U.S. were a prime concern (Kasprzak 2018). But the Nixon administration opposed reforms that increased government support. The passage of the Health Maintenance Organization (HMO) Act of 1973 and the creation of HMO insurance plans was promoted as the solution to ballooning costs.

However, health care costs in the U.S. continued to rise as private for-profit insurance companies increasingly prioritized profit over cost containment (Frakt 3018). Rather than curtailing exorbitant health care expenses, in the 1980s the Reagan administration enacted even greater insurance deregulation. Drastic cuts to critical government funded social service programs were also made. By 1994, even Blue Cross and Shield were forced to become for-profit stay afloat (Rosenthal 2017).

These public health cuts, health care inflation, and deregulation have terribly damaged the state of U.S. health care. In 2010 an estimated 48.2 million non-elderly Americans were without insurance (Finegold et al. 2021). The passage of the Affordable Care and Patient Protection Act (ACA), also known as “Obamacare,” dramatically reduced this number by over 20 million people. Yet approximately 30 million non-elderly Americans without health insurance still remain.

Where health insurance began as a mutually beneficial not-for-profit arrangement between hospitals and working class people, it is now almost entirely driven by profit motives. But, as demonstrated by the passage of the ACA, healthcare reform is possible.

More must be done to provide equitable, affordable, and accessible health care in the United States:

• All insurance companies must be not-for-profit

• The government must pay for the majority of insurance costs

• More stringent caps on premiums must be instated

• Insurance must be independent of employment

• Enrollment in health coverage must be mandatory for all

• Government programs for low and middle-income people must be expanded

• Fair and consistent fees for service and reimbursements must be established

I like to think that the ACA is only the beginning and even better legislation to ensure national access to quality health care is in the future. Better oversight is also crucial. For my conclusion on what’s ahead for U.S. health care, read the final series installment, How Health Insurers Hurt People in Pain Part IV: Where to go From Here.

Other posts you might like:

• How Health Insurers Hurt People in Pain Part I: Benefit Restrictions

• How Health Insurers Hurt People in Pain Part II: Financial Gain Over Patient Wellbeing

• Addressing Pain Treatment Disparities Through Health Education

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Sources

Finegold, K., Conmy, A., Chu, R. C., Bosworth, A., & Sommers, B. D. (2021, February 11). Trends in the U.S. uninsured population, 2010-2020. Retrieved April 1, 2021, from https://aspe.hhs.gov/reports/trends-us-uninsured-population-2010-2020

Frakt, Austin. "Reagan, Deregulation and America's Exceptional Rise in Health Care Costs." The New York Times. The New York Times, 04 June 2018. Web. 18 Feb. 2021.

"Healthcare Around the World." Calvin University. 7 Apr. 2012. Web. 18 Feb. 2021. <https://www.youtube.com/watch?v=ur6UoY-H41o&feature=emb_logo>.

Kasprak, Alex. "Was It Illegal to Profit from Healthcare Prior to the HMO Act of 1973?" Snopes.com. 04 Dec. 2018. Web. 18 Feb. 2021.

Rosenthal, Elisabeth. "How Health Insurance Changed from Protecting Patients to Seeking Profit." Stanford Medicine. Web. 18 Feb. 2021.

Thomasson, Melissa. "Health Insurance in the United States." EHnet. Web. 18 Feb. 2021.