Private Health Insurance History

Private health insurance has some early precursors, but its defining period of growth was the 20th century, when it grabbed hold in the United States of America in particular. The quality of health care in America's private insurance market is high, but so is its cost, and debates rage today as to whether America's system or the government-based system in most other developed countries is superior.

Early Forms of Health Insurance

• Private health insurance has its origins far back in human history. It goes back even to the days of Hammurabi's laws in Mesopotamia, when courts assessed doctors' liability based on the compensation given to them. In medieval times, guilds collected fees to cover members' health costs, and community-based initiatives like that were the norm until the 20th century, when health costs, along with advancements in medical technology, began to increase dramatically.

Individual Sickness Funds

• The groundwork for private, individual health insurance plans first appeared during the American Civil War, when customers could purchase accident insurance covering injuries suffered during steamboat or railroad travel. Called "sickness funds," the plans that developed from these accident coverage plans simply provided a small allowance to individuals to compensate for missed work. Health insurance as it exists today was often not necessary, since medical knowledge and technology were still relatively primitive.

Blue Cross and Blue Shield

• In the United States, advances in medical science coincided with the hard times of the Great Depression, and so costs increased at the same time that people were less able to pay for them. Encouraged by the success of a contract between Dallas-area teachers and a local hospital to provide treatment in exchange for a fixed fee paid in advance, other hospitals created a plan called Blue Cross, and physicians created the competing Blue Shield.

Medicare and Medicaid

• Following the arrival of Blue Cross and Blue Shield, private insurance exploded as an industry and successfully fought off any attempt to create government-based universal health insurance. Congress did pass Medicare and Medicaid in 1965, which provided some coverage for the elderly and the poor, respectively, but these programs offered limited coverage. This ensured that government insurance would be inadequate and, more importantly to the insurance industry, would have an inadequate image.

Modern Developments

• As all recent attempts at universal health insurance in the United States have failed, including those put forward by Presidents Clinton and Obama, private health insurance has continued to dominate American life. This is in the form of direct coverage or a prevention-based health maintenance organization (HMO). Still, escalating health costs have compelled the government to become more and more involved. The health care reform bill that passed in early 2010, for example, will end discrimination against customers with pre-existing conditions. As long as health costs continue to rise, this trend of government involvement will likely continue.