The Finance of Health Care

CHAPTER 4

The Rise of the Medical Insurance Market

What we commonly call health insurance can be traced to the creation of hospital associations in the latter part of the 19th century. Railroads built hospitals in unsettled areas to treat their workers who became sick or injured on the job. Similarly, logging, coal, and metal mining companies built hospitals and hired doctors to give their workers the medical care they needed because of serious injuries they suffered in these hazardous businesses. Employees paid for the medical care with a fixed payment deducted from their pay. This fee structure became the forerunner of managed care.¹

Meanwhile, at the beginning of the 20th century, a period known as the Progressive Era, workers’ compensation ...