Chapter 1


A Brief Recap of the History of Reform

As any student of history is taught, those who fail to learn from the past are doomed to repeat it. Thus, a brief review of the history of health insurance and its impact on the healthcare delivery system is in order to provide context to the discussion of what the 2010 reform legislation was designed to reform.

Early Reform Efforts

The 2010 reform legislation is but one late-stage episode in the history of the financing of healthcare in the United States, which dates back to the first Blue Cross plan established at Baylor University in 1929, when teachers paid $6 a year for up to 21 days of hospitalization. The financial pressures of the Great Depression caused expansion of Blue Cross plans by hospitals and ultimately led to the formation of Blue Shield plans by physicians. Private health insurance expanded dramatically during World War II when wage and price controls caused health benefits to be substituted for wages. This was also a period that saw the rapid expansion of Blue Cross plans, particularly in states north of the Mason Dixon line, in conjunction with labor unions. Shipping and steel magnate Henry Kaiser established the first staff model health maintenance organization (HMO) for wartime workers on the West Coast. In addition, the passage of the McCarran-Ferguson Act took place, which left the regulation of insurers to the states and provided insurers with the anti-trust exemption that accounts for one key ...

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