I am currently reading and trying to finish a book that I have picked up and put down a few times now, The Rise and Fall of American Growth by Robert Gordon. I might write some longer review about it, but currently the part that I am at is heavily related to my job. At Justworks, I have worked on the Benefits team since my first internship there in 2018. Offering competitive benefits to our customers is one of the major parts of the business. Our current product offerings are a Payroll only solution for $8/mo/employee, $79/mo/employee for PEO Basic, and $109/mo/employee for PEO Plus, where you can offer benefits to your employees.
On the PEO, we offer a Master Policy health insurance plan, actually a few of them with different carriers, but also offer the option for Open Market Small Group plans to eligible customers. We also offer dental and vision insurance, 401k, life and disability insurance, savings accounts like HSA/FSA/commuter, and a few other options such as One Medical or Citibike. There are other "benefits" we administer for employees, what we are calling statutory benefits, things such as Colorado Paid Family Leave or New York Disability Law. In addition to these, we have to do State Unemployment Insurance and Workers Compensation.
In The Rise and Fall of American Growth, Gordon outlines the creation of the health insurance industry. In the late 19th century and early 20th century, society changes more in the US than any other era. Hospitals were nothing like the behemoths that they are now, medicine was still full of quacks. In 1929, total expenditures on healthcare was only 2.3% of GDP, whereas now it is nearing 20% of GDP.
Before health insurance came Workers Compensation (originally known as Workmens Compensation). We don't think of Worker's Compensation as health insurance, but getting injured or sick, which before many of the modern inventions and policy changes we take for granted now such as licensed doctors, clean water, antibiotics, antiseptics, etc., was much more common. At first, it was only injuries on the job, seen as the realm of responsibility of the employer, was made into law. The first state to do so was Wisconsin in 1911.
By 1919, a majority of states had some form of Workers Compensation law. Sickness was seen as a private matter, and health insurance was nowhere to be seen. In a survey of a Chicago neighborhood in the early 1900s, out of 4,500 workers, one in four had missed a weeks worth of wages due to sickness. The survey stated that this amounted to almost %14 of annual income.
The earliest form of health insurance were thus modeled on the Workers Compensation laws. There was large opposition to these policies, as Gordon writes, from "an unlikely set of opponents, including doctors, pharmacists, employers, and even labor unions." Morissey writes:
Between 1916 and 1919, 16 states considered such legislation; none adopted it. Employers tended to oppose this legislation because, unlike workers' compensation, it did not have any offsetting reduction in costs. Labor unions had mixed views. Samuel Gompers, the founder of the American Federation of Labor (AFL), was opposed. He believed that workers knew how to spend their money and the role of the union was to get them more money to spend. The American Medical Association (AMA) officially favored this legislation in 1915 but opposed it by 1920, arguing that the insurance interfered with the doctor-patient relationship. Indeed, the experience with workers' compensation suggested as much. Physician opposition could be intense.
Murray goes on to write that even though health insurance was opposed at the state level for some time, there were "sickness funds" that were set up to cover employees.
Workers made weekly contributions of about one percent of their wages to the fund. When one of the fund members became too ill or injured to work, the fund would provide him with cash, often 60 percent of his wages. One might think of this coverage as similar to the Aflac indemnity coverage (with the duck) that one often sees advertised at sporting events today. The first survey by the federal government estimated that nearly 1,300 such nonfraternal funds existed in 1890. By the progressive period, Murray (2007) estimates that 20 percent of industrial workers were members of a sickness fund. Even though the sickness funds did not provide health insurance per se, Murray argues that satisfaction with these plans is an underappreciated reason why the early compulsory health insurance initiatives failed so completely.
Once health insurance got off the ground, it started to look closer to what we know and love today. As infectious diseases and infant mortality were reduced signficantly, most of the issues that remained required specialists, which are increasingly expensive. When the diploma mills were shut down, the supply of doctors went down, the costs of medical care increased for many reasons, one such the cost for paying doctors.
Not too unlike today, Gordon cites a report that in 1930, "3.5 percent of the families who had the largest medical bills paid a third of the cost of medical care in the nation." Thus, "The risk of uninsured charges equal to such a large portion of income naturally raised the demand for health insurance."
Gordon ends this section of the chapter criticizing FDR that, rather then shaping public opinion, he followed it. At the time, public opinion was opposed to any sort of universal health insurance, so it was struck out from the Social Security Act.