Origins of Employer Sponsored Health Plans

Why has the responsibility of offering health insurance fallen on employers?

It’s a good question and worth exploring.

In the 1920s Baylor hospital decided to offer local teachers a deal.

For $0.50 a month the hospital agreed to cover their hospital visits.

They called it Blue Cross.

Fast forward to 1942 and the nation was experiencing a labor shortage due to WWII.

President Roosevelt feared businesses would raise wages to attract employees and this would lead to massive inflation.

To prevent this he signed Executive Order 9250, establishing the Office of Economic Stabilization and wages were frozen.

Employers countered by using benefits and specifically health coverage to compete for laborers.

Then in 1943 the Internal Revenue Service determined employer sponsored healthcare would be tax free (Revenue Act of 1943).

In 1954 those tax advantages were expanded with the Internal Revenue act of 1954.

Employer sponsored health coverage became even more attractive and cheaper way for Americans to purchase health coverage.

By the 1960s Americans started to see “good jobs” as those which offered health coverage and 70 percent of the population was covered by private health coverage.

These same incentives and models are at work today.

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Sources:

https://archive.ph/LCOGK#selection-335.0-335.64

https://www.npr.org/templates/story/story.php?storyId=114045132