Then & Now: 75 Years of Employer Health Care Changes

ThenNowThe Affordable Care Act (ACA) is transforming American health care, affecting every employer and employee. Health care developments have affected employers for 75 years and MSEC has helped members to adjust. Looking back on past developments can shed light on our current challenges.

Through the early twentieth century, medical care was largely ineffective due to untrained practitioners, unsanitary facilities, and ineffective medications. Improvements came in the early 1900s thanks to improved medical schools, licensed personnel, and sterilization techniques. However, healthy Americans did not value health care services and preventive care insurance was unpopular. Most people preferred to pay out of pocket for emergency services. Does this sound familiar? Through the 1920s, Progressive Era activists included health care in their efforts to no avail. Lacking national consensus, the federal government deferred to the states, who deferred to the private sector.

Two models emerged in the 1930s that defined practices for decades. Non-profit “Blue Cross” health plans met quality standards and equal premiums for all consumers. Competing with them were plans developed by life insurance companies that used risk management techniques offering variable cost plans based on individual factors like age and gender. Responding to market forces, Blue Cross plans changed pricing to follow suit. President Roosevelt called for mandated coverage as part of his New Deal, but dropped this effort to secure his employment agenda.

Employer-provided health insurance practices solidified in the 1940s. Wartime labor shortages, coupled with wage and price controls, encouraged companies to expand benefits to attract new hires. Labor unions successfully attained health coverage for their members. In 1943, the Internal Revenue Service ruled that employer-paid health benefits were not taxable income to employees, and bills failed to pass that would have mandated universal health care funded by payroll taxes. President Truman’s 1945 call for health care reform and single-payer, universal comprehensive coverage was thwarted by Cold War fears of socialism, communist ideology, and opposition from lobbyists. The 1950s brought a Social Security expansion to cover disability benefits, but little else except climbing health care costs that accelerate in the 1960s. Concerns over declining affordability and skilled health care labor shortages grew. In partial response, Medicare/Medicaid programs began in 1965.

Major advances in medical technology and pharmaceuticals and the corporatization of health care marked the 1970s and 1980s. These dramatically increased medical costs and insurance premiums, and “crisis” was used to describe U.S. health care. Both Presidents Nixon and Carter fail to pass universal health care coverage. Managed care and HMOs
were created to slow cost growth, with limited success. The Consolidated Omnibus Benefits Reconciliation Act (COBRA) passed in 1986 remained the most impactful national health care legislation for employers until the Health Insurance Portability and Accountability Act in 1996. Despite intense political efforts, President Clinton’s proposal for universal coverage was defeated in 1993. Lacking political support, health care legislative efforts lay dormant through the early 2000s. By 2007, 45.7 million Americans were uninsured, costs were spiraling, and concerns abounded over the impact to GDP, budget deficit, and global competitiveness.

President Obama’s 2008 platform included major health care reforms and expansion of coverage. When his ACA passed in 2010, it imposed major compliance requirements on employers. In 2014, the ACA is affecting employers and employees more than any previous health care legislation. American health care is changed forever and MSEC will continue to stay on top of developments to guide members. If you need help, call us at 800.884.1328, or visit MSEC’s Health Care Reform Learning Zone.