Medical expenses can quickly become extremely pricey, especially in the event of long-term care, hospital stays and surgeries. As healthcare technology improves, the costs associated with it continue to rise, and most people are incapable of paying for care out of pocket. In order to help with the expense, many people choose to carry health insurance. Most health insurance is provided by a person’s employer, although individual policies are becoming more commonplace for people who are self-employed, unemployed or simply do not like the offerings from their employers.

A Brief History of Medical Insurance

The history of health insurance is intimately entwined with the history of healthcare itself. Prior to the 1920s, most healthcare was rendered in the patient’s home. Doctors would make house calls to tend to ailing patients and provide basic services.

Healthcare at that time was very limited; doctors had no access to the tools and machinery of modern times and there were substantially fewer medicines available to treat diseases. Surgery was rare and often occurred in the home, and people died of infections much more frequently than they do today. Because the technology was primitive and the cost of operating a medical business were fairly low, doctors did not need to charge as much money, although medical expenses could still be beyond the budget of some working families.

A much greater expense in those times was the lost wages suffered by sick individuals. Because it was common for there to be a single wage-earner in the family and for the individual to work a strenuous job, a severe illness by the head of household could be devastating for the family. In order to compensate for these lost wages, some people began purchasing “sickness insurance,” which operates similarly to our modern day disability insurance by providing wage compensation for people too ill to continue working.

After the 1920s, medical technology began to advance tremendously and more individuals began pursuing treatment at hospitals and clinics. Doctors were able to use more advanced diagnostic technology and better medications. The overall quality of healthcare went up, necessitating the increase of care costs as well.

By the 1930s and ’40s, Americans began to require help in paying for medical expenses, and this is when the first health insurance companies began to emerge.

Blue Cross and Blue Shield

The precursor to Blue Cross was developed by a group of teachers in 1929. At this time, the plan was a form of pre-paid care service; the potential patients contracted directly with hospitals to work out a payment plan in advance for future possible expenses. These pre-payment plans provided a constant income stream to hospitals, which was especially important because of the declining economy throughout the ’30s.

In order to discourage competition between hospitals, pre-payment plans began to be paid into a central organization that funded all hospitals rather than being paid to the specific healthcare provider. This central organization became known as Blue Cross.

Further Development of Insurance Companies

After Blue Cross and Blue Shield became more popular, other insurance companies began to see the value in carrying medical policies in addition to existing life, automobile or other types of insurance. From the 1940s through the 1960s, health insurers offered coverage primarily through employers. This allowed the companies to make sure they were covering young, relatively healthy people, which kept costs down and reduced the risk for the insurers.

In the 1960s, the government began offering Medicare and Medicaid to help fund medical care for low-income families and the elderly. By this time, over 75% of Americans were insured and insurance companies resisted government subsidized healthcare. In order to remain competitive and prevent the socialization of healthcare, insurance companies had to expand coverage to include the elderly and other people who may not have qualified for health insurance in the past.

Oldest Insurance Companies in America

Many of the oldest insurance companies in America actually did not begin offering health insurance until many years after the company had begun. While some insurers were providing coverage for life, home or liability insurance at the beginning of the 20th century, medical insurance took longer to form. Therefore, not all of the oldest insurance companies were offering health insurance since their inception.

Blue Cross and Blue Shield are probably the oldest health insurance programs in America and played a vital role in the development of healthcare throughout the country. Aetna followed soon after, providing consumer policies in the 1930s. Cigna was founded in 1792, although it did not begin offering health insurance until much later.