EVOLUTION OF HEALTH INSURANCE IN THE UNITED STATES PRIOR TO THE AFFORDABLE CARE ACT

ACA Patient Protection and Affordable Care Act (“ACA”) Pub. L. 111-148, 124 Stat. 119, to be codified at scattered sections of the Internal Revenue Code and in Title 42 of the U.S. Code. Signed by the President on March 23, 2010.

HISTORY George Santayana (1863-1952), a renowned philosopher and essayist, stated: Those who cannot remember the past are condemned to repeat it. Thus, it is useful in this discussion to understand the evolution of health insurance in the United States before we tackle ACA.

THE BEGINNING In 1929 a man named Justin Ford Kimball (1872-1956) went to work as a Vice President of Baylor University’s hospital in Dallas, Texas. Discovered a large number of unpaid bills, many from Dallas school teachers. To address this problem, he developed a plan whereby teachers could prepay $6.00 a year for 21 days of hospitalization at Baylor University. Beginning of national Blue Cross movement.

TIME MARCHES ON 1930s-1940s 1939 American Hospital Association adopts Blue Cross symbol as emblem for plans meeting certain standards (affiliation terminated 1972) Post World War II health insurance viewed as an employment benefit 1940-1945 56-80 Blue Cross (hospital) plans, enrollment increased from 6 million to 19 million; Blue Shield (doctor) enrollment approximately 3 million 1948 proposed merger between Blue Cross and Blue Shield organizations failed due to opposition from American Medical Association, which was concerned that such a move between hospitals and doctors would create anti-trust problems

TIME MARCHES ON 1950s-PRESENT 1950s advent of commercial for profit health insurance companies to compete with Blue Cross/Blue Shield not-for-profits. 1951 for profit insurers 40 million members, Blue Cross members 37.4 million 56 million members in Blue Cross plans (about 77 nationwide) by 1961 – 1/3 of U.S. population 1960s Medicare/Medicaid Acts passed and changed healthcare landscape (by 1970 half of $10 billion in premiums Blue Cross plans were collecting came from government agencies) Medicare enrollment 34.3 M (1990) to 47.5 M (2010); Medicaid enrollment 42.8 M (2000) to 61.8 M (2009) per National Data Book 1970s to present health costs spiral

MAJOR LANDSCAPE CHANGES 1945/TODAY In 1945, in contrast to today: Mainly not-for-profit/community healthcare organizations involved in providing health insurance and delivering healthcare Health insurance coverage primarily limited to catastrophic events (like car/home insurance) did not cover routine medical benefits Cost of care lower/quality lower Health care delivery not centralized/local control Physician practices mostly independent and small