History of US Health Insurance Industry

Today I would like to throw some light on the history of the health insurance industry in the USA. Insurance is a contract between the insurance company and the client, wherein the company agrees to indemnify the client against the losses or compensate for the damages caused to his life or property, for a consideration, i.e., the premium paid by the client.This model works on the principles of probability. The insurance company pools money from a number of clients in the form of premium, and the financial risk arising out of losses is shared by all the clients. The underlying principle is that not every client will face a mishap at a same time.Health insurance or medical insurance means insurance against the loss incurred in case of event of sickness. Health insurance in US may be purchased from private insurance companies, or it may be availed under welfare programs run by the US government.The first insurance company to offer accident insurance belonged to Massachusetts. Franklin healthcare insurance company was incorporated in the year 1850. The accident insurance policy sold by this firm indemnified the policy holders against the losses arising out of injuries suffered in accidents. Accidents included within the scope of the policy were those pertaining to steamboat and railroad. The advent of insurance against financial losses due to sickness dates back to the year 1890.The development of health insurance was delayed because people didn’t have faith in the services offered by the hospitals; they restricted themselves to opt for home remedies, and the model of business followed the insurance companies. The sickness insurance policies being offered until the early twentieth century were based ‘free for service' model. These policies aimed to compensate the policy holder only for the loss of wages due to his inability to work on account of sickness. The compensation did not cover the payment of medical expenditure and it had to be borne by the policy holder. The faulty business model was the major cause that deterred the growth of health insurance industry.Major evolution leading to the health insurance industry dates back to the earlier decades of the twentieth century. Research and development lead to the advancement of the medical science. The Council of Medical Education was developed in the year 1904 under the leadership of the American Medical Association. Strict standards were laid down for establishing and legitimizing quality of healthcare services provided by the medical institutions. The American College of Surgeons came into existence in the year 1913. It took up the responsibility of accreditation of medical schools. These positive reforms helped gain people’s faith in the medical institutions. This phenomenon led to favorable changes in the policies and business models of health insurance industry. The first public health insurance system was proposed by President Harry Truman in the year 1945. The revolution popularized the concept of medical insurance in USA and it began to grow at a stable pace year after year. By the end of the year 1960 the health insurance industry had grown manifold and more than 70% of the population was covered under some form of health insurance. Around 20, 60, 000 citizens were enrolled under some or the other medical insurance plan. Since then, there have been many incidences of crucial development in the industry. Rise in the number of companies in this field gave rise to competition which is still in continuation. Medical insurance companies are striving to give the best possible quotes to the people and the market has now become customer centric.