Employment and Health Benefits A Connection at Risk (1993) / Chapter Skim
Currently Skimming:
2 ORIGINS AND EVOLUTION OF EMPLOYMENT-BASED HEALTH BENEFITS
2 ORIGINS AND EVOLUTION OF EMPLOYMENT-BASED HEALTH BENEFITS
Pages 49-86
The Chapter Skim interface presents what we've algorithmically identified as the most significant single chunk of text within every page in the chapter.
Select key terms on the right to highlight them within pages of the chapter.
From page 49... ...
system of voluntary employment-based health benefits is not the consequence of an overarching and deliberate plan or policy. Rather, it reflects a gradual accumulation of factors: innovations in health care finance and organization, conflicting political and social principles, coincidences of timing, market dynamics, programs stimulated by the findings of health services research, and spillover effects of tax and other policies aimed at different targets.
|
From page 50... ...
5. The central role of employment-based health benefits and the very substantial discretion accorded employers rest, in considerable measure, on federal laws and regulations (in particular, the Employee Retirement Income Security Act of 1974)
|
From page 51... ...
Although these efforts were often described as sickness insurance, sick benefits, or health insurance, they usually did not cover medical care expenses (Faulkner, 1940; Glaser, 1991~. In the latter part of the nineteenth century, however, some European mutual aid societies and other groups did offer limited medical expense coverage, and several employed or contracted with physicians and created clinics or hospitals to serve their members.
|
From page 52... ...
company to issue health insurance organized in Boston New York passes first general state insurance law French mutual aid society establishes prepaid hospital care plan in San Francisco Travelers Insurance Company offers accident insurance in the United States Railroad, mining, and other industries begin to provide company doctors funded by deductions from workers' wages Granite Cutters Union establishes first national sick benefit program American Association for Labor Legislation founded to promote workers compensation and other social insurance programs Flexner report on need for improvements in medical education Montgomery Ward enters into one of the earliest group insurance contracts Physician service and industrial health plans established in Northwest and remote areas First model state law developed for regulating health insurance International Ladies Garment Workers Union (ILGWU) begins first union medical services program Efforts to establish compulsory health insurance programs fail in 16 states Committee on the Costs of Medical Care established Stock market crash followed by Depression Baylor group hospitalization plan founded (first Blue Cross plan)
|
From page 53... ...
521. Although hospital costs were on the verge of becoming an important concern for workers and their families, protection against income lost due to illness and injury remained a more significant objective than medical expense protection.2 As European ideas and institutional forms diffused to the United States, often through immigrants, various kinds of mutual aid or benevolent associations, fraternal organizations, workers clubs, unions, and other similar concepts and structures were adapted to this country's circumstances and culture (Mums, 1967; Anderson, 1968, 1972; Brandes, 1976; Weir et al., 19881.
|
From page 54... ...
It was probably, like most early efforts, more an income protection than a medical expense plan. The International Ladies Garment Workers Union followed a different approach, creating the first union medical services program in 1913 and incorporating the first union health center four years later.
|
From page 55... ...
As a consequence of these and other concerns, unions often pressed for cash benefits instead of company medical services (Starr, 1982~. Finally, in addition to the programs devised by voluntary associations, employers, unions, and other employee groups, disability and sickness insurance products created by commercial insurers constituted another institutional base for modern health insurance (Faulkner, 1940, 1960; Somers and Somers, 1961; MacIntyre, 1962; Anderson, 1972~.
|
From page 56... ...
In yet other countries, it has largely been replaced by alternative structures, for example, the National Health Service in Britain. Generally, the building of publicly supported arrangements for medical expense protection was embedded in the broader development of social insurance and other policies to protect workers, their families, and others against various harms, in particular, the loss of earning ability due to old age, disability, or workplace injuries (Flora and Heidenheimer, 1981; Weir et al., 19881.6 As described in Chapter 1, social insurance for medical expenses shares common features with other social insurance programs.
|
From page 57... ...
Early in this century, the instability and inadequacy of voluntary health benefit programs and the need for broad government action became a subject of public debate and agitation in this country, as it had elsewhere (Anderson, 1968, 1972; Harris, 1969; Starr, 19821. As noted above, many early employer-sponsored programs were not well regarded, and the financial instability of union and mutual aid programs and the conservatism of commercial insurers also contributed to negative opinions of voluntary private insurance.
|
From page 58... ...
Particularly prominent in behalf of both was the Committee on Social Insurance of the American Association for Labor Legislation (AALL) , the organizing of which began in 1905 at the annual meeting of the American Economic Association.7 The AALL, whose prestigious administrative council included Jane Addams, Louis Brandeis, and Woodrow Wilson, drafted a model state medical care insurance bill in 1915, and some 16 such bills were introduced at the state level by 1920.
|
From page 59... ...
51. The AMA Committee on Social Insurance concluded that voluntary health insurance under private control was unworkable and urged support for state legislation.
|
From page 60... ...
civil service was too underdeveloped to provide the intellectual and organizational activism seen in many European countries. Altogether, opposition from commercial insurance companies (who were primarily protecting related lines of business, because medical expense insurance was almost nonexistent)
|
From page 61... ...
· Some innovative employment-based arrangements for medical expense protection were developing that offered health benefits for as little as $6 to $12 per year, depending on the scope of benefits. · About 150 multispecialty medical groups existed, many of which were developing innovative health care delivery and financing methods that could coordinate patient care across different settings and clinical problems.
|
From page 62... ...
98~. They conceded, however, that private insurance might have merit if based on plans created by state or county medical societies.
|
From page 63... ...
98~. The response of organized medicine to the CCMC majority report is colorfully represented in a 1932 editorial by Morris Fishbein, editor of the Journal of the American Medical Association: "The alignment is clear on the one side the forces representing the great foundations, public health officialdom, social theory even socialism and communism inciting to revolution; on the other side, the organized medi cal profession of this country urging an orderly evolution guided by con trolled experimentation." (quoted in Anderson, 1968, p.
|
From page 64... ...
The Social Security Act passed in August 1935 with no provisions for health insurance, but it provided some support for state public health programs including maternal and infant care. A provision in the original Social Security bill calling merely for further study of the health insurance problem provoked so much controversy that it was deleted (Anderson, 1968~.
|
From page 65... ...
The eventual result was the establishment of the Medicare and Medicaid programs in 1965, which are discussed later in this chapter. Innovation in the Private Sector The Committee on the Costs of Medical Care had documented a number of interesting private sector initiatives to provide medical expense protection or prepaid medical services but revealed that their scope was limited.
|
From page 66... ...
; Starr, 1982; Weeks and Berman, 1985; Stevens, 1989; also see Journal of Health Policy, Politics and Law, Winter 1991 issue, for several historical assessments of Empire Blue Cross and Blue Shield (New York) that refer to broader developments.
|
From page 67... ...
For example, J.L. Hudson, the large Detroit-based department store, and Ford Motor Com i4Even into the 1980s, the Blue Cross and Blue Shield Association preferred to describe its organizations not as insurers but rather as prepayment or service benefit organizations, despite the substantial blurring of the distinctions between the two concepts.
|
From page 68... ...
Although early Blue Cross plans stayed away from coverage for physician services in order to decrease physician opposition to group hospitalization insurance, the demand for such coverage and the growing interest of commercial insurers helped prompt a somewhat parallel source of nonprofit benefits for physician services. What is considered the first Blue Shield plan, the California Physicians Service, was organized in 1939-with leadership from Ray Lyman Wilbur, who had chaired the CCMC (Starr, 1982~.15 This plan helped pioneer a number of innovations, including the relative value system for pricing physician services (still surviving albeit much altered in the Resource-Based Relative Value System adopted by Medicare in 1989)
|
From page 69... ...
This opposition was codified in many state laws and in medical society rules that excluded prepaid group practice physicians from membership. Twenty-six states eventually prohibited consumercontrolled medical plans, and 17 states required that plans allow free choice of physician (Starr, 1982~.
|
From page 70... ...
Both helped tie health coverage even more closely to the workplace. One of the most important spurs to growth of employment-based health benefits was-like many other innovations- an unintended outgrowth of actions taken for other reasons during World War II (Somers and Somers, 1961; Munts, 1967; Starr, 1982; Weir et al., 1988~.
|
From page 71... ...
By 1958 an estimated three-quarters of the 123 million Americans with private health coverage were participants in employment-based programs, and about 36 million of this group participated in plans that were collectively bargained (Somers and Somers, 19611. In 1960, 79 Blue Cross and 65 Blue Shield plans had been established, 250 to 300 prepaid group practice and other independent plans existed, and over 700 commercial insurance companies were selling individual or group coverage or both (Somers and Somers, 1961~.
|
From page 72... ...
However, reflecting its roots in property, casualty, and life insurance practices and principles, commercial insurance brought to the provision of health insurance a perspective that is quite different from that of the Blue Cross and Blue Shield plans, with their ties to health care providers and their nonprofit, community orientation (Faulkner, 1960; Somers and Somers, 1961; MacIntyre, 1962; Anderson, 1975; HIAA, l991b)
|
From page 73... ...
governmentwide plans, including both a service benefit plan (Blue Cross and Blue Shield) and an indemnity plan; (2)
|
From page 74... ...
Plan administrators also concluded that premiums could be held in check by excluding coverage for experimental and ineffective treatments, for treatments whose use was highly discretionary or difficult to monitor, for extended or custodial care for chronic conditions, and for relatively low cost services that could be scheduled and budgeted. For the most part, these provisions built from principles developed in more traditional forms of insurance, as discussed in Chapter 1.20 Relatively slower to develop was the hope that payment for and timely use of certain low-cost services (e.g., preventive 20The most notable exceptions to these traditions were what came to be called the "first dollar" service benefits for hospital care offered by Blue Cross plans and their participating hospitals.
|
From page 75... ...
Controls on Payments to Providers During the financially difficult years of the 1930s, contracting and risk sharing with providers were important economic elements of prepaid group practice arrangements and some health insurance plans. For example, most Blue Cross plans through their guarantee of service benefits rather than indemnity payments had provisions for some sharing of risk by their contracting hospitals (Donabedian, 1976~.
|
From page 76... ...
However, some early physician organized health plans established a form of peer review.2i Although some hospitals used committees to monitor utilization in an effort to cope with the short supply of hospital beds during World War II, the first explicit use of retrospective utilization review to control fee-for-service payments for unnecessary and inappropriate hospital services seems to have been in the l950s (Payne, 1987~. In 1954, Fred Carter, a physician, wrote in The Modern Hospital, "'Why not appoint a standing hospital staff committee designated as the "hospital utilization committee" to do in the field of hospital and medical economics what the tissue committee does .
|
From page 77... ...
THE LIMITS OF VOLUNTARY HEALTH BENEFITS AND MEDICARE AND MEDICAID As the growth of employment-based health benefits was making such coverage an expected feature of personal life for many Americans, some limitations of voluntary private insurance were simultaneously being identified. The elderly were singled out as a special problem, having greater medical needs but less financial protection than younger individuals still in the work force (Somers and Somers, 1961; Feingold, 1966; Harris, 1969; Marmor, 19731.
|
From page 78... ...
For both practical and political reasons, the program reflected and built on structures and practices developed in the private insurance sector. In its design and implementation, Medicare continued the division between hospital and physician services coverage that had accompanied the growth of Blue Cross and Blue Shield.
|
From page 79... ...
On the hospital, or Part A, side, most of the intermediaries were Blue Cross plans. On the Part B side, carriers were initially split about 50-50 between commercial insurers and Blue Shield plans, although the Blue Shield share has since grown.
|
From page 80... ...
National Health Insurance Revisited In the 1970s, some kind of national health insurance program was widely believed to be imminent (Starr, 19821. A 1977 summary by Herman and Anne Somers listed four basic categories of proposals (Table 2.5~.
|
From page 81... ...
ministration and congressional leaders (in particular, Senator Kennedy and Representative Mills' appeared willing to compromise on a broad national health insurance program. They proposed private insurance for workers and their families and public coverage for others.
|
From page 82... ...
Until the 1970s the national government largely confined its attention to employment-based health benefits to two policy issues: collective bargaining and taxation. Faced with rising Medicare and Medicaid costs in the 1970s, the federal government instituted an array of cost management initiatives, including federal wage-price controls, health resource planning, HMO promotion, and quality and utilization review of health care services (see Chapter 6 for a discussion of these programs)
|
From page 83... ...
and Blue Cross and Blue Shield of Alabama, 1992 U.S.
|
From page 84... ...
(See Chapter 3 for further discussion.) ERISA did establish somewhat more extensive regulatory provisions for one type of employment-based health benefits involving multiple employers, but the results have not been satisfactory to many (CRS, 1988b; McLeod and Geisel, 1992; National Health Policy Forum, 1992; U.S.
|
From page 85... ...
It diminished the position and influence of states and insurers and eliminated some protections for insured individuals but provided little in the way of explicit national standards for employee health benefits. As states' concern about the uninsured and the financial problems of health care institutions providing uncompensated care has grown, ERISA has also limited states' efforts to develop state risk pools, set minimum standards for certain kinds of health benefit programs, and act generally in areas in which the federal government has not taken the initiative.
|
From page 86... ...
Among the key features cited are the · extensive involvement by business (primarily large employers) in the design of health plans and efforts to influence the d~.liv~.rv nrin.e anr1 overall cost of health care; -- A ~ lo -- -- ' · significant responsibilities and administrative complexity for employers, employees, health care providers, and public officials resulting from the expansion and diversity of employers' efforts to manage their health benefit programs; · troublesome segmentation of high- and low-cost or high- and lowrisk individuals into different insurance pools and growing debate about what constitutes an equitable spreading of risk for medical care expenses; · continued escalation in medical care expenditures and uncertainty about the value of this spending despite many efforts to contain medical care prices, limit unnecessary or marginally beneficial use of health care services, and otherwise control costs; and · persistent controversy about the merits of public, private, or mixed strategies for achieving a more satisfactory allocation of resources for health care.
|
Key Terms
This material may be derived from roughly machine-read images, and so is provided only to facilitate research.
More
information on Chapter Skim is available.