Number of states mandating insurance
But while many hospitals saw the benefits of offering prepaid policies, the physicians themselves tended to oppose health insurance because they feared that interference from a third party would restrict their income and limit their ability to price discriminate (ibid., p. In exchange for these special provisions, Blue Cross and Blue Shield were initially required to community-rate their policies, which required them to charge different employee groups the same premium, regardless of their health status.
With the employment-based system firmly in place by the mid-1950s, the incidence of employer-provided coverage expanded rapidly over the course of the next few decades.
The supply of health care was stimulated by various government initiatives in support of scientific research and hospital construction.
These plans are formed from Health Reimbursement Accounts (HRAs) or Health Savings Accounts (HSAs), which provide traditional insurance for non-routine care but require individuals to incur higher out-of-pocket expenses to cover routine care.
As Figure 1.5 shows, whites are more likely to have coverage than blacks, Hispanics and other minority groups; wealthier families are more likely to have coverage than poorer ones; and college educated people are more likely to have coverage than those without degrees.
The number of Americans without insurance would be even more staggering in the absence of government programs, such as Medicaid and SCHIP, which have provided insurance for millions of low-income families (particularly children) when their employment-based coverage was lost (Gould, 2005).
As the largest purchasers of health insurance coverage, employers are typically interested in reducing the premiums that must be paid, while Insurers have an incentive to protect their profits by maintaining higher premiums.
Although they were initially reluctant to do so, hospitals and insurance companies helped to accommodate the growing demand for medical care and health insurance by organizing prepayment plans and marketing them directly to worker groups.
The American Hospital Association (AHA) encouraged the proliferation of prepaid health plans, organizing them under the name Blue Cross, and state laws gave the plans tax-exempt status and allowed them to operate as nonprofit organizations.
Third, small business owners often argue that many of their employees would never acquire coverage anyway, since turnover rates are relatively high and there is usually a waiting period before benefits kick in for new employees.