American 250: The history of health insurance
Health insurance has become so embedded in American society that many people may assume it’s always existed as it does currently: tied to jobs and offered as a benefit. In reality, healthcare has evolved over time through policy decisions and economic pressures.
Efforts to establish health insurance can be traced back to the early 20th century, long before employer-sponsored plans became the norm. Most people paid for medical and dental care out of pocket. In 1912, Theodore Roosevelt’s Progressive Party supported the idea of insurance —including health insurance — as part of a greater effort to protect workers. In 1915, the American Association for Labor Legislation drafted a bill for mandatory health insurance, but it was not enacted.
As hospital bills increased in the 1920s and 1930s, some insurance plans started to emerge to help people pay for care. In 1929, Baylor Hospital in Dallas, Texas, created a prepaid insurance plan that allowed teachers to contribute small monthly payments in exchange for future hospital care, according to an article on the history of health policy published by the Delaware Journal of Public Health. That model was the foundation for what later evolved into Blue Cross plans.
In the 1930s, the country was in the midst of the Great Depression and millions of Americans were struggling to find work or afford basic necessities. The economic state highlighted the need for stronger social policies, particularly to protect employment, provide retirement security and ensure access to healthcare. In response, President Franklin D. Roosevelt created the Committee on Economic Security to study these challenges and recommend solutions. Although the committee’s work helped shape programs like Social Security, a proposal for national health reform did not advance.
World War II played a vital role in changing the American health insurance system. During the war, the government controlled how much companies could pay workers. In return, companies started offering extra benefits like health insurance to attract employees. Federal tax policy also started excluding employer-paid health insurance premiums from employees’ taxable income, which made employer-sponsored insurance appealing for both companies and workers.
After the war, employer benefits continued to expand and dental coverage began to follow a similar path. For decades, dental care had largely been excluded from early health plans, leaving a lot of patients to pay full costs out of pocket.
A turning point came in the mid-1950s on the West Coast. Labor groups representing longshoremen began looking into ways to provide dental care for workers’ families after recognizing that many could not afford treatment.
In 1955, several dentists in California worked with unions and employers to develop one of the first large-scale prepaid dental care programs for longshoremen and their families. This led to the Washington Dental Service being established in 1954, and the Oregon Dental Service and the California Dental Association Service in the following year. What started as an effort to address unmet needs for a certain group of workers ended up changing how Americans get oral healthcare.
The history of health insurance in America shows that it was not just about hospitals and doctors. It was also about workers, labor groups and policymakers who recognized the importance of workers’ health.