Robert S. Mori, CPA, President  7429 East Heather Way, Everett, WA  98203-5424

 Health Care Insurance Washington       

Employee benefits in Washington, including Health Care Insurance or medical insurance  in Washington State, as we know them today, are a recent phenomena of business practice in terms of human history. While some examples of health insurance, life insurance , and private pensions existed early in the 20th century, they were by no means widespread. One of the earliest practioners of health care insurance was developed right here in Washington State.  Regence Blue Shield was one of the earliest providers.  Back in 1917, logging and mining companies here began negotiating with doctors and other providers to share the responsibility of healthcare in our state. Physicians formed Pierce County Medical Bureau, the first pre-paid health plan in the United States.  

Particularly, with respect to health care insurance, there were several significant milestones that shaped the way Americans are insured today for health care.  

The first of these milestones came in the 1930s, when President Franklin D. Roosevelt directed those who were shaping his new social program, Social Security to not include health insurance as part of the package. Roosevelt felt that  too many doctors and hospital administrators opposed such a medical plan so strongly  that to try to incorporate health insurance would threaten passage of the entire program.

Thereafter, with the lack of government involvement, private business took up the mantle and led the nation in sponsoring new health insurance coverage.  Back then, most commercial insurance companies also were out of the health - medical insurance market since they believed it wasn't a sustainable business and left this vital service to the Blue Crosses and the Blue Shields of the world. In Washington State these were the predecessors to Regence Blue Shield and Premera Blue Cross.   As the Blues grew and prospered, commercial insurers noticed that there was a real market for health care insurance  and began jumping into the marketplace with their own offerings.  

The next major milestone occurred during the early part of World War II when the federal government locked in wages and salaries to prevent runaway inflation. This opened the door to a wide range of non cash arrangements and gave rise to the first major step in employer-sponsored employee benefits including health insurance, life insurance and pensions.  Employers used these plans to effectively  add to the compensation of their employees.  They rewarded loyal service, boosted employee morale, and attracted the best available employees thru these employee benefits.   When the wage freeze ended after the war, many employers, who had the gi's coming back from the war to hire,  were no longer interested in funding these plans, most of which had no vested benefits and had been unilaterally introduced by the firm.  Employees, however, had come to feel that these benefit packages were their right, and they took industry to court to preserve them.  employees victory came when the US Supreme Court decided that employee benefits were subject to collective bargaining under the Taft-Hartley labor law.  At this point, in the late 1940's, another dramatic surge in growth of benefit plans took place.  On the health insurance side, the basic benefit was hospital insurance, with a lesser, but significant, growth in surgical benefits.

Most plans had limited benefits by today's standards, with the Blues generally offering  first-dollar coverage, which were defined in terms of number of days of hospitalization or specific surgical procedures.  This was made possible by the symbiotic relationship that the Blues had with the major provider organizations-American Hospital Association and the American Medical Association-which were sponsors of Blue Cross and Blue Shield, respectively.  Through a dual contract arrangement, the members never received any cash.  Rather, the cash was paid directly to the providers on the basis of a contractually determined fee for service.  Premiums were held down by limiting the number of days of service that were promised.

The commercial insurers, by contrast, offered indemnity (cash) benefits to the subscriber after the procedure was completed, and they did not have any contractual guarantee of service costs with providers because it was felt that it would violate antitrust laws.  The cash limits, typically stated in terms of both maximums per unit of service and maximums in terms of the total bill, were quite low as an underwriting protection, but so were charges in those days

In the early days, commercial insurance often provided the same first-dollar coverage that the Blue plans offered.  In a sense, they were coerced into this by the fact that subscribers had come to expect it from the way the pioneer Blues did.  Another feature that distinguished the Blues was the use of community rating or charging all subscribers the same premium.  This arose from he strong sense of social service commitment  that motivated the founders of the Blue plans.  Many perceived the Blues to be semi social service organizations. because of their nonprofit status and the government legislation under which many of them were started, which also provided tax rating distinctions based on perceived risk factors, just as they did in the rest of their business.  The majority of the plans were also limited to cover only employees in the early days, but gradually the coverage of individuals and families became widely accepted. 

After President Harry Truman tried to get a  national health insurance program passed thru Congress and failed, the pattern of employment based health insurance for the vast majority of Americans seemed to be firmly entrenched in US society.  this precedence was against the trend in comparison to the  rest of the industrialized world.  This unique position has continued except for those over 65 who are covered by Medicare.