January 1998

History of Health Insurance Benefits


  • 1789 - Congress establishes the U.S. Marine Hospital Service. The service was funded by compulsory contributions from seamen's wages.

  • 1847 - The Massachusetts Health Insurance Company of Boston becomes the first insurer to issue sickness insurance.

  • 1849 - New York passes the first general insurance law.

  • 1853 - French mutual aid society, La Societe Francaise de Bienfaisance Mutuelle, establishes prepaid hospital care plan in San Francisco.

  • 1863 - The Travelers Insurance Company of Hartford, CT, offers accident insurance for railway mishaps (followed by other forms of accident insurance). Travelers was the first to issue insurance resembling today's policies.

  • 1870s - Railroad, mining, and other industries begin to provide company doctors funded by deductions from workers' wages.

  • 1877 - Granite Cutters Union establishes first national sick benefit program.

  • 1910 - Montgomery Ward & Co. enters into one of the earliest group insurance contracts.

  • 1910s - Physician service and industrial health plans established in the Northwest and remote areas.

  • 1912 - National Convention of Insurance Commissioners (now the National Association of Insurance Commissioners) develops first model for state law, the Standard Provisions Law, for regulating health insurance.

  • 1913 - International Ladies Garment Workers Union (ILGWU) begins first union medical services.

  • 1915-1920s - Efforts to establish compulsory health insurance programs fail in 16 states.

  • 1929 - A group of schoolteachers arranges for Baylor Hospital in Dallas, TX, to provide room, board, and specified services at a predetermined monthly cost. This plan is considered the forerunner of Blue Cross plans.

  • 1937 - Blue Cross Commission established.

  • 1939 - Revenue Act of 1939 (sec. 104), establishes employee tax exclusion for compensation for injuries, sickness, or both received under workers' compensation, accident, or health insurance.

  • 1943 - War Labor Board rules wage freeze does not apply to fringe benefits.

  • 1945 - Kaiser Foundation Health Plan opens to non-Kaiser groups.

  • 1948-McCarran-Ferguson Act gives states broad power to regulate insurance.

  • 1949 - Supreme Court upholds National Labor Relations Board ruling that employee benefits are subject to collective bargaining.

  • 1954 - Revenue Act of 1954 (sec. 106) excludes from taxation employers' contributions to accident and health plans benefiting employees, and clarifies that such contributions had always been deductible as business expenses.

  • 1965 - Medicare and Medicaid legislation passed as titles 18 and 19 of the Social Security Act.

  • 1968 - Firestone Tire and Rubber Co. begins to self-fund health benefits.

  • 1973 - Health Maintenance Organization (HMO) Act of 1973 establishes benefit, administrative, financial, and contractual requirements for entities seeking designation as federally qualified HMOs. The act also requires most employers who offer an HMO to offer a federally qualified HMO.

  • 1974 - Employee Retirement Income Security Act of 1974 (ERISA) establishes uniform standards that employee benefit plans must follow to obtain and maintain their tax-favored status. ERISA supersedes or preempts all state law otherwise applicable to pension and welfare plans covered by ERISA. ERISA still recognizes the state's role in regulating insurance.

  • 1984 - Deficit Reduction Act of 1984 (DEFRA) changes the tax treatment and contribution limits of voluntary employee beneficiary associations (VEBAs) and imposes new nondiscrimination rules for VEBAs similar to those for tax-qualified pension and profit-sharing plans. DEFRA makes Medicare the secondary payer for covered health expenses of workers ages 65-69 who are covered by an employer plan.

  • 1985 - Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires employer with 20 or more employees to offer continued health coverage to terminated employees and dependents for 18 or 36 months.

  • 1996 - Health Insurance Portability and Accountability Act of 1996 (HIPAA): sets national nondiscrimination and "portability" standards for individual health insurance coverage, HMOs, and group health plans; establishes tax-favored treatment of long-term care insurance; and institutes a trial medical savings account (MSA) program, limited to 75,000 individuals by the year 2000.

For more information, contact Ken McDonnell (202) 775-6342.

Source: EBRI Databook on Employee Benefits, fourth edition, 1997, and Marilyn J. Field and Harold T. Shapiro, eds., Employment and Health Benefits: A Connection at Risk, National Academy Press, Washington, DC, 1993.
To review other FACTS from EBRI, please visit our Web site at www.ebri.org/facts/

01/98