Why We Need Health Insurance

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From the individual perspective, health insurance helps us avoid catastrophic costs by spreading risk among a large pool. From the provider perspective, insurance establishes a payment system and rates, which provides a degree of safety for providers, especially those working in under-insured communities. The uninsured have poorer access and worse health outcomes, so shifting the costs of care to the government and employers ensures health care providers can be paid for treating individuals who could not otherwise afford it.

In theory, an individual puts her money into the insurance company instead of her personal medical bills with the goal of being protected from the high costs of medical care in the United States. This is obviously much more complex and there are many arguments to be made about why prices are as high as they are and how much insurance companies themselves contribute to those costs, but hopefully this lays the groundwork for why having health insurance essentially equals access to care in the U.S. Without it, we wouldn’t be able to afford health services.

A Quick Timeline of Health Insurance

  • In 1939, the California Medical Association started the first Blue Shield plan, designed to pay physician fees. By 1974, Blue Cross and Blue Shield had merged, forming the joint insurance corporation operating in almost every state today.
  • During World War II, employees accepted employer-paid health insurance to compensate for the loss of raises. The U.S. Supreme Court ruled in 1948 that employee benefits were a legitimate part of union-management negotiations. By 1964, Congress made employer-provided health coverage nontaxable, further solidifying the private health insurance market’s presence in the health care system. Today, the country remains a predominantly employer-based system, with about 50% of Americans receiving insurance through work.

Under the Affordable Care Act, employers with more than 50 employees must offer health insurance to 95% of their full time employees, or face a penalty for each employee who purchases health insurance outside of the workplace. Additionally, employers face further penalties for plans that aren’t affordable or are of poor value.

Want to learn more? Check out this post on the ins and outs of insurance.

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