Employer provided health care didn’t start until the 1940’s and there was no overarching plan for it to be the standard.
Before that time, the American public largely paid its own way where medical costs were concerned, or more likely did not pay until there was a medical need. Medical insurance was rare.
In the 1930s, President Franklin D. Roosevelt wanted nationalized Universal Health Care as part of his plan for Social Security. However, he realized that tying universal health coverage to the Social Security Act might doom both initiatives to failure.
Once America became embroiled in World War II, there was great concern that rampant inflation would threaten the American economy. To combat inflation, the 1942 Stabilization Act was passed. It limited employers’ freedom to raise wages and thus to compete on the basis of salary for scarce workers. To attract workers, employers began to offer health benefits as an incentive.
Suddenly, employers were in the health insurance business. Because health benefits could be considered part of compensation but did not count as income, workers did not have to pay income tax or payroll taxes on those benefits. Employers had an increased incentive to make health insurance arrangements for their workers, and the modern era of employer sponsored health insurance began. Most large firms and 50% of those firms with less than 50 employees provide an employer sponsored health insurance.
President Truman and President Johnson toyed with the idea of Universal Health Care, but those efforts never congealed. As an alternative to Universal Health Care, the Heritage Foundation, a conservative think tank, came up with the Affordable Care Act. President Obama, when he wanted to try for a national health care system, decided to go with the conservative plan hoping to garner conservative support; but it did not materialize. The conservatives have been trying to defeat the Affordable Care Act since its passage.
Now the Trump administration has proposed Association Health Plans. This would allow a group of companies to cooperate in providing care. Being larger, they could negotiate better rates from existing insurance providers, like the big companies do. These plans are already allowed for a given industry within a given state. The change is that they would be allowed for unrelated industries and beyond state boundaries.
These plans may be the answer for some small businesses but these Associated Health Plans have a history of problems. Between 1988 and 1991 such plans defaulted on more than $123 million in claims. This is not just buying another insurance plan, it will require the small business to understand the organization and to stay involved in its management to insure that they and their employees have health care when it is needed.
Suggestions to help Minnesota’s small business owners and potential small business owners.
By Mel Aanerud
Former Assistant District Director of the United States Small Business Administration