From Sickness to Health: The Twentieth-Century Development of U.S. Health Insurance

This paper explores the institutional development of health insurance in the United States. By combining a qualitative history of the development of the market with an empirical analysis of a panel of health insurance data from 1931-1955, the paper identifies a number of factors that influenced the growth of the health insurance market. While demand factors such as increasing income and improvements in medical technology certainly contributed to the growth of the market, supply side factors were also important. There is evidence that hospitals may have contributed to the growth of health insurance as a means of smoothing revenues during the Great Depression. State-level policies that allowed the Blue Cross and Blue Shield plans to operate as nonprofits also spurred market growth, as did federal government policies that promoted the link between employment and health insurance.