Health care history
The current health insurance schemes that are provided by the employers in America came as a result of the unintended tax breaks that were launched in America way back in the 1940s (Schumpeter, 1938). The tax breaks that were initiated during those years formed the foundation under which the current healthcare programs are based. The healthcare industry has undergone a number of struggles and reforms over the past several decades because of the numerous reforms that have been initiated in the past years. Before the commencement of World War 2, a good majority of the Americans had to pay for their own medical bills because no employer by then was ready to offer a health insurance scheme for their employees. By that time, the employees had two alternatives of taking care of their medical bills. The first option was through paying their medical bills directly to the hospitals they owed the money (Thomas, 2000). The second option was to use the health insurance scheme that was provided by Blue Cross, which was a non-profit organization.
Blue Corp Insurance
The Blue corp institution was created for the purposes of providing a guaranteed service to its customers within certain fixed rates. By that time the insurance cover that was offered by Blue cross was valued by those who used it because it came at a time when those who were in the employment circles could not afford to pay the bills because such expenses were beyond their financial capabilities. The Blue Cross scheme provided coverage for items such as hospitalization bills that were considered to be quite high during that time. The other expenses that were incurred by the patients were paid directly from their pockets to the providers of the health services.
Rise in medical cover
The most familiar form of employment insurance started to be introduced some decades after the end of World War 2. The stability of most nations in terms of their financial capabilities is what led to the introduction of the employment-based insurance. After that there was an expansion that came about as a result of the employers getting exempted from the payments of insurance covers from their employees. By the time the world was in the mid-1950s, it was approximated that close to forty five percent of the entire work force had hospital insurance. After a duration of sixteen years, the percentage of those who had the insurance cover increased from the initial forty five percent to a new figure of seventy seven percent. Additionally, it was estimated that close to more than half of the entire population had a health cover for their regular medical expenses for the short term illnesses. Similarly, statics indicate that one fourth of the population by that time had a medical insurance for their major illnesses.
Decline in medical cover
By 1980s, the employer-based medical coverage was thought to have gotten to its peak level, but since then the number of those covered has been on the decline. Experts believe that the decline in employment-based medical coverage is a result of the increase in difficulty financial times. Moreover, the financial crisis that had hit the world was a major contributor to the drop in the number of those who get medical insurance cover. The institute of employee benefit and research did a research and established that between the year 1987 and 1999, the number of employees with medical covers dropped significantly. Their research results indicate that the number of those who had the medical insurance fell by approximately 2.8 percent between the two years already mentioned above. Between 1999 and 2004, the population that was under medical insurance fell from 3.5 percent to an all time low of 2.8 percent. It therefore shows that the percentage of employees who were under employment based insurance fell by a margin of 6.3 percent between 1987 and 2004.
Effects on financial decisions
Initially, the insurance schemes were in the form of quasi-social schemes but that has since changed to insurance covers that are based on the actuarial principles. The actuarial principles type of insurance primarily assumes that the risks faced by the employees are not predictable for either an individual or a group of individuals. If however, it happens that the risks become predictable in advance, then the premium amount that is paid by such individuals is adjusted upwards. On the contrary to the actuarial principle, the initial social insurance never categorized the risks faced the different sets of employees. Everyone paid the same amount of money irrespective of their risks; therefore the issue of differential premiums was not in existence. The excess costs of the more risky employees would be shared equally between the entire set of employees. What the above statement means is that the employees with low risks pay the same amount with those who are associated with high risks. In market terms it would be said that the two set of employees cross-subsidize their risks.
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