History of insurance

History of insurance refers to the development of a modern laws and market in insurance against risks. In some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: money economies (with markets, money, financial instruments and so on) and non-money or natural economies (without money, markets, financial instruments and so on). The second type is a more ancient form than the first. In such an economy and community, we can see insurance in the form of people helping each other. For example, if a house burns down, the members of the community help build a new one. Should the same thing happen to one's neighbour, the other neighbours must help. Otherwise, neighbours will not receive help in the future.The concept of health insurance was proposed in 1694 by Hugh the Elder Chamberlen from the family. In the late 19th century, "accident insurance" began to be available, which operated much like modern disability insurance. This payment model continued until the start of the 20th century in some jurisdictions (like California), where all laws regulating health insurance actually referred to disability insurance.

Accident insurance was first offered in the United States by the Franklin Health Assurance Company of Massachusetts. This firm, founded in 1850, offered insurance against injuries arising from railroad and steamboat accidents. Sixty organizations were offering accident insurance in the U.S. by 1866, but the industry consolidated rapidly soon thereafter. While there were earlier experiments, the origins of sickness coverage in the U.S. effectively date from 1890. The first employer-sponsored group disability policy was issued in 1911.

Before the development of medical expense insurance, patients were expected to pay all other health care costs out of their own pockets, under what is known as the business model. During the middle to late 20th century, traditional disability insurance evolved into modern health insurance programs. Today, most comprehensive private health insurance programs cover the cost of routine, preventive, and emergency health care procedures, and also most prescription drugs, but this was not always the case.

Hospital and medical expense policies were introduced during the first half of the 20th century. During the 1920s, individual hospitals began offering services to individuals on a pre-paid basis, eventually leading to the development of Blue Cross organizations.The predecessors of today's Health Maintenance Organizations (HMOs) originated beginning in 1929, through the 1930s and on during World War II

Five big health care issues

ConLog's Arnold Kling, who is doing some of the best thinking these days on reforming America's dysfunctional health care finance system, identifies in the five big questions in health care:

1. What will we do about the large projected deficit in Medicare?

2. What can we do to reduce government subsidies for extravagant use of medical procedures with high costs and low benefits?

3. What should we do about the health care needs of the very poor?

4. What should we do about the health care needs of the very sick?

5. What should we do about a scenario in which both income inequality and the share of average income devoted to health care rise sharply?

Kling goes on to discuss our social fetish with health insurance, which is really not insurance at all:

If you ask me what kind of health insurance I would like for my family, my instinct is to answer, "None." The only reason we have health insurance now is to avoid the stigma of being called "uninsured."

Somehow, health insurance has become a social fetish. I could travel to the far reaches of the globe, and almost everywhere I would find merchants where my credit is good and my dollars are welcome. But here at home, trying to enter a local hospital with nothing but a wad of cash and a credit card would be like urinating on the sidewalk.

Government policy has exacerbated these issues and is unlikely to solve them through greater involvement in the system:

The tax code is the original hectoring mommy behind our health-care neuroses. It gives the biggest subsidy to those who need it least. It pays the affluent to buy more medical care than they would if they were spending their own money. It prompts them to launder our health spending through an insurance bureaucracy, creating endless paperwork. It prices millions of less-favored taxpayers out of the market for health insurance. It fosters a misconception that health care is free even as workers are perplexed over the failure of their wages to rise.

A big risk of health care finance reform

A big risk of health care finance reform

In addressing issues relating to health care and health care finance reform over the years, I've tried to be careful to differentiate America's Byzantine and inefficient health care finance system from the quality of America's health care, which remains very good overall.

But strains in the quality of care are definitely as America's existing health care finance system crumbles under the weight of, among other things, excess government regulation on medical insurance markets, unrealistic expectations regarding the supply and allocation of medical resources, over-reliance on third-party payors and the failure of American society to confront the issues pertaining to the limits of care.

The following is an email from a friend of mine, who is a first-rate internist who has been working as a hospitalist for the past several years. He is preparing to leave a hospital for which he has worked for the past couple of years because of the failure of the hospital's administration to address worsening working conditions for the hospital's primary care physicians:

I'm down to ten days left there, and those days can't go by fast enough for me.

The average number of admissions in a weekday day shift (7 a.m. to 7 p.m.) is 12.

We had 23 yesterday.

When you take the standard estimate of an average of 75 minutes necessary to complete a new patient admission to the hospital -- with the attendant patient interview and data collection, physical exam, review of lab and x-ray results, formulation of treatment plan, preparation of admission orders, and dictation of the official patient history & physical for the medical record -- the amount of work requested from our hospitalist group yesterday was 13+ hours over average. This is more than another full-time equivalent doctor, yet we can't persuade the national hospitalist company managing the hospital to provide any more help for us.

As a consequence of the barrage of admissions, I did not complete my "morning" rounds on existing hospital patients until 6 p.m. There were a couple of patients who could have been discharged from the hospital yesterday, but by the time we got to them, it was too late in the day to discharge them (area nursing homes won't take transfers after 2 p.m.).

As you can imagine, this type of delay causes longer length-of-stay and more expense for the system. And this does not even begin to address the mistakes in care that may have been (or more likely WERE) made due to all of us rushing around as if we were in a 12-hour long fire drill.

It's a bad way to practice medicine.

Contrast this to my new situation, which is a hospital-administered program. They believe in and adhere to the notion that the risk is high that patient care is likely to suffer once a doctor is required to see more than 15 hospitalized patients per day. Inasmuch as they don't have the heavy administrative overhead that national hospitalist companies are required to service, my new hospital can allow their docs to work at a more controlled pace and still make ends meet.

Ten more shifts and I'm gone.

Thanks for letting me vent.

Believe me, my friend is the type of doctor that you want to have taking care of you if you find yourself in the hospital. That a hospital administration is willing to let him get away is a sure warning sign that the problems in the health care finance sector are adversely affecting the quality of care.