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Stanford University School of Medicine

A tale of health insurance in the United States — from protection to profits

I didn't know I was interested in history of health insurance before I read the excerpt from An American Sickness that appears in the latest issue of Stanford Medicine magazine. As a topic, it struck me as rather dull and business-y — certainly nothing that would displace a murder mystery or a Thailand travel saga on my bookshelf. But after reading the excerpt, I realized just how wrong I was.

First, its author is Elizabeth Rosenthal, MD, who recently left the New York Times — where she penned an influential series of articles on the cost of health care — to take the helm of Kaiser Health News.

She knows that most Americans, like me, don't understand how our health-care system got quite so screwy or so complicated. Or that the high cost of health care is due, in part, to lifesaving advances like chemotherapy and ventilators. Until reading this piece, I hadn't spent much time pondering who should pay for the costs of these valuable therapies. Of course the answer is not me. But then who? Employers? Hospitals? The government?

Formative changes in the industry took place in the 1950s and 1960s, when private companies spotted an opportunity to make money. Rosenthal explains:

Suddenly, at a time when medicine had more of value to offer, tens of millions of people were interested in gaining access and expected their employers to provide insurance so they could do so. For-profit insurance companies moved in... They accepted only younger, healthier patients on whom they could make a profit. They charged different rates, depending on factors like age, as they had long done with life insurance. And they produced different types of policies, for different amounts of money, which provided different levels of protection.

...With aggressive marketing and closer ties to business than to health care, these for-profit plans slowly gained market share through the 1970s and 1980s.

That led to the near disappearance of nonprofit health insurance that aimed to help everyone.

How that came out, and what that means now, is actually a gripping read. Sure, the words "premiums," "deductibles" and "medical loss ratio" make appearances. But I found out I actually care about medical loss ratios (the percent of a premium health insurers spend on medical care).

After reading, I found myself asking my parents and my grandmother about insurance when they were growing up. And wondering how things might have been different. And making room for another book on my shelf.

Previously: Stanford Medicine magazine reports on sex, gender and medicine and Experts discuss high costs of health-care — and what it will take to change the system
Illustration by David Plunkert

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