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History Of Employer-Based Health Insurance In The U.S.


Millions of people have lost their jobs due to the coronavirus pandemic. And along with the loss of work, many of those same Americans no longer have health insurance. Now, other developed countries like Britain, Germany, Japan, have different systems - a universal system that covers everyone, regardless of whether you're employed or not.


So how did the U.S. end up with an employer-based system instead? Well, our colleagues over at NPR's history podcast Throughline wanted to find out. Their latest episode tells the story of the battle for health insurance in the U.S. It's long and complicated, and it could have ended up another way. Today they're going to share the moment employer-based health insurance was cemented in the U.S. Here are hosts Rund Abdelfatah and Ramtin Arablouei.


RUND ABDELFATAH, BYLINE: In 1953, Dwight D. Eisenhower was sworn in as the country's 34th president.


FRED M VINSON: ...Preserve, protect and defend the Constitution of the United States so help you God.


JIM MORONE: The Eisenhower administration comes in - the only Republican administration between 1932 and 1968 - long stretch of Democrats.

ABDELFATAH: This is Jim Morone. He's a political science professor at Brown University and co-author of the book "The Heart of Power". Before Eisenhower, several Democratic presidents pushed for federally backed social safety nets, some successful, others not so much. Franklin D. Roosevelt passed Social Security, and after that, Harry Truman tried and failed to bring about a universal health care program.

RAMTIN ARABLOUEI, BYLINE: And so when Eisenhower, a Republican, got elected, the administration came in with a plan to distinguish itself, bringing reforms to everything from foreign relations to the economy to health care.


EISENHOWER: A proposal to establish a sound reinsurance program will be submitted to the next session of the Congress. It will be an important part of a health program to fill the great gaps in this field of health preservation.


ARABLOUEI: After about a year in office, Eisenhower went on national television to explain his plan for health care in America - one rooted in a private system. And he made it clear that his vision was nothing like Truman's.


EISENHOWER: I hope that none of us confuse social progress with socialism.

ARABLOUEI: Keep in mind - all of this was going down during the Red Scare, so Eisenhower couched his health insurance agenda in the language of anti-socialism.


EISENHOWER: The program for voluntary health insurance is one further step in achieving this objective in the American way. It is the logical alternative to socialized medicine.


ARABLOUEI: So the Republicans looked for ways to preserve this private system, one that was growing but still vulnerable. And they realized exactly what they needed to do to stabilize it.

MORONE: Eisenhower goes to Congress. And he says, you know this thing we did during World War II? Well, the IRS is now thinking to tax it.

ABDELFATAH: So let's back up. In the 1940s, the government indirectly incentivized employers to start offering health insurance to workers. And the IRS made it tax-free, making it much cheaper for employers. But by the 1950s, after a decade of growth in the industry, the IRS was like, wait a minute. We made this tax-free. What were we thinking?

ARABLOUEI: So the IRS and the courts both started to chip away at the tax-exempt status.

MORONE: And the Eisenhower administration says, no, we are going to lock this into place.

ABDELFATAH: Congress went for it. And with that, it was decided once and for all. Employer contributions to health insurance would be tax-free.

MORONE: And that was the moment Eisenhower locks the employer-based system into place.

ABDELFATAH: But this created a big problem for people who didn't work at all, especially folks who were no longer supposed to work, like retirees. How would they be insured? President Truman tried to solve this problem with Medicare, government-sponsored health insurance mostly for people 65 and older, as well as younger people with certain disabilities or fatal illnesses. It didn't go through - not during Truman's presidency, and definitely not during Eisenhower's.


ARABLOUEI: Enter JFK. He's elected president in 1960. And then, his father has a stroke.

MORONE: And he can't believe it.


ARABLOUEI: In a speech not long after, Kennedy, half-joking, said it was a good thing his father was richer than the president so he could afford his health care. And that joke touched on something deeper, a question that haunted him.

MORONE: What do ordinary people do? And Medicare went from, I don't really care about this, it's too complicated; I don't understand it - to an obsession with John F. Kennedy. He just had to have it. Well, he gets assassinated before he gets anywhere, and Lyndon Johnson picks it up. Johnson wants to pass everything that was on Kennedy's plate.

ARABLOUEI: And in March of 1965, Medicare passed. And to celebrate, Lyndon Johnson wanted to sign the bill with the man who had championed it in the first place - Harry Truman.

MORONE: And there's Johnson. And as he signs - he's got his pen in his hand. And he turns to Truman. And he says, only you can understand my feelings as I sign this bill. And then he hands Truman Medicare card No. 1.

ABDELFATAH: Receiving Medicare card No. 1 may have been a dream come true for Truman, but it wasn't his dream come true - not his full one, anyway. This wasn't a historic signing of a unified universal program. This was piecemeal, just another piece of the puzzle that we're left with today.

PAUL STARR: This is what happens when things unfold in sequence.

ARABLOUEI: That's Paul Starr. He's a professor of sociology and public affairs at Princeton University.

STARR: We kept trying to fill in all the gaps. But then, it turns out, you know, even with all these efforts to fill in the gaps, there's still millions of people who fall into the void and don't have any protection.

ARABLOUEI: But the reality is many Americans are still resistant to trying a new system.

STARR: So many people are very anxious about health care. And whenever the issue comes up politically, that anxiety makes people very reluctant to endorse big changes. Although, you know, this pandemic is, I think, bringing out such serious problems with the way health care and public health work in this country. You know, maybe I'm underestimating the demand for change. Maybe something bigger is possible. We could make different choices now.

CHANG: Professor Paul Starr speaking with Rund Abdelfatah and Ramtin Arablouei, the hosts of NPR's history podcast Throughline. Listen to the whole episode about the evolution of U.S. health insurance wherever you get your podcasts.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

Ramtin Arablouei
Ramtin Arablouei is co-host and co-producer of NPR's podcast Throughline, a show that explores history through creative, immersive storytelling designed to reintroduce history to new audiences.
Rund Abdelfatah
Rund Abdelfatah is the co-host and producer of Throughline, a podcast that explores the history of current events. In that role, she's responsible for all aspects of the podcast's production, including development of episode concepts, interviewing guests, and sound design.
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