Collection of the Museum of American Finance
This pay order from the Museum of American Finance’ s collection was issued to Dr. John Lawrence on November 5, 1776. It is for two pounds, 15 shillings and seven pence“ for physician to cover medicines, etc.”
A member of the University of Pennsylvania’ s first class of medical school graduates, Lawrence received his AB in 1764 from the College of New Jersey, now Princeton University. Until the War of Independence, he practiced in Middlesex County, New Jersey. Lawrence was a loyalist, and in July 1776 he was arrested by order of George Washington and sent to Elizabethtown before being released on parole. The date on the pay order indicates he returned to practice while on parole. After his examination by the Council of Safety in 1777, he moved to New York.
The pay order also indicates that medical costs have long been significant expenses. The sum is roughly equivalent to 240 pounds, or $ 330 today. More importantly, though, it represented about half a month’ s earnings for a skilled laborer in England in the 1770s. Hard money was always tight in the colonies, and even more so during the war, so this represents a considerable outlay.
name: Blue Cross Plans. The goal was not to make money, but to protect patient savings and keep hospitals— and the charitable religious groups that funded them— afloat. Blue Cross Plans were then not-for-profit.
“ Blue Cross and its partner, Blue Shield, were more or less the only major insurers at the time and both stood ever ready to enroll new members. The former covered hospital care and the latter doctors’ visits. Between 1940 and 1955, the number of Americans with health insurance skyrocketed from 10 % to over 60 %. That was before the advent of government programs like Medicare and Medicaid.”
When the War Labor Board froze wages in 1943, it excluded“ fringe benefits” including health insurance. As noted, employer-based health insurance was already well established, but that wartime expedient entrenched the concept. Through the 1950s, while many workers at all levels tended to stay with the same employer, that system seemed satisfactory.
A second reason for the rapid growth in health insurance was the expansion of organized labor over this period, according to Michael A. Morrisey in Health Insurance, 2nd Edition, published in 2013 by the
American College of Healthcare Executives.
“ Union influence on health insurance stemmed in part from the 1947 Taft-Hartley Act, which defined health insurance as a condition of employment and, therefore, a subject for collective bargaining,” wrote Morrisey.
The third reason for the rapid growth in health insurance was the treatment of health insurance in the federal tax code. As noted, in 1943 the Internal Revenue Service issued a private ruling holding that employer-provided health insurance benefits were not subject to federal income taxation.
When America entered World War II, thousands of diverse workers migrated from across the country to Henry J. Kaiser’ s shipyards in Richmond, California; Portland, Oregon; and Vancouver, Washington. Many of them were inexperienced and in poor health, according to Kaiser Permanente’ s company history.
Kaiser was familiar with Dr. Sidney Garfield, a young doctor who arranged a care program for workers on the Colorado River Aqueduct project in southern California. As one of the aqueduct’ s contractors, Kaiser organized an insurance
company, Industrial Indemnity Exchange, for his workers. Industrial Indemnity Exchange agreed to prepay Dr. Garfield a fixed amount per worker per day for workrelated injuries and healthcare. Workers then voluntarily prepaid a premium of five cents per day from their paycheck for non-work-related healthcare.
President Franklin D. Roosevelt released Dr. Garfield from his military obligation at Kaiser’ s request to organize a care plan at the Kaiser shipyards. Then, as the war effort wound down, the shipyard workforce fell from 90,000 to about 13,000 people in only a few months. The number of shipyard doctors declined to about a dozen. But Dr. Garfield and Kaiser wanted to continue their new approach to healthcare. So, on July 21, 1945, the Permanente Health Plan officially opened to the public.
By the early 1950s, several large for-profit health insurance companies had become established, as had numerous smaller regional, local and vocational programs.
“ Contradictory and inconsistent private rulings emerged over the 1940s and early 1950s,” wrote Morrisey,“ prompting Congress to enact legislation in 1954 that exempted employer-sponsored health insurance from federal income taxation. This tax exclusion is a key reason why the US health insurance market looks the way it does. The tax code effectively encourages employees and their employers to shift compensation toward untaxed health insurance and away from taxed money income. This tax subsidy is a big deal. The Congressional Budget Office( 2013a) estimates that the federal tax subsidy alone amounted to $ 248 billion in 2013.”
In her 2023 paper,“ A( Brief) History of Health Policy in the United States,” Katherine Smith, MD, executive director of the Delaware Academy of Medicine / Delaware Public Health Association, noted that“ in 1938, the National Health Conference was convened in Washington, DC. Recommendations from that conference were incorporated into the National Health Bill, which died in committee in 1939. In that same year, the first Blue Shield plans were organized to cover the costs of physician care.”
In 1943, legislation was introduced to operate health insurance as a part of Social Security, Smith wrote.“ The Wagner-Murray-Dingell bill included provisions for universal comprehensive health insurance and changes to Social Security to move it toward a life-long social insurance. It did not pass.
22 FINANCIAL HISTORY | Summer 2025 | www. MoAF. org