The Birth of Health Insurance
1933 - Institutional Event
The first modern group health insurance plans began to appear in America around the beginning of the Great Depression. In 1933, Dr. Wilburt C. Davison, first dean of the Duke University School of Medicine, and George Watts Hill, a prominent Durham business leader, founded the Hospital Care Association. The insurance plans they sold were called hospital prepayment plans. Later, the organization merged with rivals to form a company that was eventually called Blue Cross and Blue Shield of North Carolina.
In its early days, the association had very limited financial assets. They even gave plan memberships as payment for services they needed to launch their company. For example, their first membership certificate was issued in 1933 to a printer in exchange for providing printed materials for the new company. Over the next few years, the company became more established and profitable.
Soon other organizations launched hospital prepayment plans. But not all were backed by sufficient reserves to pay members’ claims. The Chicago-based American Hospital Association developed standards to protect the public and hospitals, using the Blue Cross symbol as their seal of approval for plans that met these standards. The two plans that later became Blue Cross and Blue Shield of North Carolina received Blue Cross approval in 1938.
Information provided by BCBSNC.
The Hospital Care Association grew to form the company that became Blue Cross and Blue Shield of North Carolina. Photo courtesy of the BCBSNC archives.
The Blue Cross symbol assured the public of a plan’s ability to pay claims.
Growing and Changing with the Times
The new concept of health insurance was unknown to many North Carolinians, especially in rural areas. So the American Hospital Association sent sales representatives across the state to explain how their prepayment plans worked.
By 1940, the first North Carolina employers began offering employees medical coverage. The cost of limited health coverage was very low in those days, and enrollment grew quickly during World War II. After the war came the Baby Boom, increasing the population and the need for medical insurance. Health care became the fastest growing sector of the economy. Insurance options grew, too, covering medical and surgical services as well as hospital care.
By 1950, health insurance was a common workplace benefit and a key bargaining issue for labor unions. But rural areas still lagged far behind North Carolina cities in the availability of health care and insurance. To bring information to many people still in need of coverage, Blue Cross and Blue Shield sent mobile enrollment offices to all 100 counties in the state during the late ’50s.
Information provided by BCBSNC.
Sales representatives explain hospital prepayment options to Craven County turkey farmers in the mid-1930’s.