In 1911, when Great Britain passed a National Health Insurance Act, the concept of providing medical care expense benefits generated significant interest in the United States. Various plans were investigated, but even Samuel Gompers, then President of the American Federation of Labor, rejected compulsory health insurance as being to paternalistic. In the early 1920’s, individual hospitals in Rockford, Illinois; Grinnell, Iowa; New Bedford, Massachusetts; and Brattleboro, Vermont offered hospital expense benefits on an individual prepaid basis.
The principle of group prepayment for hospital coverage originated at Baylor University Hospital in Dallas, Texas, in 1929, when some 1500 school teachers were covered for 21 days of semi-private room and board and hospital extras in any one year. During the depression, more and more hospitals followed the Baylor plan.
Blue Cross developed during the thirties. In 1934, the General Tire & Rubber Company asked the Equitable Life Assurance Society of the United States to add group hospital expense coverage to its existing group insurance program. About the same time, Occidental Life of California added hospital expense benefits to an existing short-term disability income policy for a large chain of grocery stores.
The development of the group hospital expense benefit was a significant step forward in helping employees meet the cost of medical care. The next step was coverage for surgeons’ fees and physicians’ charges for in-hospital, home, and office benefits. In 1938, private insurers introduced group surgical expense benefits, followed by group medical expense benefits in 1943. In 1939 the first state-wide Blue Shield Plan was developed, California Physician Service. Private insurers continued to add other basic medical care expense benefits, for example, vision benefits in 1957, extended care facility benefits in 1959, and prescription drug benefits in 1964.