wartime economies and the mobilization of labor || the business of health security: employee health...

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The Business of Health Security: Employee Health Benefits, Commercial Insurers, and theReconstruction of Welfare Capitalism, 1945-1960Author(s): Jennifer KleinSource: International Labor and Working-Class History, No. 58, Wartime Economies and theMobilization of Labor (Fall, 2000), pp. 293-313Published by: Cambridge University Press on behalf of International Labor and Working-Class, Inc.Stable URL: http://www.jstor.org/stable/27672686 .

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ARTICLES

The Business of Health Security: Employee Health

Benefits, Commercial Insurers, and the

Reconstruction of Welfare Capitalism, 1945-1960

Jennifer Klein Smith College

Abstract

The cash-indemnity health insurance system that emerged in the United

States after 1945 represented but one trajectory among many. The late 1930s and

early 1940s marked a period of innovation and creative experimentation in volun

tarist health care programs. Spurred by the Social Security Act of 1935 and the New

Deal's legitimization of the politics of security, unions, consumers, employers, and

doctors began developing a range of health care programs that enabled patients to

pool the risks and costs of sickness and injury, thus bringing medical care within the

reach of more people. Employers and private insurers, too, acceded to the pervasive

ideology of security. Invoking the New Deal language of security, life insurance com

panies competed with community and nonprofit organizations to meet a burgeon

ing market?the market for prepaid health services. While organized labor advo

cated noninsurance models, commercial insurance companies, aligning with large

employers, dramatically expanded their reach during the 1940s, bringing in large

groups of subscribers. By the time substantive collective bargaining over health ben

efits commenced between unions and management in 1950, commercial group health insurance had become well entrenched in many workplaces, and, as a result

of this growth, had undercut the competitive and political conditions that enabled

other, more equitable, communal-based health insurance alternatives to thrive.

Today, the notion of economic security is in eclipse, but as a right of citizenship and employment, it occupied a central place in American cultural and political life at mid-century. New Deal legislation created a social entitlement to a mini

mum standard of living?if not for all workers, then as a model to which the na

tion should aspire. Yet the New Deal did not simply create a limited welfare

state; it launched a new economy of welfare in which the ideology of "security" on the job, in retirement, even in world affairs proved a powerful construct. Giv

en the ideological power of "security," the New Deal set in motion a rapid ex

pansion of the insurance, health care, and income maintenance options offered

by private-sector institutions. As the public welfare state expanded, it had a ma

International Labor and Working-Class History No. 58, Fall 2000, pp. 293-313 ? 2000 International Labor and Working-Class History, Inc.



294 ILWCH, 58, Fall 2000

jor competitor in the social welfare field: American business firms. Over the next

two and a half decades, large business firms, like the state, came to offer pen

sions, disability wages, and unemployment benefits. Employers also provided

paid sick leave, hospital insurance, medical insurance, and, less often, retiree

health benefits. To this day, job-based health insurance remains the primary door

to health coverage for Americans under age sixty-five. While over two-thirds of

the US population under age sixty-five depends on employer-sponsored health

plans,1 we know little about the historical development of this private social wel

fare "system."2 This essay seeks to place the development of commercial health

insurance plans within a broad context of industrial relations and the politics of

security prompted by the New Deal. The politics of the 1930s and early 1940s

opened social-democratic possibilities, as in many European countries; New

Dealers identified economic security as a grand national project, "a great coop

erative enterprise [among] the citizens, the economic system, and the govern

ment"?although this new set of social rights extended only to the white citi

zenry.3 But in the United States, this impulse was quickly commercialized by big business. Welfare-capitalist employers responded to the establishment of a na

tional old-age pension system by racheting up the rewards of welfare capitalism.

Commercial insurers and employers successfully channeled the development of

both government and private health provision away from the universalist,

community-based, or service-oriented options that New Deal labor-liberals and

trade unionists demanded. Welfare capitalism did not simply end with the Great

Depression; it was a perpetual strategy for negotiating pressures from the state

and the workers.4

In 1939, Thomas Parkinson, the president of the Equitable Life Assurance

Society of America, celebrated the opening of his company's New York World's

Fair Exhibit, "The Garden of Security," by proclaiming, "Security! The modern

world is in constant search of security."5 Indeed, observers from all quarters,

from the National Association of Manufacturers (NAM) to the Congress of In

dustrial Organizations (CIO), agreed that "as a nation, we have become securi

ty conscious." This palpable concern with security arose out of the discourse gen

erated by the Social Security Act of 1935.6 All forms of private insurance

benefits that proliferated in the late 1930s and 1940s built on the public social

security foundation laid by Progressive Era reformers and the New Dealers. In

surers had quickly adapted to and essentially taken over the market for occu

pational injury reimbursement created by Progressive-era workmen's compen

sation laws in the 1910s and 1920s. A generation later, insurers began referring to their new pensions, disability benefits, and nonoccupational health policies as

supplemental social security, for as Equitable's Thomas Parkinson insisted, "We

in the life insurance business are selling security and preaching security."7

By the 1940s, life insurers believed that Social Security had been a tremen

dous boon to the sale of insurance and old age pensions. Insurance executives

instructed their agents to incorporate the new Social Security program in their

sales pitch, emphasizing that federal old age pensions would meet only the barest

subsistence needs. As one Metropolitan Life supervisor said, "Now we sell an



The Business of Health Security 295

insurance program that will fit in and add to the social security protection the

prospect already has."8 Equitable's group insurance directors exhorted employ

ers "to complete the protection afforded under the Social Security Act," re

minding them that Equitable "specializes in all forms of group insurance: group life, group accident and health [disability], group accidental death and dismem

berment, group hospitalization with surgical benefits, and group annuities."

With federal pensions in place, individuals or employers could more easily pur chase a retirement annuity worth one year's full salary for a small outlay.9

While willing to extend the scope of Social Security coverage to new groups within the work force, the insurance industry vehemently opposed attempts to

expand the types of benefits offered through Social Security. Its leaders decried

Senator Robert Wagner's health insurance bills of the 1940s in all their mani

festations, as well as state and national temporary disability insurance propos

als. Yet life insurance companies avoided actively lobbying against governmen

tal programs in the early 1940s, fearing that their agitation might lead to greater

government scrutiny, regulation, or taxation of their own industry. As one in

surance leader advised, "If the trend is toward extensive liberalization of social

insurance measures in this country, it is more important to know that and to at

tempt to guide it into sensible channels rather than merely futilely trying to hold

back the tide ... by fighting every manifestation."10

In 1941 and 1942 insurers stepped up their efforts to market group health

insurance to employers. Commercial insurance policies were based on a cash

indemnity, fee-for-service principle. Insurers paid the patient for each service he

or she obtained, at whatever price doctors or hospitals independently charged.

It was the insurance companies, more than anyone, who saw the potential in the

National War Labor Board's (NWLB) ruling that employer contributions to in surance premiums did not violate wage stabilization guidelines. Insurers had an

other incentive for aggressively promoting such group policies. Even during the

war, liberal policymakers continued their efforts to expand New Deal social pro

grams, regularly introducing new social welfare legislation. By the time the

NWLB issued its decision on fringe benefits on March 23,1943, group insurance

sales had already increased during the war by 80.5 percent.l ^ The number of per

sons covered by group hospital insurance increased from one million before the war to 8.5 million by 1944. Companies like Metropolitan, Aetna, Prudential, and

Equitable made it easier for employers to put a program in place swiftly before

"getting the employeesf] and perhaps the union[']s approval." During the war, insurers allowed employers to pay the first month's premium, announce that the

policy had been put in place, and then let employees "sign up."12 Such exclusive

relationships between insurers and employers would persist after the war had

ended and complicate collective bargaining over insurance when unions made

their big push for benefits in the late 1940s.

In planning for the postwar period, insurers believed that workers who

earned under $3,000 represented the largest untapped market for insurance of

all kinds. As one Metropolitan Life executive proclaimed, "the great market

ahead is the new aristocracy of America?the technical workers, those who are



296 ILWCH, 58, Fall 2000

skillful with their hands. Seek that market."13 Moreover, insurance journals em

phasized that these workers, as part of a newly empowered working class, would

be the engine driving postwar efforts to expand the welfare state. The editor of

The Spectator, a life insurance journal, advised his readers to heed "the new so

cial order" in which the average worker "is one of millions who ... have become

a prime force in the social, economic, and political currents of democracy. Un

less some assurance to his future is offered by private enterprise ... he will de

mand a state agency to effect his objective." In this new social order, the work

ing voter would demand that government meet vital security needs that were not

met through work and wages.14

Insurance companies were not the only ones who sought to accommodate

the new security consciousness. The labor movement had been calling for ex

pansions of Social Security and the passage of Wagner's national health insur ance bill during the war. Yet finding themselves stymied on the political front, trade unions also had been experimenting with local, "voluntary" (as all non

public plans were called) health insurance plans. In fact, the passage of the So

cial Security Act in 1935 and the National Health Conference sponsored by the

Roosevelt administration in 1938 stimulated a grass roots health security move

ment. After attending the National Health Conference, community activists?

in particular, trade union women?began pressing for local, prepay health care

clinics. Trade union women in Chicago, for example, helped form the Citizens

Committee for Adequate Medical Care, a coalition of unionists, women's auxil

iaries, the National Negro Congress, Hull House, the Young Women's Christian

Association (YWCA), the Young Men's Christian Association (YMCA), the

Chicago Association of Medical Students, and Chicago's Non-Partisan League.

In 1939, the Committee began agitating for Cook County Hospital to establish

outpatient clinics in working-class neighborhoods. Teachers unions and postal

clerks unions made prepayment plan arrangements with the Civic Medical Cen

ter in Chicago?a private, group practice clinic.15

By this time, unions had generally discontinued traditional mutual benefit

sickness funds. Instead, independent of labor-management bargaining, local

unions negotiated group subscriptions for prepaid hospital plans, known as Blue

Cross plans. In 1945, thirty-eight locals of the United Automobile Workers

(UAW) belonged to Blue Cross service plans. In service plans such as these, members paid a set fee in advance, receiving services without being charged for

each visit. The UAW workers themselves paid for these policies; even where

they worked out a paycheck deduction system with employers, union members,

not employers, paid the premiums. Hotel workers, printers, pressmen, and chain

restaurant workers in New York all subscribed to Blue Cross by the end of the

war, as did the United Furniture Workers. The American Federation of Hosiery Workers and the Textile Workers had designed their own group hospital policy

in conjunction with a labor-oriented carrier, the Trade Union Accident and

Health Association of America.16 World War Two had also seen the initiation of

the Group Health Cooperative in Seattle/Puget Sound, Group Health Cooper ative in New York City, and Kaiser Permanente Foundation health centers in




California?all prepaid, service-based plans. At the end of 1945, Kaiser Foun

dation opened the plan to the general public. The International Ladies Garment

Workers Union had obtained employer subsidization of their union's health cen

ters, while the Amalgamated Clothing Workers decided to insure its own bene

fits by creating the Amalgamated Life Insurance Fund. Employers, too, enrolled

in Blue Cross plans, so by the end of World War Two, Blue Cross had nineteen

million subscribers.17 In the first half of the 1940s, then, Americans could choose

from a variety of experiments in health insurance.

Perceiving that national public health insurance was a distant goal (yet not

forsaking it), trade unionists set out to learn as much as they could about their

private-sector options. Some of the larger CIO unions, such as the UAW, as well

as the American Federation of Labor (AFL) central office, spent 1945 and 1946

conducting a massive educational effort: collecting information on insurance

companies and medical plans from around the country, comparing the benefits

of each, corresponding and meeting with Blue Cross representatives, devising

their own group plans with labor insurance companies, and visiting hospitals. In

1946, organized labor targeted its research on "prepaid medical plans, whether

private or cooperative, that emphasize complete medical, surgical, and hospi

talizaron directly as opposed to cash indemnity plans."18 By the time the CIO

passed an official resolution calling for "Security Through Bargaining" in the fall

of 1946,19 the labor movement had developed an expertise on the possibilities for organizing and financing health care without government and independent

ly of commercial insurers.

Now familiar with both service-based and indemnity-based health cover

age, labor representatives astutely gauged the benefits of the former and the

weaknesses of the latter. They preferred Blue Cross, a nonprofit hospital bene

fit plan, because, in its original form, Blue Cross came rather close to being true

social insurance. Members paid only one fee?a membership fee. Patients could

be admitted to the hospital without delay, and they would incur few additional costs. As a nonprofit institution, Blue Cross accepted all risks all year round.

Most plans covered preexisting conditions and, in some cases, diagnostic care.

And since everyone in the community who belonged to the hospital group paid the same rate, a community rate, those who were healthier helped subsidize

those who needed services more often. Prepayment really did mean prepay

ment: Blue Cross coverage paid for over ninety-five percent of the patient's hos

pital bill.20

Still, Blue Cross, as an alliance of hospitals, could only provide hospital ser

vices, and unions wanted more. For example, most UAW members could not

pay for surgery or physician care outside of the hospital, even when covered by

Blue Cross. Thus, the labor movement argued that true "health security" also

had to include prepayment of physicians' services, rehabilitative services, and

preventive medicine. Labor health experts envisioned a not-for-profit commu

nity plan, wherein the program, or a central administrative board, contracted out

for services. Public members and labor representatives as well as health profes

sionals would have representation on the governing body of the health program.



298 ILWCH, 58, Fall 2000

The UAW designed a model plan under which groups of physicians, working in

cooperation with hospitals, would sign a contract with a union-community

Board of Trustees. For a monthly per capita fee, physicians rendered all services needed by the patient at clinics that had outpatient services, diagnostic labs,

X-ray facilities, and specialists all together. In this way, the doctors would be forced to contain or self-subsidize costs. Moreover, the emphasis would not al

ways revolve around expensive hospital care, as was the case with Blue Cross

and commercial hospital insurance. Further, progressive health care experts and

organized labor hoped that federal social policy would soon financially support the development of group service programs and community medical centers.21

Commercial indemnity insurance directly contradicted these goals. Insur

ers designed health policies around the basic premise they used for all other lines of insurance. They insured something against loss. Insurers calculated premiums

and benefits based on exposure to loss or risk. In the case of health insurance,

risk meant exposure to medical care or health services, and what was lost was

the cash used to pay for them. "A necessary corollary," an Equitable actuary ex

plained in 1940, "is that the happening of the event must not be subject to the control of the insured individual, or that there must be a strong incentive or nor

mal desire on the part of the insured individual to avoid the happening of the event which is the subject of the insurance."22 In short, the insured individual

must avoid seeking routine medical care. Commercial insurance applied a vari

ety of mechanisms to protect this principle. The more one did use medical care,

the higher the premium became and the lower the net benefits. Those who had health problems and needed the services had to pay the most money. Neighbors in the same community or workers in the same firm could pay significantly dif ferent rates based on their medical experience. By necessity, coverage had to be

limited, and cash indemnity plans covered only a fraction of the insured services,

generally paying between forty-five to fifty-five percent of an individual's hospi tal expenses.23 Insurers indemnified each medical service separately: hospital

policies covered hospital stays only, but a separate surgical policy was necessary

to actually cover the doctor's work. For medical care outside the hospital, one

had to buy yet another policy?medical insurance. Commercial cash-indemnity

insurance excluded preexisting medical conditions. Patients shouldered an

open-ended liability. Electrical workers complained that cash-indemnity plans at General Electric (GE) and Westinghouse continually left them with unex

pected, hidden costs. Dave Fitzmaurice, the president of an IUE (International Union of Electrical, Radio, and Machine Workers) local in Cleveland, groused that his members paid out-of-pocket expenses for X-rays, drugs, and laborato

ry work dispensed in the hospital. "They are typical examples of the things GE

employees do not like. They want full coverage under the GE plan," Fitzmau rice complained.24

And labor representatives recognized the inherently inflationary nature of cash indemnity insurance. Instead of forcing service providers to contain costs

and prices to what they took in prepayment fees, insurance, by paying a per

centage of anything doctors or hospitals charged, opened the way for swift med




ical price inflation. In addition, because there was no direct relationship between

the indemnifier (insurers) and the service providers (hospitals or doctors), there

was no structural mechanism to monitor and evaluate costs and care and ensure

that beneficiaries received the most cost-effective services.25

In the postwar years, then, insurance companies faced competition not only

from the state but from a set of quasi-public labor-oriented health care programs

that had emerged in the late 1930s and early 1940s. Insurers needed an alliance

that would serve as a bulwark against the service-providers' alliances. Since in

surers did not provide the medical services, they had to make sure that hospital

groups and medical groups did not shut them out. If insurers were to gain any

clout, they would have to represent large groups of potential patients.

Insurance companies found that ally among large employers, unionized and

nonunionized. By 1946, corporate employers were becoming quite receptive to

the message promoted by insurers?that business had to engage the politics of

security. Employers wanted to restore the managerial prerogatives they saw un

der attack from both the New Deal state and unionized workers. They took

unionism in basic industry as a given, but they wanted to take the offensive?

both ideological and economic.26 Employers certainly recognized that "the

American employee of today is vitally interested not only in wages and working

conditions, but in security against the hazards of illness, disability, old age and

death." Business Week advised executives to respond quickly. "Management, for

the first time, is faced with a broad social demand?the demand for security," a

feature story opined. "But if management does not use it wisely, the worker is

likely to transfer his demands from the bargaining table to the ballot box." On

one front, then, corporate employers sought to check the growth of the federal

government and the national welfare state. If the state stepped in with taxation,

business could lose control over any social spending. Social security taxes would

only go up, depending on the whim of the legislature, for as the NAM feared, "the domestic trend is toward creation of a Welfare state; the world trend is to

ward a Welfare World; the slogan of the hour is a Fair Deal for all." The NAM

raised the specter of alarming increases in the Social Security taxes?twenty to

twenty-six percent of payroll (the actual tax rate hovered between 1 and 1.5 per

cent in those years). It was far better for employers to structure their own poli

cies.27

On the other front, employers feared that welfare benefits might further le

gitimize trade unionism. Union leaders, the US Chamber of Commerce ex

plained, "hope that the union treasury and the union leaders become the exclu

sive source of worker protection. ... In other words, management.

. . [is] being

forced to finance health and welfare funds in order that unionism and union

leadership may be more deeply entrenched." In an official policy statement, the

Chamber of Commerce urged employers to move as quickly as possible to in

stall "voluntary" health coverage and thereby gain the moral high ground on the

security issue.28 The NAM agreed "that management should not surrender its

initiative in this matter to the union."29 This imperative seemed all the more

acute as a great strike wave swept the nation in 1946. The United Mine Work



300 ILWCH, 58, Fall 2000

ers brought coal production to a halt, publicly demanding union-controlled

health and retirement programs. Facing John L. Lewis on one side and Harry

Truman's Fair Deal on the other, employer associations sought to accommodate

these dual threats by developing a more sophisticated form of welfare capital ism to compete with the state and the unions.

For employers, the unilateral purchase of commercial group insurance

proved the key to containing union power and union political goals. Amid the

strike wave, commercial group health sales surged, after which steady growth

lasted for the next three decades. Between 1945 and 1947, the number of per sons covered by commercial group hospital and surgical insurance doubled, ris

ing from 7,804,000 in 1945 to 14,190,000 persons in 1947.30 Nonunionized com

panies, especially consumer goods industries with relatively stable employment

patterns, purchased the most full-scale health insurance packages. Johnson &

Johnson, Kodak, UpJohn Company, Bristol Meyers, the Borden Company, Col

gate Palmolive, and the Pillsbury Flour Mills Co. installed hospital, surgical, dis

ability, and even limited medical insurance plans.31 Unionized companies, such

as General Motors (GM), Ford Motors, Republic Steel, US Rubber, Standard

Oil, US Steel, Socony-Vacuum (Standard Oil), General Electric, International

Harvester, and Westinghouse?all longtime policyholders with Equitable, Met

ropolitan Life, John Hancock, and Aetna?expanded their existing group life

insurance policies to include coverage ranging from minimal disability to hospi

tal-surgical plans. The majority of these new group health insurance sales rep

resented employer modification of existing policies?without union input or

union revision.32 The major firms in the steel, rubber, auto, electrical, and oil

industries repeatedly rejected union requests to negotiate over the actual sub

stance of the benefits. At end of the decade, only 380 out of 2,200 collective bar

gaining agreements contained health insurance.33 In the face of New Deal de

mands for social entitlements, these companies clung to an older tradition that

defined health benefits as "gratuities given by employers to employees."34

Commercial insurers made it possible for employers to resurrect welfare

capitalism, "tailoring" health insurance policies to fit the needs of each employ er. In order to make their product more competitive, insurers offered the pur

chaser of a group plan the opportunity to select exactly what it did and did not

want. Employers could choose the hospital services that would be covered, the

percentage of reimbursement, and the amount of an employee's contribution.

For medical plans, they could decide whether specialists would be included, the

number of visits that would be paid for, or whether payments would start with

the first visit. "Every Equitable Group plan is specifically tailored to meet your

company's individual needs, eliminating the cost of superfluous coverage while

protecting you from the danger of inadequate coverage," an Equitable promo

tion piece assured the prospective clients.35 Insurers rarely met with either

unions or workers' representatives during this formative period. A Federal Me

diation and Conciliation Service conciliator reported in 1949 that during ten

years of service, "the insurance representatives made no attempt to reach an un

derstanding with labor representatives."36 Managers and insurers became part




ners in defining what constituted health security, shifting its focus away from the

New Deal emphasis on national standards and toward a multitude of isolated,

firm-specific welfare sites.

Insurance tailoring infuriated labor leaders. They saw it as subverting their

attempts to win universal benefits throughout an industry or region. When the

Steelworkers surveyed their members in the early 1950s, they found that "almost

all the insurance programs negotiated in the different companies under contract

with our union differ in some respect." Such variation remained the case a

decade later.37 As Nelson Cruikshank later complained: "In industry today, thousands of different arrangements exist, whose variations in scope and bene

fits are not justified by any criteria, despite the prevalence of the appeal to fit the

insurance benefits to the needs of a given group or industry. . . . This piecemeal

approach means inequality of benefits even in the same community or neigh

borhood." Cruikshank argued that "tailoring" was a sham; workers' "needs are

always [for] comprehensive health services and medical care," regardless of

company or industry.38

Besides leading to uneven benefits, tailoring also made it difficult for work ers to know what they were getting for their money. Because the insurer dealt

directly with the employer, unions or employee representation councils never

knew just how much the premiums actually cost. Joseph Swire, Director of the

International Union of Electrical Workers' Pension and Insurance Department

and their chief negotiator on employee benefits, complained that in the case of

General Electric, which had Metropolitan Life group insurance, "the employ ees never have had a complete report, don't know how much Metropolitan keeps

in retentions, what the exact costs were, how much commission or fees brokers

get, [or] whether or not improvements could be made for the same cost."39 Since

premium rates and benefits varied from company to company and even within

companies, attempts to estimate the cost were almost impossible, thus putting

unions at a disadvantage during collective bargaining. The true costs and benefits were even further obscured by the "channeling"

of dividends. Insurance companies also used the promise of dividends to pro

mote their product. All mutual insurance companies purposefully overcharged

at the front end to make up for any possible miscalculations in "risk" or actual use of services. After covering administrative and other charges, insurers re

turned any extra premium money as a year-end dividend. Since the corporation was the legal policyholder, such dividends belonged solely to management. In

the case of General Motors, dividends from Metropolitan Life often exceeded

the company's premium payment for group disability and life insurance in the

1940s. Even in 1950, when the workers paid half the premium, GM pocketed all

of the dividends.40 General Electric continued to keep dividends that amount

ed to $20-$30 million between 1950 and 1954. IUE officials estimated that work ers actually paid for about sixty percent of the group policy, while receiving far

more limited benefits than they would if they subscribed to Blue Cross.41 The

return of dividends also enabled insurers to convince employers that they were

signing on to programs that initially seemed inexpensive. Companies like West



302 ILWCH, 58, Fall 2000

inghouse explicitly stated in their collective bargaining contracts that dividends would be used to reduce the company's (not the workers') contribution to the

insurance plan.42

Another selling point was that employers' premiums were based on the medical experience of each firm. Under this principle, premiums varied accord

ing to the company's accident or sickness experience. Lane Kirkland, then a so

cial insurance expert with the AFL-CIO, commented that "experience rating raises a wall of isolation about each covered group. It conflicts with the princi ple of social insurance which calls for the pooling of risks and the spreading of costs over the widest possible area of population."43 Experience rating not only had an impact on the workers in each plant. It also directly affected the viabili

ty of the service plans. By cherry-picking the better health risks, insurers left the

community service plans with a higher-risk population. By the early 1950s, the tremendous growth of group insurance had made it increasingly difficult for

Blue Cross to underwrite plans based on the prepaid service principle. Although experiencing significant growth as well, the Blues either increased rates contin

ually or switched to cash-indemnity, fee-for-service underwriting in the 1950s.44

Commercial insurers were rapidly limiting viable alternative health programs,

especially those that led to a more universal system of relatively equitable, service

based care.

All of these factors?tailoring, undisclosed information on costs, dividends,

experience rating, and financial and investment relationships between insurance

companies and business corporations?reinvigorated postwar welfare capital ism. The large eastern life insurance companies that dominated the market

rarely sold group health plans to labor unions, farm organizations, community

groups, or consumer cooperatives. Over ninety percent of group insurance poli cies were written for single employers or their subsidiaries. Labor unions or

multiple-employer associations held less than seven percent of all group poli cies. When in 1947 the Taft-Hartley Act outlawed independent union-run wel fare funds, it encoded de jure what had already become the insurance industry's practice.45 This private, employer-based welfare system linked health insurance

to steady employment in a particular firm. Unlike Kaiser Permanente or the

original Blue Cross, insurers made no attempt to allow an employee to convert

from a group policy to an individual one if she or he left her or his work. Equi table Life vice president William Graham declared that group insurance "ex tends protection to employees over the term of their employment. That is all it

does, all it was planned to do."46 Equitable's group insurance promotional ma

terial made clear that "employee privileges on termination of employment" were "none."47 Group insurance, then, retained two essential aspects of welfare

capitalism. It tied workers to a particular company, and it made all other family members dependent on the worker. In the 1920s, employers and insurers had

relied on scientific management and industrial efficiency as the rationale for welfare capitalism. After 1935, security became the ideological frame for group

insurance. As Graham explained, "Group insurance is a purely American plan of providing security by protecting the pay envelope at its source."48




Such a welfare system was inherently patriarchal and unequal. Because

they designed health insurance as part of the family wage?a single breadwin ner and dependent family?insurers forged a health care system in which nu

merous persons had no direct claim to medical care. Their only claim to medical

coverage was through a wage earner. Women who worked in basic manufactur

ing or in large white-collar firms, such as insurance companies, did receive the

same health plans as male employees. State insurance regulations and federal

tax laws required employers to enroll seventy-five percent of their work force,

and so employers simply could not exclude entire classes of employees. Yet in

surers and employers established employment-based health coverage on a

white, male model of labor force participation: the full-time, full-year worker.

Half of the female waged work force worked in part-time or seasonal jobs. Women who worked full-time were concentrated disproportionately in low

paying industries such as food service, sales, and administrative support. Facing

few threats of unionization or labor supply, employers in these sectors found

they could do without employee benefits. Because of the pressure to keep labor

costs low and the low wages of the employees themselves, any insurance coverage

that employers did provide remained minimal?generally confined to skeletal

hospital coverage. Moreover, because of interruptions in their labor force par

ticipation to raise children or care for sick family members, women switched jobs more often; this made them more vulnerable to preexisting condition clauses.

African Americans faced many of the same problems, complicated by the fact

that many lived in nontraditional family structures. Thus, employment-based

benefits widened the income disparity between workers.

Inequality inhered in coverage for family members, especially if they were

not in the waged labor force. In most cases, even in unionized industries such as

automobile manufacturing, workers had to pay out of their own pocket in order

to extend their health coverage to their families, often limiting the amount of in surance coverage they received. Family members usually received lesser bene

fits, such as fewer days in the hospital and more excluded procedures, and faced

stricter rules about preexisting conditions.49 In the 1950s, the AFL determined

that "coverage for family members is found to be spasmodic and generally less

complete in scope of benefits than for employees."50 The United Steelwork ers conducted a survey of members in 1960 and found that commercial, cash

indemnity insurance benefits "covers on the average something less than 41 per

cent of total family health costs"; Blue Cross and Blue Shield paid slightly more

than 43 percent of total cost per family. Nonemployed women also risked losing any coverage if they divorced their spouse. The variations in coverage for non

workers and workers in secondary economic sectors reflected the unevenness

and inequity of this private welfare system most acutely.51

Together, insurers and employers implemented health plans that specifi

cally fit the demands of management in industrial relations rather than the ac

tual health needs of the population. While the spread of hospital insurance

among the population was striking, group insurance (and Blue Cross) still did

not cover actual care from doctors. The number of persons who had any form of



304 ILWCH, 58, Fall 2000

hospital insurance had risen from six million in 1939 to approximately seventy five million in 1950 and to ninety-one million in 1952. Yet in 1950, only twenty one percent of those covered had hospital and surgical coverage; eleven percent

had hospital, surgical, and limited medical. Less than three percent had com

prehensive medical care insurance (hospital, surgical, and complete medical).

Welfare capitalism maintained its regional disparity. In the seventeen southern

states from Delaware to Texas, only 7,622,000 people had medical coverage in

1952.52 A study by the Health Information Foundation in the mid-1950s con

cluded that over seven million families went into debt each year because of med

ical bills and "'having or not having insurance had no appreciable effect on in

debtedness' for medical care." Unions such as the UAW concluded that "the mere buying of group insurance does not mean a health security program."53

To forestall the unilateral imposition of insurance industry health care plans and pensions, the labor movement turned to the federal courts and the Nation

al Labor Relations Board (NLRB). Although the NLRB ruled in 1947 that the

refusal of General Motors to bargain over health insurance and the company's

unilateral imposition of a Metropolitan Life hospital and surgical insurance plan constituted an unfair labor practice, GM continued enrolling employees into the

Metropolitan hospital and surgical policy.54 Meanwhile, the Steelworkers had

two cases pending, one against Inland Steel regarding pensions and one against

W. W. Cross and Company regarding health and other social welfare benefits.

The NLRB ruled against the companies in both cases in 1948, declaring that all

of these benefits, as "conditions of employment" and indirect wages, were ne

gotiable. Employers, however, took their case to the US Court of Appeals, and

eventually the Supreme Court. The US Court of Appeals also ruled against the

companies, upholding the decisions of the NLRB; the Supreme Court denied

certiorari in 1949, reinforcing the Appeals Court. The following year, health bar

gaining finally commenced.55 GM and US Steel signed new contracts terminat

ing the old group contracts and adding Blue Cross.

Although these cases pried open collective bargaining somewhat, they did

not make a significant difference in the way health insurance would be dis

pensed, administered, and financed. In the early 1940s, when unions had begun

designing health plans for their members, the whole idea of prepaid health cov

erage was a novelty. Unions and liberal health care reformers saw an opportu

nity to influence the organization and delivery of medical services, not just pay ment for such services. Employers in basic industry and large-scale consumer

goods manufacturing, however, generally refused to pay unions a flat percent

age of payroll that labor could use to establish independent social welfare pro

grams. Instead, over the next decade, commercial insurance companies solidi

fied relationships with employers, gained over fifty percent of the hospital and

medical insurance market, and undercut the viability of service plans through

the spread of experience rating. Firm-based collective bargaining, in turn, chan

neled labor's health security efforts into commercial insurance contracts. Dur

ing the 1950s, the growth of cash-indemnity plans outpaced that of any other al

ternative, growing at twice the rate of Blue Cross. By 1953, commercial hospital




insurance covered fifty-one million people, or about thirty-two percent of the

American population.56

The American Medical Association (AMA) realizing they could no longer hold back the tide of voluntary insurance, coalesced around the indemnity

approach, albeit through their own institutions, the Blue Shield associations.

The AMA vehemently fought all attempts to reorganize the practice of medi

cine. They rejected prepayment group practice plans in any form?even those

run by physicians. Medical societies penalized and even expelled physicians who

participated in such plans. Instead, the AMA decided that indemnity-based in

surance, whether provided through Blue Shield or insurance companies, offered

doctors the most autonomy to determine rates and medical treatment. By the

mid-1950s, doctors and insurers had formalized their alliance by establishing the

Health Insurance Council to entrench fee-for service care through insurance and

Blue Shield.57

Although labor's vision of nonprofit, cooperative or community-based

group health programs did not materialize, powerful unions like the UAW and

the United Steelworkers did achieve some elements of the comprehensive pro

gram the UAW originally designed in the mid-1940s. General Motors paid half

the premium for Blue Cross and extended temporary disability benefits to a

record twenty-six weeks. They added surgery and other medical benefits. Steel

workers generally obtained Blue Cross over commercial insurance as well. US

Steel even picked up the tab for surgery insurance for dependents. In cities or

regions where these unions held significant community-wide power, such as De

troit and Pittsburgh, they preserved community-rating and fought to maintain

Blue Cross as a service-based plan?a strategy that benefited all members of the

community. In areas where a direct service or group practice program existed,

such as northern California, Seattle, or New York City, the UAW successfully

negotiated to enroll their members in Kaiser Permanente or the Health Insur

ance Plan of New York (HIP).58 Unions like the UAW or the Steelworkers were

large enough that they could also fulfill social-democratic functions unmet by the state. They tried to fill the gaps in social policy?the lack of a national foun

dation for universal health care?by working to create a national standard of

Blue Cross service benefits, or what they referred to as the "Auto Standard."59

But these labor-management contract benefits remained closer to employ

ment compensation and managerial employment policy than a genuine workers'

health security program, not to mention a national health care program. Despite

collective bargaining, the auto workers could not gain an equal voice with man

agement on the full administration and distribution of costs for the health secu

rity program.60 Even in the era of health bargaining, companies like General

Motors could still use private commercial insurance as a bulwark against union

power and union attempts to gain economic security. Moreover, as much as they

tried, unions simply could not overcome regional variations in benefits. And as

they were keenly aware, benefits negotiated with employers left out all those

who were not employed, such as retirees, the disabled, and family members. The

more the labor movement tried to increase the reach of employment-based ben



306 ILWCH, 58, Fall 2000

efits by negotiating new contracts with employers or expanding the range of ben

efits therein, the more they foreclosed the possibility of constructing truly com

munal health programs because health financing just became linked ever more

tightly to a firm-centered structure.

Nor could the rest of the labor movement follow in the UAW's footsteps. Indeed, the UAW represented the exception, not the model. What happened in

the electrical industry is more typical. Despite the presence of a union and the

appearance of bargaining, electrical workers could not penetrate the links be

tween their employers and commercial insurance companies, and hence, could

not obtain the health benefits they thought best for workers and their families.

Whether they were represented by the communist-influenced United Electrical

Workers (UE) or the anticommunist International Union of Electrical, Radio, and Machine Workers (IUE), the result was generally the same. General Elec

tric and Westinghouse, whose ties to Metropolitan Life and Equitable stretched

back to the early 1920s, refused to grant union requests for Blue Cross coverage or community-based group plans. At every bargaining round in the 1950s, the

companies refused to divulge the costs of the commercial plan or how much the

firm paid. They unilaterally chose the carrier, perpetuating the same group poli

cies they had had since before World War Two, in some cases since before the

New Deal, but offering some new benefits each year. Workers had to pick up the

tab for their dependents. As George Meany, president of the AFL-CIO, charged before the Senate's Special Labor-Management Rackets Committee, "the com

pany maintains 'a consistent policy of secrecy.'"61 According to the IUE, "not

only does GE keep dividends on its own contributions but also the dividends on

contributions by workers for their programs and on contributions for depen

dents on which GE does not pay one cent." Because labor representatives rarely

dealt directly with the insurance providers, workers' contributions and their

health benefits differed from town to town; every local union had to negotiate its own plan and benefits ended up being widely divergent, especially where the

unions were weak. Union leaders, wanting only to report victory in collective

bargaining, refused to admit to the membership that the commercial policies fell

far short of what they had demanded. Health benefits in the electrical industry remained nonstandardized and unequal?reflective of the situation in most of

the country.62 Ultimately, firm-based collective bargaining could not alter the

way in which health care would be organized and financed.

General Electric's Employee and Plant Community Relations Department distributed pamphlets, posters, and newsletters claiming sole company credit for

social welfare benefits and workers' security. All such benefits were said to re

sult from company generosity, not from union pressure. In fact, GE literature

argued that the union, rather than contributing to workers' welfare and securi

ty, only took from workers. In one such pamphlet, the headline boasted: "GE

Extra Benefits?IUE Extra Assessments." While union leaders would be col

lecting strike funds from workers which would go straight to Washington head

quarters, GE would be paying out in '"the dreams-come-true' area?the new

house, helping the kids go to college, retirement, and leisure." GE explicitly em




phasized that American corporations, through welfare capitalism, could meet

the demands for security more successfully than the state or the unions.63

As early as the 1950s, commercial insurers, though, had already begun to

experience a serious problem of "spiraling costs." Despite the return of divi

dends and the ostensible competition among insurance companies, premiums

never did go down. As an Equitable report on group insurance admitted, "pre

mium rates are being forced ever-upwards." Searching for cost control mecha

nisms, insurers devised a new policy, Major Medical. Covering hospital, surgical,

and medical services, Major Medical also employed the deductible and coinsur ance to force patients to control their spending on medical care. Insurance cov

erage did not activate until the patient had spent his or her own money on ser

vices up to a specified amount, the deductible. After the deductible, insurers

then split the cost of the medical bill: insurance paid seventy-five to eighty per cent of the bill while the patient paid the remainder. By making the insured pa tient take greater responsibility for expenses, insurers would control "abuse"?

which they had concluded was the main problem with health insurance.64

Major Medical spread instantly. Major Medical plans experienced thirty two-fold growth in five years. This type of health plan covered just over 500,000 individuals in 1952. By 1956, that number had grown to almost seven million, and three years later coverage reached twenty-two million. Prominent nonunion

companies such as Kodak enrolled in major medical plans, offering nonunion

ized employees the closest thing to comprehensive benefits commercial insur

ance had yet come up with. Its share of the market increased from three to thirty

two percent in four years, as mass purchasers of group insurance aspired to

obtain comprehensive coverage.65

From the moment Major Medical appeared, labor leaders across the board

disliked it?viscerally. To them, this plan clinched all the trends toward limiting services and limiting workers' control that organized labor had been struggling

against. The deductible discouraged workers from seeking minor treatment or

regular physical exams. It was paternalistic, for it allowed insurers and employ

ers to determine which services were necessary or unnecessary through control

of the deductible: the higher the deductible, the less routine care workers would

receive. Even more significantly, this policy left families without coverage for

most of their medical expenses since the bulk of the care needed by the average

person fell within the deductible range. Indeed, this form of insurance placed controls only on the consumer, in a sense punishing workers for using medical

services. Yet it left those who actually had some control over the costs?doctors

and hospitals?unhampered in setting prices.66

In fact, Major Medical's open-ended offer to pay seventy-five to eighty per

cent of any fee only intensified the inflationary effects of insurers' earlier poli cies. Even though employers offered expanded policies to their workers over the

next two decades, the dramatic surge in medical prices and premiums often un

dercut the gains. Insurers themselves soon realized the inflationary nature of the

Major Medical policy. An Equitable executive admitted to a group of insurance

representatives in 1958 that "we were enthusiastic about the potentials of this



308 ILWCH, 58, Fall 2000

new coverage and dismissed rather lightly the possible pitfalls.. . .

Today, in

sharp contrast, we find ourselves in the very sobering position of seriously ques

tioning how we can live financially with this coverage."67 And so, insurers knew

they had created a leviathan, but they refused to turn back or chart a new course.

By the mid-1950s, many unions felt Major Medical was their best chance

for approaching comprehensive coverage. Although the UAW urged unions not

to accept d?ductibles and coinsurance, many reluctantly accepted what was giv

en to them. Although sixty percent of the population had some form of private health coverage by the end of the decade, true health security remained elusive.

Fragmentation and inequality had become just as much a part of the private wel

fare system as of the public one.

Conclusion

A key factor in the development of this particular type of public-private social

welfare system in America was the strength and organized response of the com

mercial insurance sector. Forming economic and political relationships with

large corporate employers, business adeptly responded to the political demands

for security legitimized by the New Deal. Threatened by the potential expansion of the New Deal state?its regulatory apparatus, welfare support, and endorse

ment of trade unionism?American business firms acceded to the pervasive ide

ology of security in the 1940s and 1950s and provided unprecedented levels of

social welfare benefits. Yet, this rejuvenated welfare capitalism also aimed to

check the growth of a reinvigorated labor movement and the state.

Health care access in the United States remained a marketable commodi

ty whose distribution is still determined by insurers and employers. Private wel

fare benefits became more like the paternalism of an earlier age. With each

round of labor-management bargaining in the 1950s and 1960s, employers grant ed enumerated increases?adding on a few more surgical procedures, addition

al hospital days, physician's office visits, maybe coverage for eyeglasses and root

canals?within a limited framework that foreclosed labor's capacity to challenge any existing economic relationships, whether in industrial relations or the deliv

ery of health care. As long as business executives faced a countervailing weight?

unions or the state?the incentive to bargain upward remained. In the 1970s, the

tables turned and bargaining started going in the other direction; "bargaining for

security" became a downward spiral of concessions and losses. Thus, just as the

expansion of the public welfare state encouraged the growth of private benefits, so the employment-based system of social welfare benefits has, more recently,

been contracting in tandem with the public one.

ACKNOWLEDGMENT

I would like to thank Nelson Lichtenstein, Brian Balogh, Jim Berger, Sue Cobble, Joshua Free

man, Roger Horowitz, Margaret Weir, and the Five College History Seminar at Amherst Col

lege.




NOTES

1. United States House of Representatives, Committee on Ways and Means, Overview of Entitlement Programs, 1994 Greenbook (Washington, 1994), 945.

2. For the conventional narrative, see Lawrence Root, Eringe Benefits: Social Insurance in

the Steel Industry (Beverly Hills, CA, 1982), ch. 2; Robert Zieger, American Workers, Ameri can Unions, second edition (Baltimore, 1994); Beth Stevens, "Blurring the Boundaries: How the Federal Government Has Influenced Welfare Benefits in the Private Sector,11 in The Poli

tics of Social Policy, ed. Margaret Weir, Theda Skocpol, and Ann Orloff (Princeton, 1988), 123

48. Labor relations consultants in the 1960s did publish studies of collective bargaining and

health insurance as guides for other unions. See, for instance, Raymond Munts, Bargaining for Health: Labor Unions, Health Insurance, and Medical Care (Madison, 1967); and Joseph Gar

barino, Health Plans and Collective Bargaining (Berkeley, 1960). More recently, historians have

finally begun to probe the actual nature of labor's negotiated health plans: Ivana Krajcinovic, From Company Doctor to Managed Care: The United Mine Workers Noble Experiment (Itha ca, 1997); Rickey Hendricks, "Liberal Default, Labor Support, and Conservative Neutrality:

The Kaiser Permanente Medical Care Program After World War II," Journal of Policy Histo

ry 1 (1989):156-80; Joshua B. Freeman, Working-Class New York (New York, 2000), ch. 7; and

David Rosner and Gerald Markowitz, "Hospitals, Insurance, and the American Labor Move

ment;' Journal of Policy History 9 (1997):74-95. 3. Annual Report of the Social Security Board (Washington, DC, 1937), foreword. 4. While earlier historians argued that welfare capitalism met its demise during the Great

Depression, more recently Sanford Jacoby has written about the revival of welfare capitalism after the New Deal. See Sanford Jacoby, Modern Manors: Welfare Capitalism Since the New

Deal (Princeton, 1998). See also Elizabeth Fones-Wolf, Selling Free Enterprise: The Business

Assault on Labor and Liberalism, 1945-1960 (Urbana, 1994). 5. "Opening of the Equitable Garden of Security at the New York World's Fair," Supple

ment to Equitable Agency Items, May 29, 1939, Thomas Parkinson Papers, RG 4, Secretary's

Department?Historical Collection, box 20c, folder 7, Equitable Life Assurance Society Archives (hereafter ELAS).

6. William Haber, "Pensions and Collective Bargaining," in The Law and Labor Manage ment Relations, Wilbur Cohen Papers, MSS 789, box 249, folder 1, State Historical Society of

Wisconsin (hereafter SHSW); National Association of Manufacturers, "Suggested Resolution on Greater Security Through Employee Benefit Programs For Consideration of Resolutions

Committee," October 14, 1948, National Association of Manufacturers (NAM) Papers, Ace.

1411, box 105, Hagley Museum and Library. 7. Thomas Parkinson, President, Equitable Life Assurance Society, "Are Life Insurance

Company's Pikers?," Bond Club Speech reprinted in The Underwriter Review (May 1943), His

torical Collection: Thomas Parkinson Papers, ELAS.

8. The National Underwriter (Life Insurance Edition), November 20, 1942, 27; The Spec tator: The Business Paper of Insurance, January 24, 1935, 15; The Spectator, October 31, 1935,

16; W. R. Williamson, Actuarial Consultant, to Corson, Falk, Cohen, Stern, Social Security Board, October 12,1940, Social Security Board Papers, RG 47, box 23, File 050.111, National

Archives. Martha Derthick, Policymaking for Social Security (Washington, DC, 1979), 136-42.

9. N. E. Horelick, Director of Group Annuities, to All Sales and Service Staff of the Group

Department, Subject, "Revised Social Security Act," September 19,1939, and William J. Gra

ham, Vice President, to Our Group Patrons, October 27, 1939, both in Group Insurance Re

search Division, RG 4, Secretary's Department-Historical Collection, Ace. 84-50, box 35A, folder 4, ELAS; William Graham, "Notes on a Group Annuity Retirement Plan To Supplement

The Federal Old Age Benefits of the Social Security Act," 1935, William J. Graham Papers, RG

4, Secretary's Department-Historical Collection, Ace. 84-50, box 18D, folder 1, ELAS; and

"Social Security," A Radio Address Delivered by William J. Graham, December 17, 1936, William J. Graham Papers, box 18, folder 2, ELAS.

10. The National Underwriter, December 4,1942, 12.

11. The National Underwriter, March 19, 1943, 1. The sale of group policies also received a boost from the Revenue Act of 1942, which stipulated that employers could only get tax ex

empt status on benefit fund monies if they offered the plan to seventy percent of the work force.

See Christopher Howard, The Hidden Welfare State: Tax Expenditures and Social Policy in the

United States (Princeton, 1997), ch. 6.

12. The National Underwriter, March 19, 1943, 2; and The National Underwriter, July 16,

1943,6.



310 ILWCH, 58, Fall 2000

13. The National Underwriter, April 3, 1942, 27.

14. The Spectator, August 1942, 16, 18; Lizabeth Cohen, Making a New Deal: Industrial

Workers in Chicago, 1919-1939 (New York, 1990). 15. "Local Initiatives for Organized Medical Care: A Chicago Symposium," Medical Care

1 (1941):157?65. For further discussion, see Jennifer Klein, Managing Security: The Business of American Social Policy, 1910-1960 (Princeton, forthcoming), ch. 4.

16. Helen Baker and Dorothy Dahl, Group Health Insurance and Sickness Benefit Plans

in Collective Bargaining (Princeton, 1945), 11-17 and Appendix B; Robert William Dvorsky, "The Development of Negotiated Health Insurance and Sickness Benefit Plans of the Steel,

Automobile, and Electrical Equipment Industries" (Ph.D. diss., University of Pittsburgh,

1956), 91; Walter Reuther to UAW International Executive Board, January 16,1945, UAW Sec

retary-Treasurer's Office: Emil Mazey, Ace. 52, Series 3, box 15, folder 2, Walter P. Reuther Li

brary, Wayne State University (hereafter WPR Library); National Ford Department to All

Ford Local Unions, July 7, 1948, UAW President s Office: Walter Reuther, box 97, folder 2, WPR Archives; and Jennifer Klein, "Managing Security: The Business of American Social Pol

icy, 1910s-1960," (Ph.D. diss., University of Virginia, 1999), ch. 4.

17. Hubert Person, President of Medical Service League of California, to the American

Federationist, December 21, 1942, American Federation of Labor Papers, MSS 117A, Series

8E, box 3, file: Hospitalization and Health, SHSW; Paul Starr, The Social Transformation of American Medicine (New York, 1982), 320-327; Raymond Munts, Bargaining for Health: La

bor Unions, Health Insurance and Medical Care (Madison, 1967), ch. 2; Health Benefit Plans Es

tablished Through Collective Bargaining, Bulletin No. 841, United States Bureau of Labor Sta

tistics, August 1945 (Washington, DC, 1945); and Rosner and Markowitz, "Hospitals, Insurance, and the American Labor Movement."

18. Harry Becker to Walter Reuther, "Notes on the Social Security Department," Febru

ary 27,1948, President's Office-WPR, box 160, folder 6, WPR Library; Harry Becker, Interview, Columbia University Oral History Research Project, Social Security Project, November 21,

1967, pages 18, 5-7, 13, and 24-27; Gerald Markowitz and David Rosner, "Seeking Common

Ground: A History of Labor and Blue Cross," Journal of Health Politics, Policy, and Law 16

(1991):704; and Florence Thorne to Martin Segal, June 21, 1946, AFL-Research Department, MSS 117A, Series 8A, box 15, folder: Health Ins. Plan, State Historical Society of Wisconsin.

19. Alan Derickson, "Health Security For All?," Journal of American History March

1994):1345; and Nelson Lichtenstein, "From Corporatism to Collective Bargaining: Organized Labor and the Eclipse of Social Democracy in the Postwar Era," in The Rise and Fall of the

New Deal Order, 1930-1980, ed. Steve Fraser and Gary Gerstle (Princeton, 1989), 143. For or

ganized labor's continued efforts on behalf of national, public health insurance, see Derickson.

20. Munts, Bargaining For Health, 25, and ch. 10; Alan Derickson, "The United Steel

workers of America and Health Insurance, 1937-1962," in American Labor in the Era of World

War II, ed. Sally M. Miller and Daniel A. Conford (Westport, Connecticut, 1995), 74-75; Rick

ey Hendricks, "Liberal Default, Labor Support," 168-72; William Glaser, Health Insurance in

Practice: International Variations in Financing, Benefits, and Problems (San Francisco, 1991), 21; and The National Underwriter, March 26,1948; National Ford Negotiating Committee, Ford

UAW-CIO Workers Security Program, Part II: Health Security Program, July 1949, UAW So

cial Security Department Papers, Ace. 317, box 60, folder 5, WPR Library. 21. United States Senate, Subcommittee on Education and Labor, Hearings: Wartime

Health and Education, S. Res. 74, 78th Cong., 2nd sess., pt. 6, Testimony of George F. Addes,

Secretary-Treasurer, UAW-CIO, March 1-2, 1944, 1995; and Andrew J. Beimiller, "Medical

Care for Wage Earning Groups," American Federationist, September 1938, 1057.

22. The Eastern Underwriter, May 17, 1940.

23. United States Senate, Committee on Labor and Public Welfare, Health Insurance

Plans in the United States, Report no. 359, 82nd. Cong., 1st session, 1951 (hereafter, Senate, Health Insurance Plans, 1951); and Joe Swire to Gordon Parker, September 28, 1955, Interna

tional Union of Electrical Workers (IUE) Papers, RG 1, Secretary-Treasurer's Office, Swire

Files/Correspondence, box 2107, folder 13, Rutgers University Archives.

24. Fitzmaurice to Joe Swire, October 14, 1953, IUE Papers, RG 1, Secretary-Treasurer's Office, Swire Files/Research, box 2210, folder 6, Rutgers University Archives.

25. United States Congress, House of Representatives, Committee on Interstate and For

eign Commerce, Health Inquiry: Hearings Before the House Committee on Interstate and For

eign Commerce, Part 6, 83rd Cong., 1st sess., January 12,1954,1776 (hereafter, Health Inquiry:

Hearings).




26. Howell J. Harris, The Right To Manage: Industrial Relations Policies of American Busi ness in the 1940s (Wisconsin, 1982); Robert Griffith, "Forging America's Postwar Order: Do

mestic Politics and Political Economy in the Age of Truman," in The Truman Presidency, ed.

Michael J. Lacey (Cambridge, 1989), 57-88; Fones-Wolf, Selling Free Enterprise, passim; Nel son Lichtenstein, The Most Dangerous Man in Detroit: Walter Reuther and the Fate of Ameri can Labor (New York, 1995), ch. 13; Nelson Lichtenstein, "Taft-Hartley: A Slave-Labor Law?," Catholic University Law Review 47 (1998):763-789; and David L. Stebenne, Arthur J. Gold

berg: New Deal Liberal (New York, 1996), ch. 3.

27. Walter Chamblin, National Industrial Council Speech, NAM Papers, Ace. 1411, 100

yy, box 226; National Association of Manufacturers, "Suggested Resolution on Employee Ben

efit Programs," November 30,1948, NAM Papers, Ace. 1411, box 105, Hagley Museum and Li

brary (HML); Business Week, May 13, 1950; National Association of Manufacturers,

"Employee Benefit Programs" (New York, 1947), Hagley Museum and Library; R. T. Comp ton to National Industrial Council, February 15, 1949, NAM Papers?NIC, Ace. 1411, 100-yy,

box 226, Hagley Museum and Library; and Derthick, Policymaking for Social Security, 245.

28. American Economic Security: The Business Journal of Social Security, published by the

Chamber of Commerce of the United States of America., vol. Ill, no. 6 (August-September 1946), 1; Statement of Andrew Court, on behalf of US Chamber of Commerce, US Congress, Senate, Committee on Education and Labor, A Bill to Provide for a National Health Insurance

Program: Hearings Before the Committee on Education and Labor, Part IV, 79th Cong., 2nd

sess, May and June 1946, 2339.

29. National Association of Manufacturers, "Minutes of the NAM Labor-Management Relations Committee," March 20,1947, New York City, NAM Papers, Industrial Relations Di

vision, Ace. 1412, box 3, Hagley Museum and Library. 30. US Senate, Health Insurance Plans in the United States, 1951, 26.

31. Outstanding American Companies Insuring Their Employees Through Equitable (New York, 1946), RG 4, Insurance Affairs/Group Operations, Ace. 82-45, box 2A, folder 5, ELAS;

Dvorsky, "The Development of Negotiated Health Insurance"; Derickson, "The United Steel

workers of America and Health Insurance," 74. Sanford Jacoby shows how nonunion compa nies were willing to spend extraordinary amounts of money on welfare benefits to stave off

unionism?often more than they would have had to spend had they been negotiating with a

union. See Modern Manors, ch. 2-5.

32. Dvorsky, "The Development of Negotiated Health Insurance," 32; and The National

Underwriter, April 29, 1949.

33. NAM, "Minutes: NAM Labor-Management Relations Committee," March 20, 1947, 4; "Summary of War Labor Board Decisions Affecting Management Functions," 1945, NAM

Papers, Ace. 1412, box 3, Hagley Museum and Library. 34. The National Underwriter, August 27,1943, 3; The Spectator, September 1943, 64.

35. "Claims Expense Limitation," RG 4, Ace 84-50, box 3, Insurance Affairs, n.d., ELAS; "Tailored to Fit," 1953, Subject Files (S.F): Group Insurance, box 19 06 04, Metropolitan Life

Insurance Company Archives (hereafter MLIC); "Employee Security Founded On Group In

surance Safeguards Employee Morale and Loyalty," 1952, S.F: Group Insurance, box 19 06 04,

MLIC; Statement of Charles Hill, Health Inquiry: Hearings, part 5, October 13, 1953,1236. 36. "Group Insurers Fail to Cultivate Labor Properly," The National Underwriter, April

15, 1949, 1; The National Underwriter, April 23, 1948.

37. David McDonald, Secretary-Treasurer of United Steelworkers, to All District Direc

tors and Staff Representatives, March 2, 1951, Philip Murray Papers, Coll. 5, box A4-94, Catholic University Archives.

38. Health Inquiry: Hearings, part 6, January 12, 1954. 1675.

39. Joe Swire to Jim Parker, March 11,1958; Swire to Gordon Parker, September 28,1955, IUE Papers, RG 1, Swire Files/Correspondence, box 2107, folder 13, Rutgers; Swire to James

Carey, November 24, 1954, IUE Collection: President's Office?Staff Memoranda, RG 1, box

2015B, File: Swire, Rutgers University; Munts, Bargaining For Health, 84.

40. Dvorsky, "The Development of Negotiated Health Insurance," 118; Group Insurance

Department, Fifty Representative Examples of Equitable Low Cost in Group Life Insurance:

"Our Cost is Your Cost" (New York, n.d.), Ace 82-45, box 3, Policyholder File-Sales Ads, ELAS; "Memorandum to Dave Lasser: Statement for Carey for Atlanta Conference," Febru

ary 27,1957, IUE Papers, RG 1 Secretary-Treasurer's Office. Swire Files/Correspondence, box

2109, folder 16, Rutgers. 41. Joe Swire to James B. Carey, "Cost Factors in GE's Insurance and Pension Programs."



312 ILWCH, 58, Fall 2000

March 1,1955, IUE Papers, RG 1, Swire Files, box 2108, folder 30; Memo to Dave Lasser; Joe

Swire to Jim Parker, March 11,1958, box 2107, folder 13, Rutgers. 42. Westinghouse Electric Corporation, "Social Insurance Plan For Employees," Effec

tive November 1, 1950, IUE Papers, RG 1, Conf. Bds and Negotiations/Westinghouse, box 6, folder 44, Rutgers.

43. Lane Kirkland, "Service versus Indemnity Plans," A Speech Before the Health and

Welfare Plan Conference, California State Federation of Labor, Santa Barbara, CA, July 22,

1957, Nelson Cruikshank Papers, M66-15, box 24, File: CA, SHSW

44. Munts, Bargaining For Health, 136-37; Lane Kirkland, "Service versus Indemnity Plans"; Starr, The Social Transformation, 330.

45. Leroy A. Lincoln, President of Metropolitan Life, to Jul B. Baumann, National Asso

ciation of Life Underwriter, October 31, 1947, reprinted in full in The Spectator, November

1947,8; "Metropolitan Supports NALU Position on Mass Coverages," The Insurance Field, No

vember 11,1947, Subject Files (S.F.): Group Insurance, box 19 06 04, MLIC; The National Un

derwriter, October 15,1948, 2; "Meany Charges Firms Misuse Welfare Funds," New York Her

ald Tribune, June 12, 1957, S.F.: box 19 06 04, folder 2, MLIC; US House of Representatives, Health Inquiry, part 5, October 13-14,1953, 1182-83.

46. W. J. Graham, "The Contribution of Group Insurance to American Family Solidari

ty," The Weekly Underwriter, May 10, 1947, 53, Historical Collection: William J. Graham Pa

pers, Ace. 84-50, box 18D, folder 1, ELAS. On statistics of coverage, see Robert D. Eilers and

Robert M. Crowe, Group Insurance Handbook (Homewood, Illinois, 1965), 66. On average,

group policies accounted for sixty-six percent of the people who had commercial health insur ance coverage.

47. "Group Insurance At a Glance," The Equitable Life Assurance Society, Group Dept.,

August 1946, RG 4, Ace. 84-50, box 2A, folder 5, ELAS.

48. Note, of course, the use of the 1920s term "American plan." William Graham, "Social

Security," Radio Address Delivered to the 64th Annual Meeting of the New York Board of

Trade, Inc., December 17, 1936, Graham Papers, Ace. 84-50, box 18D, folder 2, ELAS.

49. E. Richard Weinerman, M.D., "The San Francisco Labor Council Survey: Labor Plans

For Health, Summary of Findings and Recommendations," June 1952, Labor Health and Wel

fare Series, Committee for the Nation's Health, Cruikshank Papers, M66-15, box 5, SHSW.

50. Nelson Cruikshank, "Labor Looks at the Problem of Health Services," October 1952, Nelson Cruikshank Papers, M66-15, box 11, file: Pr?s. Commission, SHSW.

51. United Steelworkers of America, Special Study on the Medical Care Program for Steel

workers and Their Families, A Report by the Insurance, Pension, and Unemployment Benefits

Department (September 1960), 7,96-97,10; Charlotte F. M?ller, Health Care and Gender (New York, 1990), ch. 4; Alice Kessler-Harris, Out to Work: A History of Wage Earning Women in the

United States (New York, 1982), 301-03; Marcia Bayne-Smith, ed., Race, Gender, and Health

(Thousand Oaks, CA, 1996); Colin Gordon, "Why No National Health Insurance in the U.S.," Journal of Policy History 9 (1997):277-310.

52. US Senate, Health Insurance Plans in the U.S., 1951, page 2; US House of Represen tatives, Health Inquiry: Hearings, October 1953, 1181.

53. George Baehr, M.D., "Group Health Plans?Organized Labor's Stake in Voluntary Health Insurance," reprinted in 1954 issue of Connecticut Federationist, Cruikshank Papers, box 5, SHSW; The National Underwriter, May 3, 1946; The Spectator, July 1947, page 12; The

National Underwriter, June 4, 1948, 3; Ford UAW-CIO, Workers Security Program, Part II:

Health Security Program, 1949, IV-1, WPR Library. The Steelworkers' 1960 study confirmed

these findings; see United Steelworkers of America, Special Study on the Medical Care.

54. C?O News, January 26,1948, George Meany Memorial Archives; The Insurance Field, November 28, 1947, S.F.: Group Insurance, box 19 06 04, MLIC; Dvorsky, "The Development of Negotiated Health Insurance." 120-22.

55. The National Underwriter, December 17,1948; April 23,1948; and June 25,1948. W. W.

Cross & Co. v. National Labor Relations Board (United Steelworkers of America, CIO, et al.), US Court of Appeals, First Circuit, 174 F. 2d, 875; Inland Steel Co. v. National Labor Relations

Board (United Steelworkers of America, CIO, et al.), US Court of Appeals, Seventh Circuit, 170 F. 2d, 247.

56. Eilers and Crowe, Group Insurance Handbook, 66; United States House of Repre sentatives, Health Inquiry: Hearings, Part 5, Testimony of Edmund Whitaker, Prudential In

surance Co. Of America, pp. 1199-1207.

57. Starr, The Social Transformation of American Medicine, 306-310; "The Work of the




Health Insurance Council in Group Insurance," April 16,1959, RG 4, Insurance, Affairs/Group

Operations, Ace. 82-45, box 3, Policyholder Files, ELAS; UAW, "Resolution: Hospital and

Surgical Plans," September 20, 1958, UAW Social Security Dept., box 8, folder: Ford BC/BS, WPR Library. By 1960, independent group practice (service-based) plans covered only 4.5 per

cent of the insured population. See Garbarino, Health Plans and Collective Bargaining, 17-19.

58. Dvorsky, "The Development of Negotiated Health Insurance," 122-44, 149; Ford

UAW-CIO Workers Security Program, National Ford Department, UAW-CIO, June 1949, UAW Social Security Department, Walter P. Reuther Archives, Wayne State University; David C. Jacobs, "The UAW and the Committee For National Health Insurance: The Contours

of Social Unionism, "Advances in Industrial and Labor Relations 4 (1987):122; "U.S. Steel Sup

plementary Insurance Agreement," July 12, 1951, Murray Papers, Coll. 5, box A4-94; "Beth

lehem Insurance Agreement Dated Jan. 12,1950, as Amended Aug. 3,1951," box A4-94; "U.S.

Steel Company Insurance Agreement and Memo, Joint Committee on Insurance and Pensions

to Employees," July 24, 1951, box A4-94, Catholic University Archives; United Steelworkers

of America, Special Study on the Medical Care; Derickson, "The United Steelworkers," 69-85;

Hendricks, "Liberal Default, Labor Support." 59. Ken Bannon to All Representatives Servicing Ford Plants and Ford Local Unions, RE:

Hospital and Surgical Plans, January 27, 1956, and September 7, 1955, UAW Social Security

Dept., series II, box 8, folder: BC/BS, 1955-59; "Chronological History of the Efforts to De

velop a Service Type Program in the Chattanooga, TN Blue Shield Plan," November 7, 1963, UAW Social Security Dept., box 8, WPR Library.

60. Munts, Bargaining For Health, 71,102-103; Negotiator's handwritten notes, UAW Pa

pers, Social Security Dept., box 8, Folder: BC/BS, 1960-3, WPR Library. 61. "Meany Charges Misuse of Welfare Funds," New York Herald Tribune, June 12,1957,

MLIC; IUE-News, February 6, 1950, February 20, 1950, and July 3, 1950; Dvorsky, "The De

velopment of Negotiated Health Plans," 150-57; includes memo, IUE to GE, April 5,1955. 62. "Social Insurance Plan for Employees," Westinghouse Electrical Corporation, No

vember 1,1950, IUE: Conference Board Papers, RG 1, box 6, folder 44; Notes on Westinghouse

negotiations, n.d., box 6, folder 44; Benjamin Sigal to James Carey, May 29, 1950, memo on

Westinghouse negotiations, IUE: Conference Bd. papers, RG 1, box 6, folder 44; Dvorsky, "The

Development of Negotiated Health Plans," 176-188; Swire to Spencer, December 5,1956, and

Swire to Jim Parker, March 11,1958, both in Swire Files, box 2107, folder 24; Swire to Bill Brady, November 7,1957, Swire Files, box 2104, folder 8; Swire to Dave Lasser, February 27,1957, box

2109, folder 16, Rutgers. 63. GE Employee Relations News Letter, "GE Extra Benefits ?IUE Extra Assess

ments," May 16,1955, NAM Papers, Ace. 1412, Industrial Relations Dept., box 22, Hagley Mu

seum and Library. 64. "Claims Expense Limitation: A Vital Feature of Equitable Group Insurance," n.d.,

Equitable Papers, RG4, Insurance Affairs/Group Operations, Ace. 82-45, box 3, Policyhold er Files, Speeches-General, ELAS; Ray McCullough, Associate Group Underwriter, "Com

prehensive Major Medical Expense?Its Problems and Prospects," Speech at the Group Rep resentatives Club of Atlanta, October 6, 1958, Ace. 82-45, box 3, ELAS; A. C. Campbell,

Metropolitan Vice President, to All Group Representatives, RE: Group Extended Medical Ex

pense Insurance, 1951, S.F: Group Insurance, box 19 06 04, MLIC.

65. Eilers and Crowe, Group Insurance Handbook, 65; Herman R. Somers and Anne R.

Somers, Doctors, Patients, and Health Insurance (Washington, DC, 1961), 383.

66. Walter Reuther, "Statement on Michigan Blue Cross Rate Increase," December 28,

1955; Leonard Woodcock et al, To All Michigan Local Union Presidents, November 12,1954, both in UAW Social Security Dept., Ace. 317, box 6, folder: Blue Cross/Blue Shield Rates 1955,

WPR Library; Testimony of Cruikshank, Health Inquiry: Hearings, January 1954, page 1673; Somers and Somers, Doctors, Patients, and Health Insurance, 383-86; Testimony of I. Walter

Abel and David McDonald of the Steelworkers, Joseph Childs of the United Rubber Workers, John Edelman of the Textile Workers Union, IAM officials, and Jerry Voorhis of the Health

Insurance Federation of American, who all denounced d?ductibles and coinsurance, in Health

Inquiry Hearings, 1954; Joe Swire to Charles Spencer, December 5, 1956, RG 1, Swire Files, box 2107, folder 24; Swire to Brady, November 7,1957, box 2104, folder 8, Rutgers; Lane Kirk

land, "Service Plans vs. Indemnity Plans," 11.

67. Ray McCullough, "Comprehensive Major Medical Expense?Its Problems and

Prospects," Hist. Coll: Insurance. Affairs/Group Operations, box 3, Policyholder Files?Speech es, October 6,1958, ELAS; and Somers and Somers, Doctors, Patients, and Health Insurance, 386.



wartime economies and the mobilization of labor || the business of health security: employee health...

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