Why was US healthcare tied to employment in the first place?

UPDATED: May 10, 2017

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Asked May 10, 2017

1 Answer

Health care funding and employment have been tied together for centuries. It was not uncommon for employers, even in ancient times, to pay for the medical treatment of valued workers. Unfortunately, this was always elective. If a worker became chronically ill, the employer would routinely either stop paying for treatment, or discontinue an employment agreement.

The modern notion of employer-provided health insurance comes from the WWII era. In an effort to combat consumer and manufacturer inflationary prices, along with the threat of multi-industry nationwide strikes, the government made concessions with employers. Under pressure from labor groups, employee healthcare costs covered by employers was incentivized. The government made employer-provided healthcare an exemption from new mandatory income taxes. Employee health benefits were also exempted from wage controls, which meant employers had a new freedom in avoiding across-the-board and union-mandated wage hikes. By the end of the 1940s, almost every major industry in the United States adopted some form of program for providing health benefits to employees. This was mutually beneficial. Employees no longer paid healthcare out-of-pocket, employers avoided taxes, and a new health insurance sector was born.

Answered May 11, 2017 by PageIns

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