Origins of American Health Insurance: A History of Industrial Sickness Funds (review)

In this book, Murray presents a thorough history of industrial-sickness funds and explains why these funds were able to persist in the face of efforts to replace them with publicly provided insurance. The programs that Murray examines were not comprehensive health-insurance plans. Rather, they were funds, sometimes firm-specific and sometimes union-specific, that paid a cash benefit to workers who were physically unable to work for a period of time. The purpose of these programs was not “to leave the worker and his family whole” but to keep them “out of the poor house” (7). The benefits provided amounted to a portion of the worker’s pay, usually about half.

According to Murray, Progressive reformers of the time felt that industrial-sickness funds were small and inadequate but that public provision of health insurance for workers was nonetheless thwarted by the political maneuverings of powerful interest groups. Although this view has shaped most of the history written about industrial-sickness funds, Murray argues that it is wrong. He presents evidence that as many as 9 million workers (about 40 percent of all nonagricultural workers) were covered by sickness funds in the 1910s. This figure is several times larger than the less-formal estimates on which some historians have relied. Murray also argues that the standard view does not place sufficient emphasis on the initiative of the workers themselves. Many of them (especially the young, who were healthy, and the old, who had savings) chose not to participate in sickness funds because it was not in their interest, and they were unlikely to find public-insurance programs any more attractive.

Murray recognizes that efforts by the American Association for Labor Legislation (aall) to create public programs of this nature met resistance from several powerful interest groups, including physicians, commercial insurance companies, unions, and employers. Yet, he argues that these groups did not prevent the implementation of public programs that workers desired; workers, in fact, were not supportive of these public-insurance proposals either. Murray notes that a 1918 California referendum to create public insurance failed resoundingly. He also cites survey data from New York showing essentially no support among workers for public-insurance proposals in that state. Murray uses econometric evidence to demonstrate that the medical benefits incorporated into aall proposals probably made them less appealing to workers. For a given premium, workers preferred higher benefits and longer benefit periods to medical care, which they felt to be ineffectual.

Murray provides an engaging and readable history of a neglected set of institutions, combined with a vigorous (but fair) argument about how some scholars have misunderstood the operation of these funds. He draws evidence from both qualitative historical records and econometric analysis, though in the latter case, he is careful to place the statistical work in service of the historical argument rather than the other way around.

In a few areas the evidence seems inadequate to the task asked of it. For instance, in discussing low rates of fund participation by older workers, Murray shows that older workers who were not members of funds were more likely to have savings than were older fund members and that their average level of savings was greater than that of older fund members. However, only a small minority of these older non-members, less than one-quarter, held any savings at all, and their average savings would not have provided many weeks of support at the level that funds could provide (Table 7.6, 166). Hence, the expected difference (higher savings among non-members) is present, but its magnitude is small, making Murray’s argument less persuasive. Such instances of insufficient evidence, however, are rare.

Although the sickness funds that Murray examines differ substantially from the health insurance of today, his analysis has important implications for current policy debates. Murray suggests that a stronger case can now be made for government involvement in the provision...