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

John E. Murray examines the history of workplace-based union and mutual assistance arrangements for insuring American wage earners against the costs of sickness for the purpose of understanding the interplay among voluntary sickness insurance, the failure of state health insurance, and the rise of commercial group health insurance in the United States. While voluntary arrangements like the industrial sickness funds have been criticized as deficient by Progressive-era reformers pushing for state insurance and by contemporary scholars, Murray concludes that “at least until the end of the Progressive Era . . . industrial sickness funds served the workers who belonged to them well” (p. 203). By extension, as part of a wider network of voluntary insurance arrangements, Murray argues that there must have been insufficient demand for government insurance during the American Association for Labor Legislation compulsory health insurance movement between 1914 and 1920.

Murray shows that the contract available through establishment funds provided coverage that at least matched what was available to workers through public insurance in the United Kingdom and Germany. Murray also demonstrates, with cross-sectional regression analysis, that high levels of savings were correlated with lower probabilities of belonging to a voluntary insurance arrangement, suggesting that self-insurance was a substitute for insurance contracts purchased through voluntary organizations. Next, Murray seeks to establish that these organizations were important precursors to the commercial group health insurance arrangements that he contends supplanted these sickness funds. Murray shows that the size of the aggregate membership and financial health of the industrial sickness funds were stable through the Depression but that their memberships plummeted after World War II. Murray interprets the postwar decline as having been caused by the rise of actuarially superior commercial group plans in the market.

Murray’s careful and detailed study of the operations and financial conditions of the industrial sickness funds is the strength of the book and an important contribution to the literature on mutual assistance and the history of health insurance. Murray’s extension of these positive findings into an assessment of the significance of the establishment funds for the failure of the Progressive-era health insurance movement is well done, but his conclusions are more suggestive than definitive due to his focus on one particular class of voluntary insurer.

The industrial establishment funds that are this book’s subject are not obviously representative of the supply side of the sickness insurance market during and after the Progressive era, and they were not a particularly large part of the supply. The funds that Murray studies were a ninth of the aggregate membership size of the nonworkplace-based fraternal/friendly society arrangements. Whereas Murray shows numerical stability of workplace-based insurer aggregate membership until World War II, the numerical decline of friendly society sickness insurance was underway by the 1920s. Although Murray seeks to explain a post–World War II decline in voluntary sickness insurance with the development of actuarial knowledge and pricing of commercial insurers, this cannot explain the withdrawal of friendly society insurers from the market that dates from the 1890s, well before the rise of commercial group health insurance. Given the similarity of the financial arrangements and operations of workplace-based funds and friendly insurers, it is unlikely that the establishment funds were financially superior, even with employers contributing to the funds.

Murray’s optimistic assessment of the workplace-based sickness funds is necessary, but not sufficient, evidence to refute the common view in the literature on the history of health insurance that voluntarism was a failed way to address the economic security of wage earners. Progressive-era reformers acknowledged that voluntary funds worked well for the better paid of the wage-earning classes, but the funds failed in terms of extending stable coverage to the numbers of low-wage earners who were most in need. As such, the competent operations...