Sickness Insurance, January 10, 1914



Your committee on sickness, invalidity and old age insurance decided to first study sickness insurance. No plan of invalidity insurance is possible without an accompanying plan of sickness insurance which would make it possible to treat at their inception illnesses or accidents from which develops invalidity. The importance of old age insurance is very small in comparison with the importance of protection against sickness, both because of the greater extent of the problem and because of the less satisfactory means of meeting it at present available. The results of the study, which were possible with the brief period and the small funds available, were the conclusions that sickness insurance is a live topic in the United States; that its installation on the plan proposed by the committee would probably not result in an increase to employers in the manufacturing industry of more than one-half of one percent <of cost of product;> that the employees are already spending for sickness and burial more than enough to cover their share of the cost [illegible] that the idea of compulsory insurance is not a novel one, as many employees in the United States are now under practically compulsory sick insurance; that many employers are now contributing to sickness insurance for their employees; that effective health insurance for the nation cannot be accomplished except by some form of compulsory sickness insurance. The study shows further that much work must be done in the important details of the plan before a sickness insurance law can be drafted with proper reference to conditions in the United States, and that it is certain that even when all possible sources of information have been exhausted there will still remain a large amount of information in regard to economic conditions in the country which will have to be obtained through public commissions. [page 2]

The committee annexes a tentative schedule of broad standards of legislation and a draft of a plan for an organization to administer the insurance, but it emphasizes the point that information is not now available as to American conditions which should be before the drafter of a law. Your committee, therefore, recommends:

(1) That the resolution introduced into Congress by Congressman Kelly be pushed at the next session, with more precise directions as to the points to be studied by the commission to be appointed;

(2) That resolutions be introduced in the state legislatures to provide for commission of inquiry on sickness insurance or on social insurance;

(3) That, subject to careful consideration by the Congressional committee and the heads of departments in the Service, a bill be drafted to provide a system of compulsory sickness insurance for interstate railways and extending sickness insurance to seamen in interstate and foreign trade;

(4) That persons from the coal mining states be consulted as to the advisability of drafting a law providing for compulsory sickness insurance of coal miners.

The 1st and 2nd recommendations are to call attention to sickness insurance as a possibility of the near future, and especially to develop the points which should be discussed and upon which information should be gathered. Recommendation (3) is based on two considerations: (1) that interstate and foreign carriers are under Federal jurisdiction and should be governed by a Federal law uniform in operation over the whole country; (2) that the railroads especially present the best field for the trial of sickness insurance in America. Recommendation (4) is made because of peculiarly favorable conditions in coal mining for the application of the system to industry whether by state or by Federal legislation.

The railroads are the best field for the trial of sickness insurance. As has been said, your committee does not believe that the cost of sickness insurance is an important factor, but even if it should be so considered, the [page 3] rates of the railways can be raised at any time by the Interstate Commerce Commission, so that the cost may fall upon the public, where it should ultimately rest. The business of railroading is fixed in locality and is permanent; the employees are in the main, to a large extent, a permanent body of men who remain in the railroad employ all their lives, so that the element of the migratory workman is not here as important as in manufacturing. But more important still, practically compulsory insurance is now and has long been an accomplished fact on many railroads, on enough, at least, to make it a well known experience for a railroad man to be docked a certain amount every month for a sickness and accident or hospital fund, and a well known experience for a railroad company to pay, either by assuming the charge of the operating expenses of the fund or as a direct contribution, a share in the cost of the sick care of its employees. This compulsory insurance grew so common that laws have been passed in many states to prevent it, but a system of mild compulsion by contract or by large inducement offered appears to be still very common, and compulsion is not even now unknown. The men and the companies in many of the funds, notably in the great Baltimore and Ohio and Pennsylvania Associations, have become accustomed to joint management through long years of experience, and they have also, undoubtedly, created an experience of sickness and death on which contributions could be calculated as well as an experience of operation which would serve as a guide to the drafter of legislation.

There are two reasons for proposing such a law at present. One, is the imminent passage of the Sutherland Bill, which will put upon the railroads the whole burden of compensating accidents in the course of employment. At present, accidents and sickness are cared for out of a common fund, from which accidents are usually more highly compensated than sickness, and in the upkeep [page 4] of which the railroad is vitally interested, because an injured employee who desires to be cared for by the fund and to draw its sick pay must agree not to sue the railroad. When this method of avoiding damage suits will be of no more avail to the railroads, it may be questioned if the sick benefit associations will receive contributions from the companies or if their existence and increase will be energetically fostered. If the companies lose interest, these large and powerful associations will, probably, rapidly or gradually dissolve into small sick clubs or disappear altogether, and the great benefits which employees should get from a large unified fund, with the power of number as a basis for safe, cheap and efficient insurance, will be lost. The public is sufficiently interested in the health of body and peace of mind of the man whose [slightest] error may send a trainload of passengers into destruction, to demand that this powerful agency for the protection of that calmness and poise which comes from health, should not be allowed to pass away.

The report of the Commissioner of Labor for 1908, in Workmen's Insurance and Benefit Funds in the United States, Chap. 3, Railroad Benefit Funds, shows that the only funds which contain a large proportion of the employees are those in the management of which the company is associated. Chap. 5 describes certain railroad hospital funds, in all but one of which the employees are obliged to become members, and, as in the excepted case, practically all employees are members, the inference is fair that they are strongly influenced to join. It seems evident that the aid of the company or some outside compulsion is necessary if these associations are to be kept up.

Secondly, if in many cases the men and the directors of the companies jointly manage the associations, in some benefit associations and in almost all, perhaps all hospital funds, the men have no voice. They are docked for contributions; they are cared for when sick; but they have no seat in the [page 5] committee which disposes of the money and passes on the accounts. It would be surprising if there were not much dissatisfaction when those who pay have no voice in the disposition of the funds and do not even pass on the accounts. Legislation providing for joint control, fixing a legal minimum of contributions and benefits, regularizing the character of the funds without taking from them their flexibility, and providing for transfers from one fund to another, so that a man should not be bound to his job by the money he has paid for benefits, would seem justifiable in the interests of railroads, their employees, and the public. The preservation, extension and improvement of mutual sick insurance is in the interest of the railroads, in securing to them the services of healthy men, and in enabling them to detect more easily sickness and in disposing of any element of sympathy in allowing a man to go on duty, so that he may earn his wages, since the men will be sure of sick care and sick pay, thus doing away with the chance of a man in poor physical condition being at an important spot at an important moment. It is in the interest of the men, as they will secure medical care and sick pay cheaper and better than by any other method. It is in the interest of both men and railroads, as it will give an opportunity of contact for a joint concern and not to settle a dispute. It is in the interest of the public, which will be assured of greater safety in traveling, and if the German experience is to be believed, profit by the better relations between men and railroads as a result of their cooperation.

Coal mining, any mining indeed, presents a singularly apt field for the application of a sickness insurance law. The industry is fixed in certain localities; it is constant, and in the main it is in the hands of large and responsible operators. The men do not change their occupations frequently; they are apt to remain miners. The reports of mine funds in workmen's benefit funds, in the United States would appear to show that they remain fairly steadily in one [page 6] mine, the fluctuations in membership of mine funds comparing favorably with fluctuations in other industries (see Table 7). Miners are, like railroad men, accustomed to sickness dues. Mine hospital funds are very numerous and mining companies recognize by their practice the necessity of care for their men.

Here again the question is not one of inducing a new institution but rather regularizing and improving an old one. It would seem that there is but little cooperation in the management of the fund, with probably the result that the men are dissatisfied so that a good opportunity for bringing the men and operators together is turned into a source of trouble. Senate Document, 633, 61st Congress, 2nd Session, Volume 68; in the report of the Immigration Commission states that in Pennsylvania a majority of the companies paid all costs of treatment for employees insured on duty. Some maintain benefit societies for the men for injuries at work; in other localities the companies deduct a monthly sum for medical and hospital service which is larger for married men because their families have the benefit (p. 96). In a select community, called Community A, in southwestern Pennsylvania, the company maintains a hospital and deducts 50 cents a month from the employee's wages. The company appoints a doctor and maintains a good hospital with good nursing accommodations. Either sickness or accidents of the employees are cared for. On page 206, referring to West Virginia, the report says that the companies deduct from the wages of the men for sick and hospital benefits, $1.00 is the average for men with families where the families are given medical attention. The companies appoint a resident physician. Page 209 in Virginia, the company maintains a benefit fund from which all sickness and accident for the miners or their families are cared for, $1.00 a month is deducted from the wages of the married men, 50 cents for the bachelors. [page 7]

In addition to the mine hospital funds, the miners appear to belong extensively to lodges which pay cash benefits. These lodges are often small and weak and have a further defect from a patriotic standpoint, in that they form centers of association for the different foreign nationalities instead of creating, through a strong local sick fund, a nucleus of citizenship in the state. Miss Addams well says (p. 82) of the Fraternal Insurance in the United States:

"Almost every Sunday in the Italian quarter in which I live various mutual benefit societies march with fife and drum and with a brave showing of banners, celebrating their achievement in having surrounded themselves by at least a thin wall of protection against disaster, upon having set up their mutual good will against the day of misfortune. These parades have all the emblems of patriotism; indeed, the associations present the primitive core of patriotism, brothers standing by each other against hostile forces from without. I assure you that no Fourth of July celebration, no rejoicing over the birth of an heir to the Italian throne, equals in heartiness and sincerity these simple celebrations. Again one longs to pour into the government of their adopted country all this affection and zeal, this real patriotism. A system of State insurance would be a very simple device and secure a large return." Newer Ideals of Peace, (pp. 90, 91)

It is probable that either to societies or to industrial insurance companies a large sum is paid in premiums for funeral insurance, so that an investigation would probably show that the miners in a given locality through mine sick dues, through lodge sickness assessments, through burial insurance premiums, pay more than enough for their share of the insurance, not to mention the sums which they pay for medical aid or medicines. As the mines are fixed locally, it would <not> be difficult to organize local funds which, by their size and organization, would not only assure the necessary sick care and sick pay at very cheap rates, but which would be an important factor in calling attention to bad housing or other unhygienic conditions, and in developing an effective system of sickness prevention. [page 8]

Your committee annexes several memoranda on important topics in sickness insurance and a preliminary list of standards with annotations of the English, German and Norwegian laws. Your committee recommends that the German rather than the English legislation be followed where possible. The German system preserves the principle of self-government in local units, in place of the centralized English system with its tendency to become more centralized; it compels employer and employee to cooperate actively in the management of the insurance and secures the election of representative members of both classes on Boards instead of the appointive representation of the English Act, a difference of importance to a party committed to the idea that each citizen must be obliged to take his part in public affairs. Furthermore, the committee does not recognize the necessity of admitting the fraternities and societies as carriers of the insurance, but prefers the German local mutual carrier. An interesting English view of the situation is quoted from Insurance vs. Poverty by L. G. C. Money, a book which was recommended in an introduction by Mr. Lloyd George, page 118:

"The State Health Insurance system works through existing voluntary thrift institutions, and permits new voluntary institutions to be formed to carry out its provisions. No other course could have been adopted. If we can imagine for a moment the field of action cleared of all existing Friendly Societies, legislation for Health Insurance would have been exceedingly simple, and a lucid and logical system of local organizations could have been formed to carry out its [beneficent] provisions. We can imagine the whole working population naturally grouped in Local Sick Funds, democratically governed, and including in their scope all the workers under a certain income limit, irrespective of age, occupation, or health. A bill to create such a system would be a comparatively simple piece of legislation. It would be much briefer than the National Insurance Act, and infinitely less complex than the German Insurance laws, which are complicated because they are the result of a generation of original and progressive experiment in which institution has been built upon or added to institution with consequent over-lapping of functions." [page 9] The Commission especially calls attention to the fact that in the first year of the operation of the English Act a few large industrial insurance companies have organized societies which contain 3,825,000 of the 10,325,000 insured persons in approved societies while 4,618,000 are in friendly societies (p. 71 of the Report for 1912-3 of the Administration of the National Insurance Act, Part I, Health Insurance). Three companies at present write practically all the industrial insurance in the United States so that serious complications on this score are to be feared if the English system be adopted in this country.