The U.S. insurance industry has developed a complex relationship with the state—one that both works to the industry’s advantage and obstructs efforts for reform. Though industry leaders have often expressed fears of government intrusion (whether by competition or regulation), partnerships with government became increasingly desirable for the industry as it grew rapidly after World War II. Many large insurers even welcomed the landmark creation of Medicare and Medicaid in 1965, the first major expansion of the U.S. welfare state since the 1930s. Under these programs insurance companies became primary managers and coordinators of medical services, overseeing a government-funded safety net designed to catch Americans deemed too risky for the private health insurance market.
The burden of providing security for these “bad risks” now fell to federal and state governments, leaving private insurance companies with a consumer base less likely to make claims and less costly to insure. This partnership, the lynchpin of America’s public-private health insurance system, did not challenge the viability or profits of the private insurance industry. In fact, as historian Christy Ford Chapin argues, it helped legitimize the previously contested private insurance model—neutralizing, at least for a time, calls for universal insurance programs that would cover all Americans.
Partnerships in which commercial insurers in other fields worked with or subcontracted for government became common by the 1970s. Laws requiring private insurance coverage before driving a car or buying a home, for example, granted the insurance industry immense power to shape the lives of Americans and determine who had the ability to maintain property and build wealth. Critics of these laws and other insurance practices faced serious obstacles, including a powerful insurance lobby and a state-based regulatory system that made reform on a national level nearly impossible. The 1945 McCarran–Ferguson Act cemented this state-based system, which exempted insurance from federal regulation, including most antitrust abuses—a major reason social movements led by civil rights and feminist activists in in the 1970s and 1980s failed to achieve substantial and lasting reform on the federal level. The insurance industry has fought aggressively over the past seventy-six years to protect McCarran–Ferguson.