§ 11. Historical roots of health insurance. Health insurance (called also sickness insurance) had its origin partly in trade-unions and in fraternal societies voluntarily organized by workers, and partly in the system of public poor relief. The voluntary societies were first recognized, regulated, and encouraged by law (in some cases being given state subsidies), and later, in some cases, being made compulsory for some classes of members (i.e., such as miners and seamen). On these institutions have been built the later state systems of social health insurance. This movement had made great headway by the end of the third quarter of the nineteenth century in various European countries. The two systems that are the most typical and influential examples are those of the German Empire and of Great Britain, the former local and the latter national in organization. The British plan of national health insurance promises to be, on the whole, of the greatest influence upon American opinion and policy. However, the best informed American students favor in some features the more decentralized German system, as fitting our conditions rather better than the) centralized British system. While it is impossible to describe here the various systems in detail, the situation in the leading industrial countries of Europe may be indicated as follows.

2 This subject should be studied in connection with the general principle of insurance set forth in chs. 12 and 13.

Health Insurance Voluntary.

France, 1850, 1898 (voluntary except for miners).

Belgium, 1851, 1894.

Italy, 1886.

Sweden, 1891.

Denmark, 1892.

Holland (authorized private societies and poor relief).

Compulsory.

Germany, 1883, 1911 (voluntary for others with earnings of $500).

Austria, 1888 (voluntary for some classes).

France, for miners, 1894.

Norway, 1909.

Great Britain, national system 1911 (was voluntary 1875-1911).

§ 12. Need of health insurance in America. Contrary to the usual opinion in America, the sickness insurance in Germany is, both in amount of contributions collected and in importance to the welfare of the workers and their families, of more importance than is either accident compensation or the system of invalidity pensions. Yet, thus far, our interest and efforts in America have been directed almost entirely toward the reform of accident compensation, and almost everything remains to be done in the matter of social insurance against sickness. It is true that in recent years there has been a rapid development, in some of the larger cities, of medical insurance clubs conducted by private companies, with dues of ten cents weekly. They give medical care in ordinary cases, but require extra payments for surgical treatment and for medical supplies. They as yet touch only the outer fringe of the problem; but they testify to the need and to the increasing desire of the wage workers for insurance of this kind. It is believed that at least 4 per cent of the income of wage workers now is expended for the care of sickness and for burial insurance. The losses of wages meantime remain unequalized by insurance indemnities. An Illinois commission reported in 1919 that the loss in wages and medical bills averaged 5 1/2 per cent or more of the family incomes.

A large proportion of the cases of temporary destitution in ordinary self-supporting families is due to sickness, at least 25 per cent, as shown by various investigations. The German experience shows that 4 per cent of wages, collected in part from employers and in part from wage workers, is sufficient to give a far better medical service than can be had through private effort, to give some indemnity for loss of wages, and to carry on a very useful hygienic work for the families and for the public health.

§ 13. Unemployment insurance. The most difficult of all the problems of social insurance is that of unemployment. There the amount of the risk in most cases is largely dependent on the personal qualities of the worker. There are obvious objections to making the competent, steady, sober members of any trade pay the penalty for the faults of their fellows. But, on the other hand, as we have seen,3 a large part of the problem of unemployment is chargeable to social maladjustments rather than to individual faults.

At present, development in this field is along two lines, that of subsidized trade-union relief (the Ghent system), and that of compulsory state insurance in certain industries. By the Ghent plan the public pays a certain proportion (from one sixth to one half) of the amounts of the benefits paid by the unions or other associations. This plan, originating in Belgium, had been adopted before 1914 in many cities and by some countries in Europe, and in the war period was extended to other countries. Great Britain is the first country to adopt a compulsory state system, and it virtually incorporated the Ghent system by providing for grants out of state funds to associations that grant out-of-work benefits. It began operation in 1912, and applied to 2,500,000 persons, or one sixth of all the wage-earners. The contributions are made as follows: 3/8 by employers, 3/8 by wage-earn-ers, and 2/8 by the state. The application of the law was extended in 1916 to workmen engaged in any of the war industries. There are several original and interesting features of the act, such as rewarding, by the refunding of dues, those employers who provide regular employment, and older workmen who have received benefits amounting to less than their contributions. Its administration in close connection with the labor exchanges is giving valuable experience in this field. The working out of the many minor problems of classification, assessment, and administration of unemployment insurance will require many years of experimentation.

3 Ch. 23, §§ 12-19.

§ 14. Need of ideals in social insurance. The world has had forty years of experimentation of a remarkably varied kind in the field of social insurance, since the German system was inaugurated in the eighties of the nineteenth century. America stands almost at the beginning of a develop ment along those lines that is certain to be of enormous extent and importance. It would be folly for us to repeat the costly errors of other countries by failing to recognize certain principles that have been clearly established by experience. If these could be grasped and firmly kept in mind, our progress in this field in America would be faster, more certain, less costly, and farther reaching than it promises otherwise to be. We can here attempt no more than merely to outline these principles that must be embodied in an ideal system of social insurance in America.