How and why did healthcare and insurance become tied to employment?

In America during the depression and into World War II the Government was heavily involved with setting wage restrictions and regulations. Healthcare Insurance was relatively new, some companies started to offer it as a perk to employees that fell outside of the normal compensation regulations. Everyone saw this as a positive, unions began to regard this as something to ask for in negotiations, and the government encouraged it by favorable tax treatment.

Health care was a way to attract and keep people at a company. When I was a teen, my dad had health insurance through U.S.Steel, his employer. Blue Cross and Blue Shield were non-profits designed to pay bills from hospital and doctors. All they did was take care of the paperwork and transfer money from the company health care insurers.

Later, when HMO’s and for profit insurance started, Blue Cross and Blue Shield were ideally situated to make billions of dollars while coverage eligibility were reduced. It is all very sad.

Having employers provide health insurance is not as outlandish an idea as you seem to think it is. It is in the employer’s interest to have workers who are healthy and therefore more productive.

The government encouraged it through tax and other policies, and initially it was a good deal for the employer and the employee. The employer got to deduct 100 percent of the cost, as opposed to wages, where they have to pay half of the FICA and Medicare, unemployment, disability, workers comp, etc. The workers should be healthier, less absent from work. The employee got insurance tax free, as opposed to after tax cost. It’s just got so expensive over time.

In addition to the above reasons, company group plans provide economy of scale. When you pay your own medical and dental insurance without any kind of subsidy, you learn that really fast!

I hate that we get health insurance and benefits thriugh employers. It is completely horrible. I can’t see one good thing about it. It has practically enslaved some people to their jobs, especially if they have a preexisting illness. It has greatly reduced and/or taken away the end users ability to influence the market place.

As people have said above, the government encouraged it. Lobbyists from insurance companies worked hard at creating laws to help them make money. Businesses also used it to compete for employees. Unions fought for the benefits, especially through the 1970’s, which also affected competing for employees even among nonunionized businesses.

@Pachyderm_In_The_Room pardon my ignorance but what is economy of scale?How about the people that are self employed and what did they do? What about the not employed at all? How was this absorbed- or wasn’t it?

@trailsillustrated, sorry, I left out a sentence that would have made that clearer. By “economy of scale”, I mean that the more people who are in a company insurance group, the less the cost to each employee. There are other kinds of insurance groups one can join if they’re not working for a company, such as a credit union or AARP.

In health research there is a phenomenon known as the “Healthy Worker Effect”. That means that people who hold down jobs are typically healthier than the general population. This effect has been studied because many previous studies have only enrolled employees of some sort, so the conclusions drawn from the study may not be applicable to the whole population, only employed people.
But this effect allows insurance companies to cherry pick the healthiest people, the ones who are least likely to need massive amounts of health care, and pocket most of the premiums, leaving the government (Medicare/Medicaid) the burden of the more ill population. Pretty sweat deal.
Also, since preventative health care reduces absenteeism, employers would be unwilling to rely on people to purchase their own health insurance, as @LostInParadise mentioned.
So those are two factors that drove the continuing ties of employment and health insurance long after WWII.