Abstract: Actuarial Science in the Rise of Group Health Insurance

John E. Murray


From about 1920 onward health insurance availability shifted gradually away from company and union sickness funds and towards group health insurance offered by commercial insurers. Methods employed by mutual sick funds to estimate premium and benefit rates changed little in the decades following World War I. Over this period, however, the actuarial science of group health insurance advanced steadily. As commercial insurers realized the potential profitability of group health, they pooled claims data for actuarial analysis, which eventually led to reliable actuarial tables. Both sickness fund and group health insurance were widely available until after the later 1930s, when group health's advantages in cost and benefit terms became overwhelming. This paper examines the advances in actuarial science that allowed group health to overtake sickness funds in cost-benefit terms. It provides a technological history complementary to the standard histories of health insurance that focus on political operations of group health insurers.