Last Sunday you met Frederick Hoffman, the Prudential statistician who spent his life “proving” that helping Black Americans by giving them access to free healthcare would only hasten their extinction. This week’s chapter is about what he and his colleagues did with that belief once real money was on the line.
When 200,000 people showed up in Los Angeles to hear President Teddy Roosevelt speak, he pitched a platform that included “social insurance” for all Americans that included comprehensive health coverage. By 1915 the American Association for Labor Legislation (AALL) was demanding that every state enact comprehensive, universal, government-funded health insurance. By 1916 eight states, New York and California among them, had taken up its model bill, which used government money to cover all medical costs and up to 26 weeks of paid sick leave. The American Medical Association had even endorsed it.
At the time, no major companies were offering health insurance but death insurance was Prudential’s cash cow, a product a small army of salesmen sold door-to-door nationwide. The healthcare plan Roosevelt and AALL and the AMA were pitching, however, had a small ($100) death benefit to cover funeral costs, and Hoffman used it to get Prudential into the act of killing that generation’s version of Medicare For All in the crib.
“We, of course, cannot compete with Compulsory Insurance,” Hoffman wrote to his employers. He resigned from the AALL “in disgust” and became the face of a Prudential-funded campaign so fierce that one of the AALL’s founders wrote in 1918 that every piece of anti-insurance propaganda in the country, every flyer or leaflet “no matter who gives them to you,” traced back to “the Prudential Insurance Co. of America, and to Mr. Frederick L. Hoffman.”
This chapter opens with a costume ball, which led to New York’s 1905 Armstrong Investigation nearly destroyed the insurance industry’s reputation. People were so cynical that Purdential’s executives knew their opposition to health insurance “would be perceived as brazen self-interest.” So they hired Hoffman, who presented himself as a scientist.
Read Hoffman’s pamphlets with today’s talking points in your ear. Health insurance is “made in Germany,” he wrote in 1917, as American boys were shipping out to fight the Kaiser. It “makes your citizen a subject.” It means “autocracy, paternalism and coercion.”
Virtually every line the trillion-dollar health insurance industry used against the public option in 2009 and against Medicare for All in 2020 was road-tested by Prudential a century earlier. And it worked.
In 1920 California’s voters killed health insurance at the ballot box, New York’s Assembly let it die in committee, and the AALL never got another bill in front of a legislature.
New York shakes up the insurance industry
Blame the plutocrats’ costume balls for the crisis in the insurance industry at the turn of the century, a crisis that led to blocking a national single-payer health insurance system.
In 1905, the legislature of the State of New York was provoked by a public outcry to investigate the life insurance business. The New York lawmakers authorized an investigative body led by State Senator William Armstrong, later known as the Armstrong Commission, which held 51 investigatory sessions leading to eight new laws to regulate the industry.
The event not only cemented the reputation of Armstrong, but also kicked off the political career of Charles Evans Hughes, propelling him to the governorship of New York, the Republican presidential nomination in 1916, and to the Chief Justiceship of the US Supreme Court in 1930.
And it was a costume ball that triggered much of the public outrage.
Eight years earlier, in February of 1897, New York billionaire (in today’s money) banker and attorney Bradley Martin and his wife Cornelia had thrown a costume ball at the Waldorf. They’d taken over the entire hotel booking every single room, as The New York Times reported, and “all outside windows are boarded up” to keep the riffraff from seeing in.67
Mrs. Martin came dressed as Mary Stuart (wearing a necklace once owned by the Queen), her husband as the Sun King, Louis XIV. John Jacob Astor, who would die on the Titanic in 1912, was dressed as Henry of Navarre, while J.P. Morgan was Moliere.
Instead of a success, though, the party became a scandal; there was such ostentatious wealth on display that New York clergymen, progressive politicians and many of New York’s newspapers condemned the Martins.
“Some crank” sent a bomb to the Martin’s home, according to the Times, because of all the controversy. New York’s Police Commissioner told the Times, “The sensational articles that have recently appeared in two of the papers have started up these cranks to talking and writing against the Bradley Martins, and undoubtedly Mrs. Martin has been subjected to a great deal of annoyance from them.”68
The Martins were so offended, humiliated and frightened by the response of the good citizens of New York that they bought the former home of “Diamond King” Barney Barnato, what the Times said was “the most pretentious [home] in London,” and moved to England.
Like the Roaring 20s and today’s late Reaganomics era, the Gilded Age was marked by obscene wealth and excess, contrasted with low wages and poverty for working people. Thus, when it was reported that James Hazen Hyde, son of the founder of The Equitable Life Assurance Society and a billionaire in today’s money, had not only held a Versaille-themed ball himself but put it on the tab of the company, New York exploded.
The Armstrong Commission investigation was the result of the tipping point these two events hit, and it reflected so badly on Hyde that, like Martin, he fled the country, going to live in France.
The Armstrong Commission also found widespread evidence of bribery, or at least inappropriate influence, of politicians by insurance industry executives, and recommended laws barring any employee of that industry from giving money to any politician, a harbinger of the Tillman Act of 1907, which banned corporate money contributions to federal candidates.
The scandals uncovered by Armstrong also fed a growing movement to provide every New Yorker with health insurance provided by nonprofit mutual companies and paid for by the state and the employers.
And Frederick Hoffman would help put a stop to it.
From Scientific Racism to “No Compulsory Healthcare!”
The “compulsory health insurance” (what today we’d call Medicare for All) movement of the early 20th century was as much (and possibly more) about getting paid sick leave as it was about covering doctor’s visits and hospitalization, because healthcare was so cheap that an unpaid week at work was a bigger hit to the wallet.
But workers wanted both.
The most successful effort of the era came out of an organization a small group of progressive economists put together in 1905 and 1906, known as the American Association for Labor Legislation (AALL). Their initial efforts were directed at paid sick leave, workman’s compensation insurance, child labor laws and workplace safety standards. To that last end, they were actively using the kinds of statistical analysis Frederick Hoffman had both used and popularized to lay out everything from his theories on race to showing an association between tobacco use and lung cancer. Hoffman joined the AALL to promote their efforts.
A charitable reading of his motivations was that his statistical research on workplace phosphorus poisoning and lung disease overlapped with their efforts and they were an organization that, at that time, was held in high regard. He did, after all, consider himself – and was, in a very real way – a major force for reform in public health and workplace safety arenas.
A less charitable motivation is posited in Daniel T. Rodgers’ 1998 book Atlantic Crossings: Social Politics in a Progressive Age.69
Rodgers writes, “On the AALL social insurance committee, he became the [Prudential] company’s mole. … Hoffman took credit for blocking the drafting of any resolutions at the AALL’s social insurance conference in 1913. During the framing of the association’s model health insurance bill, he dragged his feet, obstructed, pressed in vain for company initiatives in the medical insurance field, and informed his employers – more and more certain that public health insurance was ‘distinctly pernicious and a menace to our interests.’”
Despite Prudential and Hoffman’s efforts, government-funded health insurance was gaining popularity in America (and being considered or adopted in Europe).
In 1912, Theodore Roosevelt made a third-party bid for the presidency, forming the Progressive Party (with its Bull Moose logo) and called for “the protection of home life against the hazards of sickness, irregular employment and old age through the adoption of a system of social insurance.” Jane Addams (Hull House founder), dressed in suffragette white, seconded Roosevelt’s nomination to wild cheers and applause; Roosevelt rallies routinely drew tens of thousands of people, and over 200,000 people showed up in Los Angeles to support him and the Party.70
Roosevelt’s endorsement of “social insurance” including health coverage both reflected and reinforced a growing national sentiment, and in 1915 the AALL called for every state to support a program of health insurance. Prudential hadn’t yet gotten into the business of insuring health (they would in 1925), but they could see the writing on the wall.
What finally blew up Hoffman’s support of the AALL apparently had to do with a system of insurance that had started in the late 17th century in the UK to cover fire losses and had gradually grown to include other forms of protection.
It was called “mutual insurance” and was unique from Prudential’s model in that the companies were owned by their policyholders, instead of traditional corporate stockholders.
In this regard, mutual insurance ran much like employee-owned co-ops, and lived in the nonprofit world both practically and philosophically. They also had lower operating costs, as they didn’t have to shovel wheelbarrows of cash to their stockholders and senior executives.
America had a tradition of mutual insurance that started in 1752 with a company known as “The Philadelphia Contributionship for the Insurance of Houses From Loss by Fire.” Its founder was Benjamin Franklin and it still exists; the idea of mutual property and casualty insurance companies grew from there across the states and around the world.71
In 1916, AALL endorsed health insurance provided through a network of local and statewide mutual companies and called for those policies to also cover a small death benefit to cover funeral costs, which would have competed directly with the funeral coverage that was Prudential’s main cash cow.
Hoffman wrote to the company that, “We, of course, cannot compete with Compulsory Insurance, including a death benefit of, say $100.”72 He then resigned “in disgust” from the AALL and begin a campaign, sponsored by Prudential, to stop nonprofit, state-funded health insurance.
Hoffman and Prudential weren’t alone in their concern: The Insurance Federation of New York told their members, “This is only the entering wedge; if once a foothold is obtained it will mean attempts to have such State Insurance of all kinds including fire.”73
AALL produced model legislation that was taken up in 1916 by eight states, including California and New York, the former via a ballot initiative and the latter in the New York legislature. In addition to calling for policies that would pay all costs of healthcare, the AALL’s legislation also called for up to 26 weeks of paid sick leave.
Picking up steam, the American Medical Association endorsed the AALL’s model legislation as well. The battle was joined.
Prudential helps kill America’s first healthcare for all campaign
Hoffman’s Prudential-sponsored campaign to prevent any state from adopting a statewide nonprofit health (and death benefit) insurance program went into overdrive through 1916-1920. He traveled to Germany several times to chronicle, in minute detail, the failings of the Kaiser’s system that had been operating since 1885.
Prudential, in 1905, had been swept up in New York’s Armstrong Investigation and so, as historian Beatrix Hoffman (no relation to Frederick) writes, “Because of their industry’s public image problems, insurance executives knew their opposition to compulsory health insurance would be perceived as brazen selfinterest.”74
They needed a front man, and the guy who was famous for discovering the causes of numerous public health crises was perfect. Thus, Frederick Hoffman became the most well-known face of a massive, multi-year effort to stop the AALL’s campaign. And, at that, he was remarkably effective.
In the years between 1916, when he resigned from AALL and 1920 when nonprofit state-funded health insurance finally died, Hoffman wrote numerous pamphlets trashing the German single-payer government health system, “exposing” corruption in the British efforts at a National Health Service, and arguing that America’s healthcare system would be thrown into chaos and crisis if the AALL’s programs were adopted. And his work was widely distributed, as historian Daniel Rodgers noted: “The Prudential saturated the state capitols with his pamphlets.”75
His 1917 pamphlet Facts and Fallacies of Compulsory Health Insurance and a subsequent “More Facts…” published two years later were his most widely cited and most consequential. Historian Beatrix Hoffman (no relation) notes that the Facts pamphlet “resembled Race Traits and Tendencies in its impressive presentation of statistics and graphs alongside passionate polemics. Hoffman refuted every figure the Progressives used in defense of their plan, from ‘Misleading Data on German Longevity’ to ‘Misleading Estimate of Cost’ and ‘Disregard of Actuarial Methods.’”
Appealing to the Daniel Boone mythos of rugged, independent individualism that didn’t require assistance from government, Hoffman wrote, “The ever-present menace to democracy and liberty is the perversion of the legislative function [toward providing health insurance]…”76
Lawmakers and the public, Hoffman wrote as America was fighting Germany during WWI, were supporting state-funded health insurance “which is unnecessary, and as essentially a product ‘made in Germany’ as any legislative panacea brought forward for the alleged good of the people during a generation or more. The propaganda had its origin in the program laid down by the International Association for Labor
Legislation, which held its first meeting in Baste, Switzerland…”77
“The proposed legislation,” Hoffman wrote, “strikes one more blow at self-dependence and initiative and makes your citizen a subject, whether of king or of commission matters little. Self-dependence and initiative, virtues only permitted to a few favored individuals in older forms of government, are again to be taken away from a large number of citizens, in return for a mess of pottage, and the normal cycle of human stupidity becomes obvious. The Constitution promised liberty and happiness, not supervision and comfort; that is, the guarantees were moral, not material.”
Citing a 1917 report from the New Jersey Commission on Old Age, Insurance and Pensions, Hoffman wrote, “Under any and every system of social insurance the development of autocratic and arbitrary methods of interference with personal rights and liberties is a foregone conclusion.”
Quoting the Bureau of Labor Statistics, Hoffman wrote, “[T]he State should concentrate its efforts on preventive work rather than on the attempt to cure diseases through insurance; in that the Workmen’s Compensation Act had already taken some of the liberties away from the individual wage-earner, and that health insurance would take more; that the tendency of health insurance would be to pauperize the workers; that health insurance was not suited to American needs; that health insurance abroad was economically unsuccessful; that its cost was prohibitive; that it was an encouragement of malingering, and that selfrespecting labor did not desire it.”78
Toward the end of the pamphlet, once again warning of the dangers to America of adopting anything resembling Bismark’s single-payer national health insurance system, Hoffman summarized:
“The German experiment in paternalism and coercion sounds the most convincing note of warning to other industrial countries, where under free institutions, under conditions of voluntary service, savings and self-sacrifice, infinitely better and more lasting results have been achieved.
“It is devoutly to be hoped that the warning will be heeded by the American people and that they will develop a strong and thoroughly effective opposition to any and every tendency towards autocracy, paternalism and coercion, under the plea of Social Insurance as inherently hostile and fatal to our traditional conceptions of personal and political liberty in a democracy.”79
Hoffman’s writing and speeches shook America’s political systems, particularly as this German-born “man of science” warned of the dire consequences to American liberty and democracy represented by universal health insurance.
In 1918, John R. Commons – one of the AALL’s cofounders – wrote that most all the nation’s anticompulsory health insurance propaganda “originates from one source; all of the ammunition, all of the facts and statistics that may come across, no matter who gives them to you, will be found to go back to the Prudential Insurance Co. of America, and to Mr. Frederick L. Hoffman.”80
Prudential paid to transport Hoffman all across America, from media events to congressional hearings, to a trip to England to document the horrors of their National Health Service system that had gone into effect in 1911.
He wrote from London, in a widely-read paper, that because of the British National Insurance Act, “The fine spirit of the English working classes, at one time the finest people of that type in the world, is gone, entirely gone.”81
Historian Beatrix Hoffman notes, “His agitation was tireless, his influence widespread. … His reputation as an expert allowed Hoffman to participate in the deliberations of the health insurance commissions of Illinois, Wisconsin, and Connecticut, and to successfully persuade commission members to vote against the plan.”
In 1920, in large part because of the Prudential’s efforts and Hoffman’s warnings, California’s voters resoundingly turned down a voter initiative in that state to provide health insurance, and, although New York’s Senate passed the bill, it died in committee in the Assembly.
While the AALL continued to campaign for state-funded health insurance until their dissolution in 1946, they never again gained enough traction to get their proposal before any state legislatures or the US Congress.
Having succeeded in killing state-funded health insurance, Hoffman, in the later 1920s, turned his attention back to his theory that blacks would eventually die out, joining the Eugenics Research Association (whose work was later used by Hitler to justify racial separation and his “final solution”).
In 1929, Hoffman asserted, in the African American publication Opportunity, that “the white race is almost solely responsible…for the health progress which the South has made during the last generation,” and that blacks moving in large numbers into cities would “lead to a thoroughly unwholesome state of affairs which unquestionably will express itself in course of time in a lower birth rate and a higher death rate.”82 Hoffman’s influence lasted long past his death in 1946 (which satisfied his stated desire to live long enough to see FDR out of office). As late as 1984, according to reporting in The Wall Street Journal, Prudential was still collecting premiums from African Americans that were “in some instances more than a third higher” that those paid by whites.83
What died in 1920 wasn’t just a bill; it was a century of Americans dying or going bankrupt for lack of access to healthcare. The AALL model law covered everybody, paid every medical bill, gave workers half a year of paid sick leave, and had America’s official doctors’ association on board.
Had it passed in New York and California, the other states would have followed the way they later followed on workers’ compensation and the way Medicare for All spread from Saskatchewan in Canada to every other province within a decade.
Instead we have half a million medical bankruptcies a year, a life expectancy that trails every peer nation, and senior executives in a predatory insurance industry who literally make hundreds of millions to over a billion dollars in personal wealth each.
Perhaps most astounding it took until 1984, eighty-eight years after Race Traits was published and thirty-eight years after Hoffman died, for Prudential to stop charging Black customers premiums a third higher than white customers paid.
When a for-profit industry can’t convince Americans (or politicians) on the merits, it buys a credentialed voice and floods the state capitols and DC. In 1917 it was Hoffman’s pamphlets; in 2009 it was the talking points that a CIGNA executive named Wendell Potter wrote for the industry’s trade group before his conscience made him quit (his story is in the book too).
This year, it’s the “think tanks” and Trump and Dr. Oz telling you the privatized, for-profit Medicare Advantage scam saves money.
Next Sunday I’ll tell you how, in 1966, just one single federal program integrated nearly every hospital in America in four months, without a court order or a federal police force.
The psychology that enabled medical costs to skyrocket is the myth of US capitalism. Specifically, the notion that the more you pay for something, the higher its quality is. That is also further bolstered by labeling universal healthcare as worthless communism. Politicians would suggest that with socialized medicine, you could die in the waiting room before seeing a medic.
The AMA fought universal healthcare because doctors loved being the richest guys in town. AMA support started eroding as the cost of running a "doctor's office" started growing along with the time demands to keep the books and process insurance claims. Doctors started opting to join group practices, then entire corporate-sized practices that include hospitals and clinics. Their administrative costs jacked up fees. So, today, you can die in the waiting room before seeing a medic.
Excellent disclosure of the Insurance industry's early attempt to undermine universal government medical insurance through false claims. Will you cover how the insurance industry recently did the same, spreading false information about the Canadian system, as Hoffman did about the German system?
Former insurance executive Wendell Potter was the Hoffman equivalent. After the Canadian healthcare system's response to the COVID crisis was far superior to the US, Potter had a crisis of conscience and came clean. I don't think the press reported the superior Canadian COVID results or the extensive false claims about the Canadian system in general. Details here: https://www.cbc.ca/radio/asithappens/as-it-happens-monday-edition-1.5631285/this-former-u-s-health-insurance-exec-says-he-lied-to-americans-about-canadian-health-care-1.5631874