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Group Health Association Archives 1937-1993
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Biography

Historical Note

The Group Health Association (GHA) was formed on January 28, 1937 in Washington, D.C.; it incorporated and held its first membership meeting on March 22, 1937. The Association's original goal was to provide employees of the Home Owners Loan Corporation (HOLC) with quality health care through a member-controlled organization. R.R. Zimmerman, HOLC's personnel director, crafted the initial plan for GHA, patterning it after that of Standard Oil, whereby employees paid dues in return for comprehensive health care. GHA members paid a flat monthly fee that covered their entire family. GHA became one of the first HMO's nearly four decades before legislation supporting such organizations existed.

When Group Health Association officially opened its first clinic in Washington, DC, on November 1, 1937, it marked the beginning of a transition from individual to third party health care financing in the United States. A contentious battle soon began when local DC physicians joined an American Medical Association restraint of trade complaint that contended GHA was financially unstable, infringed upon a doctor's right to set fees, and prevented patients from choosing their own doctor. In 1938, the District of Columbia Medical Society began pressuring local hospitals to refuse GHA doctors the use of their facilities, which for all intents and purposes denied hospital care to the entire GHA membership. The dispute soon gained national attention.

Each side prepared legal strategies involving different branches of the federal government. Because Congress appropriated money to the HOLC, some in Congress believed the HOLC should have secured congressional approval to begin GHA, and launched an inquiry into the matter. The Department of Justice, recognizing the questionable actions of the AMA and DC Medical Society, brought suit in defense of GHA. After a series of appeals lasting four years, the US Supreme Court upheld a 1941 decision that found the AMA and DC Medical Society to be in violation of the Sherman Antitrust Act. One newspaper reported the final verdict was as important to medical history "as the discovery of ether to kill pain," since it would "afford relief to the pocketbook of the average man and woman." The landmark judgment opened the door to one of the major changes in the way medicine is practiced and care delivered.

After securing its right to exist, GHA turned to developing its membership. Enrollment rose from 900 members in 1937 to 7,500 subscribers and participants at the end of 1941 when it opened membership to all federal employees in 1939. GHA rented additional office space and hired more doctors, including specialists in obstetrics and gynecology. But, during World War II, GHA struggled to keep the doors open and maintain its quality of care.

The eventual success in overcoming hard times during the war years inspired a dynamic approach to the company's future. Until 1946, members joined individually or as families. In order to offset the cost of individuals who required expensive care, the association proposed the recruitment of entire groups. Passage of this proposal resulted in two significant changes: 1) inclusion of nongovernmental groups and DC government employees as members; 2) the de facto admission of black employees of those organizations. By racially integrating its member pool, GHA once again placed itself ahead of history's curve.

Although membership reached 18,000 by 1950, it grew only marginally over the next eight years. It was not until 1959, when a contract between GHA and the DC Transit System added 9,000 new participants, that the previous decade's expansion efforts paid off. Another major breakthrough came in 1960 with the Federal Employees Health Benefits Act. GHA gained 12,400 new participants the first year the law was in effect.

As its members joined the general population exodus from the District in the 1960s, the company attempted to follow them to the suburbs by opening offices outside of the District. However, Virginia and Maryland laws restricted these expansion efforts. GHA did not gain state approval in Virginia until 1965 and was forced to form a special subsidiary, Maryland Group Health Inc., to operate legally in the state of Maryland. Not until the early 1970s, when both Maryland and Virginia changed their laws, could GHA successfully expand its suburban base.

The 1970s proved to be another tumultuous time for Group Health. The company faced both internal dissent and financial challenges. Despite the change from individual contracts in 1970, physicians wanted a greater voice in policymaking. On January 4, 1978, the GHA doctors voted to form one of the earliest physicians' unions in the country, and the first established by physicians outside the hospital setting. Bargaining over terms of the contract proved to be extremely difficult. The doctors felt so strongly about their right to see outside patients on their own time that the union went on strike on April 15, 1978. Although lasting only eleven days and ending in the physicians' favor, the strike was a traumatic experience for a company that advocated familial cohesion among its employees.

Rampant inflation during the mid-1970s created additional difficulties for GHA. The removal of wage and price controls on health care in 1974 had a negative impact on the medical community. In order to cope with economic challenges and still provide quality care, GHA reduced its staff and doctors compromised on wages. However, such cutbacks were not enough in the face of new competition resulting from the passage of the Health Maintenance Act in 1973, which encouraged the establishment of prepaid group health plans known as health maintenance organizations (HMOs). Once the only entity of its kind, by 1979 GHA had to compete with 224 plans nationwide. Attempts to offset costs by using nurse practitioners, physicians' assistants and nurse-midwives in the 1970s and 1980s temporarily alleviated the company's ever-growing financial burden. Strengthening childbirth services, dental maintenance plans, and nutritional counseling helped restore members' faith in their company--that was now close to fifty years old.

In the end, however, rejuvenated programs did little to alter the eventual outcome of GHA's struggle with a demanding economic environment. GHA shifted and expanded services several times according to the changing patterns in health care. However, with its consumer-elected governance and membership-based structures, the company could not interact effectively with the marketplace. Although a historic pioneer that revolutionized the industry, GHA eventually lost its battles with rising health costs, financial instability, declining enrollment, and a plummeting market share. In 1993, Humana, a for-profit HMO operator specializing in turning around troubled HMO's, offered to purchase Group Health Association. Despite opposition from a vocal minority, GHA members approved the final sale of GHA to Humana. The Consumer Health Foundation, a philanthropic entity created from the sale of GHA to Humana, continues to carry on the original ideals of GHA by providing grants to consumer and community-based groups in the DC area working to improve access to health care for under-served and at-risk populations.

Sources: GHA News, Group Health Association 50th Anniversary, and Health System Leader, Volume 2 Number 4, May 1995 pages 12-18.