DEV Community: Santiago Reyes

When Your Lodge Was Better Than Your Health Insurance

Santiago Reyes — Sat, 21 Mar 2026 02:14:23 +0000

In 1934, one of the ugliest years of the Great Depression, millions of Americans were living one emergency away from ruin. Savings were gone. Wages had collapsed. Jobs were scarce. A hospital stay was not just a medical problem. It was an economic catastrophe waiting to happen.

Ruth Papon of Olathe, Kansas, got sick anyway.

She went into the Security Benefit Association hospital in Topeka for what records called a "4-in-1 major operation." She survived the surgery, went home, then came back with a severe case of pneumonia. She survived that too. Months later, she wrote about the doctors and nurses with obvious gratitude. They had saved her life, she said, and the hospital had a "homey" feeling that other hospitals lacked.

That detail matters. Ruth Papon was not rich. She was not unusually lucky. She had something millions of other Americans also had in the late nineteenth and early twentieth centuries: membership in a fraternal society.

And for a long stretch of American history, that meant something close to what people now wish health insurance meant. It meant real protection.

The Lodge Was Not Just a Club

When modern Americans hear "fraternal society," they tend to picture robes, handshakes, and men saying cryptic things in wood-paneled rooms. That existed. But it misses the main point.

Fraternal societies were mutual-aid institutions. They had rituals, yes. They had lodges and elected officers and passwords and elaborate ceremonies. But they also collected dues, paid sickness benefits, covered funerals, provided life insurance, supported widows and orphans, and in some cases built hospitals, clinics, and sanitariums.

The lodge was not merely symbolic community. It was infrastructure.

By 1920, Americans carried more than $9 billion in life insurance through fraternal societies. Lodges were also major providers of health-related benefits. Some paid cash when members were too sick to work. Others arranged doctor visits. A few, like the Security Benefit Association and the Modern Woodmen of America, went further and built medical institutions of their own.

This was not a boutique arrangement for the respectable middle class. One out of three adult men in America may have belonged to a fraternal society around 1920. Black Americans built strong lodge traditions of their own. Immigrant communities from Southern and Eastern Europe relied heavily on ethnic benefit societies. Women joined female or mixed fraternal bodies that offered the same basic promise: if trouble came, the group would not leave you alone with it.

That promise is more radical than it sounds.

Why Fraternal Welfare Worked

The standard story of American social policy goes something like this: before the New Deal and the modern welfare state, ordinary people were mostly on their own, exposed to the market and dependent on charity. That is only partly true.

What many Americans had instead was a dense world of voluntary mutual aid.

The crucial difference between fraternal aid and ordinary charity was reciprocity. Charity is vertical. Someone with more gives to someone with less, often with strings attached and usually with a healthy dose of humiliation. Fraternal aid was horizontal. The people paying into the system and the people drawing from it usually came from the same neighborhoods, the same occupations, and the same general circumstances.

You were not a case file. You were a member.

That changed the emotional meaning of assistance. The dues you paid last year might help another member this year. The help you received this year might be repaid, indirectly, by your dues next year. The donor and the recipient were often the same person at different moments in life.

That is why the lodge could do something public relief and private charity usually could not: provide material help without stripping people of dignity.

It also created incentives that are mostly gone now. Fraternal societies rewarded thrift, regular contribution, participation, and a sense of obligation to people outside one's immediate household. If a member got sick, the lodge did not just send a check. In many cases it showed up. Members harvested crops, chopped wood, visited the ill, buried the dead, and kept struggling families from sliding over the edge.

Insurance, in other words, still had a social body attached to it.

The Medical Model We Forgot

The most interesting part of this story is not that lodges paid death benefits. Lots of institutions can write a check after a funeral. The interesting part is that some fraternal societies got directly involved in delivering care.

That is almost unimaginable now.

Today, American health care is built on third-party payment. Your employer chooses a plan. The insurer decides what is covered. The hospital bills a rate nobody understands. The patient receives an explanation of benefits written in a dialect of English designed to induce despair. Everyone involved claims to be managing risk. Nobody seems responsible for care.

Fraternal medicine worked differently. It was not universal and it was not perfect, but it was legible. Members paid in. The institution served members. In some cases, the same organization that collected dues also operated the facility where treatment was delivered. The connection between contribution and benefit was visible. So was the human relationship between the organization and the person it existed to protect.

This is part of why Ruth Papon described the hospital as "ours."

Nobody says that now about UnitedHealthcare.

The old lodge model had limits, of course. It depended on stable communities, repeated interaction, and cultural norms of participation that are much weaker today. Benefits were uneven. Coverage could be narrow. Many societies excluded people by race, religion, ethnicity, or occupation, even as others were built precisely by and for excluded groups. No serious person should romanticize the entire system.

But it is still worth noticing that fraternal societies accomplished something modern America still struggles to do: they built low-cost, large-scale networks of care among people who were not wealthy.

Why the Lodge Died

If the model worked as well as it did, why did it fade?

Part of the answer is scale. Industrial medicine became more expensive, more specialized, and more centralized. The local lodge that could manage a doctor visit or a hospital bed in 1910 was badly outmatched by the economics of postwar medicine.

Part of the answer is the state. As government welfare programs expanded and commercial insurance became more dominant, fraternal societies lost the practical niche that had made them indispensable.

And part of the answer is cultural. Fraternalism depended on habits that modern life steadily eroded: long-term membership, face-to-face governance, stable local institutions, and the expectation that ordinary people should help administer one another's welfare rather than outsource the entire job to bureaucracies or corporations.

By the late twentieth century, many lodges still existed, but mostly as social organizations. The mutual-aid machinery that once justified their existence had largely been stripped away.

What remained was the shell.

What This History Is Actually Good For

There is no serious path back to 1934. Nobody is going to rebuild the old fraternal world exactly as it was, and nobody should pretend otherwise. The lodge belonged to a specific historical environment that no longer exists.

But history is still useful when it exposes a bad assumption.

The bad assumption here is that there has never been an American alternative to bureaucratic charity on one side and corporate insurance on the other. There was. It was imperfect. It was uneven. But it was real, and for millions of people it worked.

Fraternal societies proved that poor and working-class Americans could build durable systems of mutual protection without waiting for either philanthropists or shareholders to save them. They proved that social welfare did not have to mean humiliation. They proved that medical care could be organized around membership and reciprocity rather than opacity and extraction.

Most of all, they proved that insurance used to be about more than financial engineering. It used to be about belonging to an institution that recognized you, expected something of you, and would show up when your life went sideways.

That world is gone. The needs it answered are not.

Originally published on The Cooper.

We Solved Insurance in 1752 and Then Forgot

Santiago Reyes — Wed, 18 Mar 2026 20:04:32 +0000

In 1752, Benjamin Franklin -- who, to be fair, was good at most things -- helped found the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. It was one of the first insurance companies in America, and it worked like this: homeowners in Philadelphia pooled their money. If someone's house burned down, the pool paid to rebuild it. The company was owned by its policyholders. There were no shareholders. There were no stock options. There was no quarterly earnings call where an executive explained why paying claims had hurt profitability.

The Contributionship still exists. It has been in continuous operation for two hundred and seventy-four years. It still insures homes in Pennsylvania. It is still owned by its policyholders. And it is, by almost every measure, a better deal for consumers than the publicly traded insurance companies that now dominate the market.

So here's my question: if we figured this out in 1752, why did we forget?

How Mutuals Worked

The mutual insurance model -- where the policyholders own the company -- was the dominant form of insurance in America for most of the nation's history. As late as 1960, mutual companies wrote nearly half of all property and casualty insurance premiums in the United States. They had names you might recognize: State Farm (founded 1922 as a mutual), Nationwide (1926), Liberty Mutual (1912), USAA (1922). The model was simple: policyholders paid premiums, the company invested the premiums conservatively, claims were paid from the pool, and any surplus was either returned to policyholders as dividends or used to strengthen reserves.

The incentive structure was elegant. In a mutual company, there is no tension between the interests of policyholders and the interests of shareholders, because they are the same people. The company has no reason to deny legitimate claims, because the claimants are the owners. The company has no reason to maximize premiums beyond what's needed to maintain adequate reserves, because overcharging the policyholders is overcharging the owners.

Compare this to a publicly traded insurance company, where the CEO's compensation is tied to stock price, the stock price is tied to earnings, and earnings go up when the company collects more in premiums and pays less in claims. In this model, every claim paid is a dollar taken from shareholders. The incentive to deny, delay, and underpay is baked into the corporate structure. It's not a bug. It's the business model.

The Great Demutualization

Starting in the 1980s and accelerating through the 1990s and 2000s, a wave of "demutualizations" swept through the insurance industry. Mutual companies -- owned by their policyholders -- converted to stock corporations, owned by shareholders. The stated reasons were usually about access to capital. Stock companies could raise money by selling shares. Mutuals couldn't. In a consolidating industry, access to capital meant the difference between acquiring and being acquired.

But the real driver was simpler and less flattering: demutualization made people rich.

When a mutual company converts to a stock company, the ownership interest that policyholders hold in the mutual is converted to shares of stock. In theory, this gives policyholders a proportional stake in the new company. In practice, the executives who engineered the conversion often walked away with disproportionately large share allocations, stock options, and compensation packages.

When MetLife demutualized in 2000, CEO Robert Benmosche received a compensation package worth over fifty million dollars. Prudential's demutualization in 2001 made its executives hundreds of millions. John Hancock, Manulife, Sun Life -- the list goes on. In each case, policyholders received some shares, executives received a lot of shares, and a company that had existed to serve its members was transformed into a company that existed to serve its shareholders.

The result: the percentage of insurance premiums written by mutual companies fell from nearly fifty per cent in 1960 to roughly twenty-five per cent today. The cooperative model that Franklin helped pioneer -- the one that aligned the interests of the insurer with the interests of the insured -- has been systematically dismantled in favor of a model that does precisely the opposite.

The Numbers Don't Lie

Here's what the data shows, if anyone cares to look.

A 2023 study by the National Association of Mutual Insurance Companies found that mutual insurers returned an average of sixty-seven cents of every premium dollar to policyholders in the form of claims payments and dividends. Stock insurers returned fifty-four cents. That thirteen-cent gap is the cost of shareholder profit, executive compensation, and stock buybacks. Over the life of a policy, it adds up to thousands of dollars.

Mutual insurers also have higher customer satisfaction ratings, lower complaint ratios, and more stable pricing. They are less likely to withdraw from difficult markets. They are less likely to raise rates dramatically after a bad year. This isn't because mutual executives are morally superior to stock executives. It's because the incentive structure doesn't reward them for squeezing policyholders.

The Cooperative Revival

Against this backdrop, a small but growing number of new cooperative insurance ventures are trying to bring back the mutual model. Organizations like Canopy Cooperative in Vermont, Kin Insurance in Illinois, and Lemonade's original peer-to-peer model are experimenting with structures that put policyholders back at the center.

The challenges are real. Cooperatives can't raise capital by selling stock, which limits their growth. They require a level of member engagement that's difficult to sustain. They face regulatory frameworks designed for stock companies. And they're competing against incumbents with massive scale advantages.

But they have one advantage that no amount of capital can buy: their interests and their customers' interests point in the same direction. In an industry defined by the tension between who pays and who profits, that alignment is not a small thing. It is, in fact, the whole thing.

Benjamin Franklin understood this in 1752. He built a company where the people who paid for protection were the same people who controlled the company. It wasn't complicated. It wasn't disruptive. It was just... sensible.

We don't need to invent a better insurance model. We had one. We just need to remember why we abandoned it -- and who benefited when we did.

Originally published on The Cooper.

Why Your Health Insurance Doesn't Cover That

Santiago Reyes — Tue, 17 Mar 2026 08:37:38 +0000

If you've ever stared at a medical bill and thought, "Why doesn't my insurance cover this?" I want you to know that the answer traces back to a bureaucratic workaround from 1943, a tax loophole that nobody planned, and a series of decisions by people who are all dead now. You're not dealing with a system. You're dealing with an accident that nobody has cleaned up in eighty-three years.

Here's the origin story. During World War II, the federal government imposed wage and price controls to prevent wartime inflation. Employers who wanted to attract scarce workers couldn't offer higher salaries -- that was illegal. So they offered health benefits instead. In October 1943, the War Labor Board ruled that employer contributions to health insurance did not count as wages for the purposes of wage controls. It was a workaround. A hack. The bureaucratic equivalent of propping up a table leg with a folded napkin.

Then, in 1954, Congress passed the Internal Revenue Code, Section 106, which excluded employer-provided health insurance from taxable income. This was not the result of a grand policy debate about the best way to organize health care in the richest country in the world. It was a tax clarification that codified what had already become standard practice. Nobody voted on whether tying health insurance to employment was a good idea. It just happened, and then it became permanent, and then one hundred and fifty-seven million Americans ended up depending on it.

The Design Flaw

The problem with a system designed by accident is that nobody designed it to work well. And the employer-based model has a structural flaw so fundamental that it's almost funny: it ties your access to health care to the one thing in your life most likely to change without warning.

You lose your job. You lose your insurance. You get sick. You can't work. You lose your insurance. You start a business. You lose your insurance. You get divorced from the spouse whose employer provided your coverage. You lose your insurance. In what universe does this make sense?

The COBRA Act of 1985 was supposed to address this by allowing people to continue their employer-sponsored coverage for up to eighteen months after leaving a job. The catch? You have to pay the full premium yourself -- the portion your employer was subsidizing plus your own share. The average COBRA premium for family coverage in 2025 was twenty-four thousand dollars per year. For someone who just lost their job. Truly, a masterpiece of policy design.

Who Benefits

Here's the thing about the employer-based system that nobody in Washington will say out loud: it survives not because it works, but because the people who benefit from it are the people who make the rules.

The tax exclusion for employer-sponsored insurance is the single largest tax expenditure in the federal budget -- roughly three hundred and fifty billion dollars per year in foregone revenue. That money disproportionately benefits higher-income workers, because the tax savings are larger for people in higher tax brackets. A CEO whose employer provides a gold-plated health plan saves thousands of dollars a year in taxes. A minimum-wage worker whose employer doesn't offer insurance saves nothing.

Insurance companies benefit because the employer-based system gives them a guaranteed customer acquisition channel. Employers do the work of enrolling employees, collecting premiums, and managing the administrative burden. The insurers just collect the checks.

Employers themselves have mixed feelings, but large employers -- the ones with lobbying budgets -- generally prefer the current system because it gives them leverage over their workforce. Health insurance is the golden handcuff. It keeps people in jobs they might otherwise leave. There's a term for this in economics: "job lock." It is estimated to affect between five and twelve million American workers at any given time. People who stay in jobs they want to leave, or decline to start businesses they want to start, because they cannot afford to lose their employer-sponsored health insurance.

The Road Not Taken

It didn't have to be this way. In 1945, President Harry Truman proposed a national health insurance program that would have covered all Americans regardless of employment status. The American Medical Association called it "socialized medicine" and spent the equivalent of thirty-five million dollars in today's money on an advertising campaign to kill it. They succeeded.

In 1971, Senator Ted Kennedy introduced a single-payer health insurance bill. President Nixon countered with a proposal to mandate employer-sponsored coverage. Neither passed. In 1993, the Clinton administration proposed a managed-competition model. It died in Congress. At every turn, the employer-based system survived not because anyone argued it was the best approach, but because changing it was politically harder than keeping it.

The Affordable Care Act of 2010 was the most significant reform in the system's history, and it explicitly preserved the employer-based model. It had to. The political cost of disrupting employer-sponsored coverage -- of telling one hundred and fifty million Americans that their insurance was going to change -- was a price no politician was willing to pay.

What Now

We are stuck with a health insurance system that was never designed, never debated, and never chosen. It emerged from a wartime wage freeze, was cemented by a tax code provision that nobody thought through, and has survived for eighty-three years because the people who benefit from it are better organized than the people who are harmed by it.

Every other wealthy country on earth figured this out. Not one of them ties health insurance to employment. Not one. The United States is the only country that looked at the problem of how to insure its citizens and said, "I know -- let's make it depend on whether they have a job, and which job it is, and whether that particular employer feels like offering benefits."

The War Labor Board members who made that ruling in 1943 were solving a short-term problem. They did not intend to design America's health care system. Nobody asked them to. But that is what they did, and we have been living with the consequences -- the coverage gaps, the job lock, the medical bankruptcies, the fundamental absurdity of it all -- ever since.

Originally published on The Cooper.