During World War II, the US government imposed wage controls to contain inflation.

With labor increasingly scarce, employers struggled to attract workers because they couldn’t freely raise wages. They found a workaround: offering additional compensation through fringe benefits, particularly health insurance. Comment “Healthcare” and we’ll send you the full video. In 1943, the National War Labor Board ruled that employer contributions to health insurance wouldn’t count as wages subject to government controls. Moreover, employer-paid health insurance premiums were generally excluded from employees’ taxable income, making them more attractive than equivalent wage increases. These incentives encouraged the expansion of employer-sponsored health insurance. The arrangement survived the war, and Congress formally codified its favorable tax treatment in 1954, helping institutionalize America’s employment-based health insurance system.