Do I understand correctly that employment-based health insurance grew as a reaction to the Internal Revenue Code?
The link to the Internal Revenue Code remains is an important one, as the IRC contains special provisions related to employer-paid health insurance that apply to almost no other employer-paid benefits. If an employer paid the premiums for an employee's disability or life insurance, for example, this would have to be reported by the employee as taxable income. The cost of medical insurance, however, is tax-deductible for the employer as a business expense but doesn't have to be reported as income by the employees on their tax returns.