Hugo Black

“ Nevertheless it argues that Southern Bell's plan should not be treated as 'health insurance' because the employees paid no fixed periodic premiums, there was no definite fund created to assure payment of the disability benefits, and the amount and duration of the benefits varied with the length of service. [2] We do not believe that these facts remove the plan from the general category of health insurance. The payment of premiums in a fixed amount at regular intervals is not a necessary element of insurance. ”

“ Broadly speaking, health insurance is an undertaking by one person for reasons satisfactory to him to indemnify another for losses caused by illness. We believe that the Southern Bell disability plan comes within this meaning of health insurance.
If Southern Bell had purchased from a commercial insurance company health insurance that provided its employees with precisely the same kind of protection promised under its own plan, the Government concedes that the payments received by ailing employees from the commercial company would not have been taxable. ”

“ United States, 199 F.2d 508, 511, the Seventh Circuit was of the opinion that: 'The provisions of Section 22 (b) (5) undoubtedly were intended to relieve a taxpayer who has the misfortune to become ill or injured, of the necessity of paying income tax upon insurance benefits received to combat the ravages of disease or accident.'↑ Section 22 (b) (5) can be traced to § 213 (b) (6) of the Revenue Act of 1918, 40 Stat. ”