November 18, 2010; Source: Greenville News | Remember the debates about the “public option” in President Obama’s health care reform package? Once the President and his allies drifted away from the public option, some Democratic senators floated the relatively ill-explained alternative nonprofit health insurance cooperatives.
Republicans thought it was simply another version of the public option. Democrats thought it difficult to figure out, especially the idea that new nonprofit coops could somehow compete with the existing nonprofit and for-profit health insurance behemoths whose shortcomings were on the bill of particulars in favor of health care reform. Now in South Carolina, the nonprofit South Carolina Health Cooperative is up and running to serve small businesses. It pools the purchasing power of small businesses to buy commercial health insurance at a lower rate than any of the participating businesses could get on their own.
Whose idea was this? A 20-year old Georgia Tech business major, Cooper Littlejohn, who is the cooperative’s CEO, says he was interested in the concept when he worked at an insurance broker in his hometown where he noted that small businesses faced continually rising insurance rates of 20 to 40 percent even if the businesses didn’t have bad years “health-wise.” The cooperative is available to small businesses with 2 to 50 employees, though Littlejohn hopes to get the Department of Insurance’s approval to raise the top size to 100 employees.
What will it take for the cooperative to work? Littlejohn says that it needs to have 1,000 to 2,000 covered employees. A health care consultant in the state thinks that it will need 5,000 to get started and 50,000 covered employees to be sustainable. The jury is out on whether the coop will succeed, but the market is there. Only 40 percent of small businesses with 50 or fewer employees offer health insurance to their employees, according to the head of the South Carolina Small Business Chamber of Commerce. So it might or might not work, but give Littlejohn and the state credit. This is an excellent example of social entrepreneurialism, not the self-indulgent, self-promotional groups that tend to get the most national attention often with scant impact (except in terms of scarfing up federal grants and press inches).
As Littlejohn said, “I saw a problem and I wanted to help,” applying business discipline to a problem that the health insurance industry hadn’t been able to address. And despite the risky-ness of the venture, the state of South Carolina examined the cooperative’s business rationale and deemed it worthy of licensing. It is doubtful that Littlejohn and his colleagues will all wear company t-shirts, seek out photo-ops with celebrities and politicians, and declare themselves visionaries as they solve the problems of the world. They’ll just apply the tools of business to a social problem within a nonprofit organizational structure. How refreshing!—Rick Cohen