S.C. Small Businesses Think Outside The Box

S.C. Small Businesses Think Outside The Box

By Lori Anne Parker, Carolinas Health Plan Analysis

November 30, 2006

In South Carolina, only 40 percent of small businesses currently offer health insurance to their employees, according to the South Carolina Small Business Chamber.

With health premiums continuing to price more employers out of the insurance market, Frank Knapp, president of
the South Carolina Small Business Chamber and Lathran Woodard, executive director of the South Carolina Primary 
Health Care Association, came up with an idea to provide the most basic healthcare to small business’ employees.

The idea was simple: encourage small businesses to pay for their employees to use federally-subsidized Community Health Centers for their primary and preventive care. 

“We provide healthcare service to uninsured already and it occurred to me—why can’t we see those employees who don’t 
have coverage as well?” said Woodard.

Such arrangements, Knapp explained, take advantage of readily available, low cost and federally-subsidized healthcare while giving small business owners a way of offering healthcare to their employees even if insurance premiums remain out of reach. It’s no substitute for comprehensive coverage, but it supplies basic primary care and a bare-bones formulary of low-cost prescription drugs. 

“The nice thing about this program is that we are linking directly with providers, and providers who don’t have an 
interest in increasing their costs. Working with health insurance companies to make insurance more affordable does not get at the true root of the problem—actual medical costs,” Knapp said.

In many ways this was an obvious solution, according to Knapp, especially given the strong infrastructure of the Community Health system in the state. 

The idea was to create a plan to hook up small businesses with primary healthcare centers, and “dip into a bucket of 
federal money already there,” said Knapp.

Necessity Is The Mother. The idea came to Knapp and Woodard while they were sitting on a task force about lowering health insurance costs for small businesses. 

“We decided that task force was not going anywhere. We thought if we cannot get a handle on insurance cost, then 
why not do something about the cost of healthcare itself?” said Knapp. 

Once the two came up with the idea, they started thinking about ways such a program could be implemented. Needed, 
of course, was a small business willing to participate.

“Frank went to members of the small business chamber and talked to them to see if we had any takers. We both 
went across the state doing informational meetings,” said Woodward. “The question was who was going to take the 
first step?”

A Willing Participant. After a lot of work, Knapp and Woodard finally found the employer they were looking for—
Mid-Carolina Steel, a company based in Columbia, S.C.

Free to design the health plan in a way suitable to his business, the owner Fred Seidenberg, decided to offer his employees and their dependents all of their primary care for a $10.00 copay per visit as long as they went to one of two participating community health centers. The only additional cost employees would incur would be prescriptions received at one of the clinics. Since clinics have on-site pharmacies, those costs would be low. All remaining costs associated with the visits would be paid on a fee-for-service basis by Siedenburg. 

Employees of the company were given identification cards, which told the center to charge the upfront copay. For the remaining costs, the centers simply sent bills to Mid Carolina. 

The pilot was launched in September 2005 and the results were remarkable. Ten months into the pilot, Seidenberg had 
spent $1,900 on care for his employees and their dependents. More than a year later, Seidenberg is continuing to offer the plan to his employees. On their part, employees have been pleased with the plan, said Knapp—both in terms of cost and care.

The Future. The idea of linking employers to the community health centers is already drawing the attention of various
groups from around the country that have contacted Knapp and Woodard for more information. 

“Any center can go out and do this,” said Woodard. “Individual health centers can decide to do it.” Ease of creation coupled with design flexibility makes it easy to see why such plans are desirable.

Since the arrangement doesn’t provide anything beyond primary and preventive care, filling this gap is one of the challenges ahead, said Knapp. Possibilities include bundling the employer-clinic partnerships with catastrophic care options. 

In a meeting on Oct. 18, Woodard and others met with the South Carolina Department of Insurance to discuss 
the future of the initiative. The arrangement between Mid Carolina and the centers poses no problems as it is simply a third party arrangement. What the DOI is mulling over, said Woodard, is the idea of an employer packaging the program along with indemnity coverage. The DOI wants to make sure this doesn’t open the door to some “fly by night plan,” that steps up to offer such coverage, Woodard said. 

The second issue the DOI is exploring is the idea of an employer partnering with the community health centers 
under a monthly capitation schedule, an arrangement of interest to at least one small business owner in South Carolina.

On both questions DOI has “promised fast turn around,” said Woodard. As far as bundling the plans with a catastrophic plan, DOI would most likely need to become involved. 

Coming Full Circle. Though arrangements between businesses and community groups are viable ways to provide
primary and preventive care, increasing access to care will in itself lead to lower insurance premiums, said Woodard

“We think it can really help in the long run. If we can get people in a healthier state and improve health outcomes and decrease hospitalization, for example, and if we can actually get people into care, we hope insurance companies will look at offering employers better rates,” she said.

The only drawback to the arrangements is the possibility of overloading the health clinics, but so far this hasn’t happened and is more like a problem the chamber would like to have, said Knapp. 

From Knapp’s point of view, the pilot with Mid Carolina Steel reveals two important things about the healthcare market,

“First, this is an affordable way of doing business. Second, it also shows that people do not abuse primary healthcare even when it is virtually free.”

OUTLOOK: Though the initiative created by the South Carolina Small Business Chamber in partnership with the Primary Health Care Association is a bold move, it is in many ways an obvious one. The initiative makes good sense and makes excellent use of an already existing healthcare infrastructure. Watch for more small businesses (if they are smart) to create similar programs for their employees.