Lawmakers pushing for wider regulation powers

By Kevin Dayton
Advertiser Capitol Bureau Chief

After years of conceding that Hawai'i businesses are burdened by bureaucratic red tape and government oversight, legislators are considering a broad range of new regulatory laws they say are needed to protect consumers.

Lawmakers are suddenly arguing for an expansion of state regulatory authority into areas such as gas prices and health insurance rates. There also has been discussion of government intervention in the planned merger between Aloha and Hawaiian airlines, even though the state appears to have little authority over that industry.

The various proposals represent an abrupt shift from the late 1990s, when Democrats joined Republicans in talking about the dangers of overregulation and the need to ease the regulatory burden on business, and took some steps to pare Hawai'i's web of rules and regulations.

Although debate has surfaced on a number of issues, and hearings are being held on the airline merger, it is not clear whether any significant new laws will pass this year.

Senate Commerce and Consumer Protection Committee Chairman Ron Menor, D-18th (Waipio Gentry, Wahiawa), said he is confident of renewed public enthusiasm for a close watch over industry, even in the business community. In other words, imposing new regulations on the oil, health insurance and airline industries has an almost populist appeal in an election year.

"I think that there's strong public support for some form of state oversight in all of these three areas, because ... whether you're talking about airfares, the price of gasoline or the premiums that consumers and businesses have to pay for health insurance, all of these areas relate to pocketbook consumer issues that are very important and of great concern to the people of Hawai'i," said Menor, who will play a key role in any new regulatory scheme.

That message is markedly different from the one ruling Democrats have been trying to put out in recent years.

As Hawai'i's economic problems deepened in the late 1990s, lawmakers looked for ways to diversify the economy and attract new industry. That initiated a serious political discussion about reducing regulation, in part because the high-tech industry the state hoped to lure was concerned about the business climate.

Lt. Gov. Mazie Hirono launched her Slice Waste and Tape (SWAT) initiative to ferret out and scrap unnecessary state regulation.

But the results were disappointing. The business community still complains bitterly about overregulation; and politically, the initiative failed to catch fire in a way that would help Hirono win over the business community or build her reputation as a reformer.

Hirono believes SWAT was effective, especially as business people stepped up to point out which regulations were an unnecessary burden. "Actually, for all of the complaints, when they had the chance to come forward there were far fewer specifics," she said.

State Sen. Sam Slom, R-8th (Wai'alae Iki, Hawai'i Kai), dismissed talk of deregulation and Hirono's efforts. He said most lawmakers never really wanted deregulation.

"The things that were taken off the books, the things that they held the press conferences on and all of that, were manini rules and regs that affected very few people," Slom said.

"The really hard things — the permit process and the regulations that people in the regulatory review board have brought up — were never addressed."

Slom contends it is overregulation and overtaxation that is limiting competition in the marketplace, leading to monopolies and near-monopolies. But he acknowledges the community attitude is complex, with many in the public and businesses community demanding government involvement.

"I've said many times before, the new plantation is not in Waialua, it's at 415 South Beretania Street (the State Capitol)," Slom said. "You've got people begging all the time (for regulation), including businesses.

"I sat on the Commerce and Consumer Protection Committee for four years, and I would get ill because all of these businesses would basically come in and ask government to regulate them, and they weren't doing it because they were concerned about the public," Slom said. Licensing requirements "make an excellent barrier to entry, to keep competition out."

For politicians, regulation is simpler than addressing core problems, said Carl Takamura, executive director of the Hawai'i Business Roundtable.

Taking health insurance as an example, he said cost increases here and on the Mainland are driven by factors such as expensive new drugs and medical technology, an aging population and demand for an expanding list of services. But those aren't issues that state lawmakers can readily address.

"To try to really get a handle on what's driving the price up is complex, so I think regulation is sort of the knee-jerk answer," Takamura said.

Another problem with regulation, he said, is that price controls might lure people into a false sense of resolution, when in fact the problem might simply resurface elsewhere. "Regulating rates is not the same thing as controlling health care costs," Takamura said.

Slom cites the example of workers' compensation reform, in which lawmakers imposed new fee schedules reducing the amounts doctors are paid for treating patients injured on the job. That reduced workers' comp premiums for employers, but also made it more difficult for injured workers to find doctors willing to treat them.

Menor said that lawmakers still support eliminating "unnecessary and burdensome" regulations, but they are willing to impose oversight where there is a "compelling justification" to protect consumers.

That might include health insurance and gasoline prices as, well as the interisland airline industry, because these cases involve what are essentially monopolies rather than free-market competition, he said.

"When you have a monopoly situation and the free market is not necessarily working ... to provide the best services and prices to consumers, then I think government needs to step in," Menor said.

He said he hasn't decided whether new regulation is warranted in the oil, airline or health insurance industries, but is "very open" to the idea.

As to the odds of passing such proposals, Menor said the state has little authority over airline regulation, and lawmakers need more information about the oil industry before they can act. He said health insurance regulation, of the three, has the best chance of passage this year.

Reach Kevin Dayton at kdayton@honoluluadvertiser.com or 525-8070.