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The Honolulu Advertiser

Posted on: Sunday, January 23, 2005


Small businesses can't wait forever

By Bev Harbin

It's been going on for years.

Small-business owners have been screaming that five is sues must be addressed by the policy-makers in the Legislature if those small-business owners are ever going to achieve success and growth and provide comfortable and healthy lifestyles for their employees:

• Healthcare reform, especially for the Prepaid Health Care Act of 1978, the Mutual Benefit Society law and subsequent administrative rules.

• Workers comp reform.

• Tort reform.

• De-pyramiding of the state Gross Income Excise tax (services to services).

• Regulatory relief, especially the continuing implementation of the Hawaii State Regulatory Flexibility Act of 1998.

Nobody hears the screaming.

The small-business community is frustrated. Democratic state Rep. Kirk Caldwell told The Advertiser recently that "It looks like too many divergent views, and no one's coming together."

Well, it's time to come together. These aren't "us-against-them" issues. We all want to accomplish the same things!

The attitude in the Legislature has traditionally been to "protect the worker." Back in the day, there's no question that Hawai'i's workers were taken advantage of, and it was right to pass legislation and install constraints that would level the playing field.

But the pendulum has swung way too far. For the past decade or so, Hawai'i's small-business employers have been struggling, while some of our legislators are doggedly protecting outdated laws that were passed to correct inequities that no longer exist.

Most small-business employers now recognize their employees are their most important assets. The employers want to provide incentives, superb benefits and comfortable working conditions.

They know competition for good employees is fierce now, and they know demands on employers are increasing. Given a little slack by the Legislature, they can improve the conditions and lives of their employees as they find ways to nourish their businesses.

But the issues for reform are complicated. Here's just one example:

Mutual benefit societies (MBS's) — notably HMSA, Hawaii Management Alliance Association (HMAA) and University Health Alliance (UHA) — hold a unique tax-exempt position in our economy and in our business community.

Management of a mutual benefit society does not have to answer to either shareholders or members. There are no shareholders because an MBS is a nonprofit organization.

Their members cannot effectively hold any power, nor can members affect the makeup of the board of directors.

The operation of these non-profit companies is in the sole and self-perpetuating control of the management, which is not accountable to anyone except the state insurance commissioner.

And the commissioner has limited authority and is only an outside regulator who can address problems only after they have reached the point of crisis (as was the case with the Pacific Group Medical Association).

In the meantime, MBS's are free to impose upon employers and employees coverages or contract provisions that may or may not be to the benefit of employer and employees, whether they like it — or can afford it — or not.

We feel it would make good sense to require that mutual benefit societies have one or more "outside" directors who are not appointed by management or by a board of directors that itself was appointed by management.

We favor legislation that would require MBS bylaws and constitutions to provide for nominations and elections by all the members, and that at least one-third of the board members be comprised of small-business owners and physicians who provide services to members.

That would assure that there would be independent voices on the board of directors of an MBS that truly represents the majority of the members.

Right now, there are no checks and balances. Boards of directors are supposed to be the first line of defense against poor or illegal management decisions.

Regulators become the "second line." In Hawai'i, there is no first line.

The issue can be addressed in legislation written by the Employers' Chamber of Commerce. Sponsors for the bill have been found, and it may be sent to committee for hearing.

But it surely will die in committee. Policy-makers have hundreds of bills to read and consider. Committees have only so much time to spend on each bill, and it's safe to say that none will take the time to research the facts upon which each bill is based.

Since the entire fabric of the workforce in Hawai'i has changed, the time is here for everybody to understand what's going on. Traditional lines between labor and management are less clearly drawn now; the issues affect both camps equally.

Part of the Employers' Chamber of Commerce mission is to clarify the issues for the policy-makers who will address them. We have five months to accomplish this. We're prepared to do that, and would welcome some legislative kokua in that pursuit.