May 6, 2014
Dueling diagnoses
State Rep. Angus McKelvey likes the metaphor: Finding the best fix for the Hawaii Health Connector is like trying to fix an airplane after takeoff. You have to do it very carefully, he said. That is the whole approach to the current version of House Bill 2529, originally a proposal to make the Connector a state agency.
"That's a good analogy," McKelvey said. "It's why we rewrote it It would have been like taking the wings off in flight."
Nobody really expected it to loom so large as an issue this session, McKelvey said. But it's more than likely that a lot of midnight oil will be burned addressing various problems with the Connector the private nonprofit that runs Hawaii's online health insurance exchange, set up under the federal Affordable Care Act.
Before and after its October launch, critics have said the whole thing should have been more open to the public, that there shouldn't be industry officials making decisions who can plainly vote their companies' interest. There are several bills that attempt to make various changes (see story, page E4).
But the biggest headache the thing that could bring the plane crashing down is the lack of funding to keep the agency running. What's worrying everyone is that the nonprofit is subsisting now on more than $204 million in federal grants that expire at year's end; beyond that, sustainability is in doubt. The presumed funding source fees assessed on enrollments in plans sold through the Connector is not penciling out.
Every Tuesday the most current enrollment figures are posted at the site (hawaiihealthconnector.com). Last week's update: Since Oct. 1 there have been 4,297 enrollments in the individual marketplace, and 444 employers applying for small-business coverage plans.
Considering the March 31 enrollment deadline is just over a month away, those aren't good numbers. The original projection had been that the Connector needed to sell 300,000 plans within two years in order to be self-sufficient.
The cost to run the agency in 2015 has been estimated at $15 million, said Steven Tam, director of advocacy for AARP Hawaii, one of the public interest groups involved in discussions about the exchange from the start.
"It appears also and no one has disputed it that they don't have a plan; the revenue to cover it is insufficient," Tam said.
The competing options at this point:
* The House proposal is to bring the nonprofit more closely under state supervision and have an oversight panel decide whether or not taxpayer support is necessary.
* The Senate idea is to leave the nonprofit more independent but assess a sustainability fee from everyone who buys insurance.
Tam isn't sure he likes the idea of subsidies: The state doesn't yet know what it's buying, he said, and should get more information before owning a piece of the Connector.
"Before you do anything, you have to look before you leap," he said. "You're in essence agreeing to buy a house without an inspection."
The person crunching the numbers right now is Tom Matsuda, who took over as acting director of the Connector when the former chief executive, Coral Andrews, resigned last fall.
And the problem, Matsuda said, is that the numbers are likely to keep changing over the coming years, as a series of deadlines set in the ACA take effect. Also, the adjustments in these deadlines made by the Obama administration have changed the calculations as well.
One instance he cited: States currently have the option to define the maximum number of employees a company can have to qualify for tax credits if they buy insurance on the exchange.
"The state last year elected to stick with the current definition, which is 50 employees or less," Matsuda said. "But in 2016, under the ACA federal law, it becomes a mandatory 100 or less.
"That expands the number of employers who potentially could sign up on the exchange," he said. "That's just a simple example of how the upcoming rules really affect enrollment, and therefore it affects sustainability."
Another example: The tax credits themselves are due to expire in 2016.
"It's meant to attract businesses into signing up for ACA plans on the exchange," Matsuda said. "I don't know what the thinking was for the Congress to have it cut off after two years but I think it was to build momentum.
"But from a sustainability standpoint, for us, if that incentive disappears after a couple of years, what is that going to do to enrollment? We don't know."
Lawmakers are asking Matsuda to come up with a financial plan, but he said that all the changes and uncertainty means that it won't be a simple plan but one sketching out different scenarios.
McKelvey, who chairs the House Consumer Protection and Commerce Committee, is working on the issue with state Rep. Della Au Belatti, who chairs the Committee on Health. Belatti said she believes changing the Connector to a state agency would be a difficult but possible transition, and ultimately, that may be the long-term destination for the exchange.
"Hawaii was unique in taking the option to create a nonprofit that, at its inception, was largely independent of state government, Belatti said.
"I think the decision-making at the time was sort of, What could we do, how would it be most expedient, in the sense that there would be flexibility, given the tight timelines, the opportunity to do something innovative?'" she said.
Earlier this session McKelvey heard the assertions by Matsuda and state attorneys that a sudden conversion from private entity to state agency could disrupt federal grants in progress (see chart, page E5). But while Belatti has joined McKelvey on staking out a middle path, she's not entirely convinced it was necessary.
"I don't think it's quite as onerous as some of them are making it out to be," she said. "Because really, the only amounts of money that they have is federal grants. And my understanding is that our federal partners have been made aware of the legislation moving."
That middle path described in the House bill would allow the state to "take a proactive oversight role to monitor the Connector and review its financial and operational plans," while it remains legally a nonprofit.
It was adapted from the approach taken in Colorado, McKelvey said, and would create a legislative oversight panel of 12 members appointed from House and Senate Health, Consumer Protection and Finance committees.The panel would review the sustainability plan for the Connector and determine what kind of fee it could charge.
By contrast, Senate Bill 2471 would simply authorize the levy of a fee on all health and dental insurance plans issued in the state, whether or not it was issued through the Connector.
On one point in particular, the House and Senate are in agreement: The governing board of the Connector would no longer include voting members from the health or dental insurance industry. Among the proposals likely to come before the conference committee later this session is one creating an advisory panel on which industry representatives would sit so that the Connector could have access to their expertise, McKelvey said.
That's a point of satisfaction to the AARP, which had argued vociferously against including health executives as voting members in the first place.
Tam said a public briefing set for this week should help address one of the principal shortcomings of the state's relationship with the Connector: the free flow of information. As a private entity, the exchange has not been subject to state sunshine law, but now, open-meeting requirements are likely to be added.
In any case, Tam said, the public needs to know what they're getting and should insist on something approaching a financial plan before absorbing any of the costs.
"Our main point to the Legislature is to get the due diligence first, find out before you make any decisions," he said. "What do they project at this point in time? What is their best estimate of the revenues they will get in 2015?
"What we're asking for is, give us information."
May 6, 2014
Breweries bill clears conference
A bill that would aid Hawaii small producers of beer, liquor and wine, including Maui Brewing Co. and its expansion in South Maui and possibly Tedeschi Vineyards in Ulupalakua, cleared the state House-Senate conference committee Thursday.
"This measure not only strengthens manufacturing and small business in Hawaii, it also offers our local breweries the opportunity to make different types of beverages that contain our local fruits and fermentables, which in turn supports local agriculture," said West Maui Rep. Angus McKelvey, a sponsor of the bill.
The measure, which still needs to pass the House and the Senate and be signed by the governor, is pivotal to Maui Brewing Co., which is in the process of completing a new brewery in the Maui Research & Technology Park. When the 42,000-square-foot brewery opens in August or September, Maui Brewing Co. will have the ability to produce about 40,000 barrels annually, according to company owner Garrett Marrero.
Work on the Maui Brewing Co. brewery in the Maui Research & Technology Park in Kihei continues Friday. The 42,000-square-foot brewery with tasting room is scheduled to open in August or September, with a brewpub next year.
This will exceed the current limit of 30,000 barrels for brewpub licenses. The company with a brew house in Lahaina and brewpub in Kahana produces more than 22,000 barrels of beer, he said earlier this year.
The measure passed by the conference committee eliminates the barrel limit.
"The concern was if we had not passed this measure it could have been very problematic for his business," said West and South Maui state Sen. Roz Baker, who introduced the bill in the Senate. "We're all about trying to promote local businesses and expanding jobs."
Marrero, who said he operates "the largest craft brewery in the state" and was involved in the drafting of the bill, said that while the measure was not "entirely self-serving . . . it certainly was important" to his company.
Another provision - the addition of a small craft producer pub license - should benefit small wineries, such as Tedeschi, and his brewery, he added.
Marrero said his company has plans to seek the small craft brewery license in the future to diversify his product lines with distilled spirits. While Maui Brewing Co. has no plans to produce wines, the company is interested in ciders and gluten-free alternatives "to showcase our local agriculture market," he said.
He noted that his company's beers use "local agriculture . . . guavas, hibiscuses and the wonderful flora and fauna here to produce unique products."
"We continue to innovate and twist the drinkers' mind" as Maui Brewery produces new lines, such as coconut beer, he said.
The measure also could benefit the Tedeschi winery by increasing the ceiling on production from 10,000 barrels a year to 20,000 barrels, said Baker.
Another issue that Marrero hoped the Legislature would address this session was the tax rates for breweries, which he said are some of the highest in the country.
"It is crippling the growth of craft brewing," he said.
He said that Maui Brewing is a large enough company to be able to budget for the taxes, but it is "hard for small guys starting out. $2.09 (the tax per case of beer) is a pretty big penalty."
Throw in the highest utility and insurance rates in the nation and the costs are pretty daunting for small breweries, he said. Marrero noted that he could produce beer at half the cost on the Mainland and bring it into the islands, like some other beer producers.
"If they want to see the industry grow, they need to see that tax shrink," he said, adding that he plans to push for lower taxes next session.
Efforts to lower spirit taxes were "problematic" this session, said Baker. There was less money to go around with the reduction in estimated revenues for the state during the session, she said. In addition, lawmakers were told that lowering of the taxes "would sweep people in" from the Mainland and not benefit only local breweries.
May 6, 2014
County to receive more TAT revenues
Minutes before the 6 p.m. deadline to file fiscal bills Friday, state lawmakers raised by $20 million over two years the amount of funds counties will share from the transient accommodations, or hotel room, tax, but the $113 million was much less than the counties had sought.
The amended bill that made it out of the state House-Senate conference committee Friday night was not the one Mayor Alan Arakawa and the Maui County Council had lobbied for. Maui County officials, along with their counterparts from the state's other counties, had sought to restore the 44.8 percent of TAT revenues they had received prior to 2010. The state Legislature capped the counties' share of TAT revenues at $93 million that year as the state grappled with difficult economic times.
Maui County receives 22.8 percent of the counties' share of the TAT. The City and County of Honolulu gets 44.1 percent; Hawaii County, 18.6 percent; and Kauai County, 14.5 percent.
The amended version of the bill does not remove the cap, but it does raise it by $10 million each of the next two years, lawmakers said Friday. That means in the next fiscal year, which begins July 1, the cap will be raised to $103 million and in the following fiscal year to $113 million.
"It did pass, but unfortunately not the way we originally wanted it," West Maui Rep. Angus McKelvey said in a phone interview Friday evening. "We were concerned it would die because of the lack of time. Speaker (Joe) Souki forced the bill onto the agenda and got a vote before the close in really, the last few minutes."
"It's a compromise, but at least we'll get something back for the counties," he said.
State Finance Director Kalbert Young has said that if the counties once again received their 44.8 percent cut of the TAT, the state general fund would lose $81 million in the upcoming fiscal year and $98 million the next.
Arakawa told council members in his budget presentation last month that if the cap was lifted, the county could see an additional $17 million in revenue, which would help alleviate the need for his proposed across-the-board property tax hikes.
"If the state removes the cap, there should be no property tax increase," Arakawa said in March. His budget proposal for the upcoming fiscal year includes an approximately 6.5 percent across-the-board increase for all real property classifications.
Council Member Mike White said Friday night that he was "disappointed" that the bill was not passed in its original form.
"It's very disappointing because the state, over the last two years, has collected approximately $250 million more than they would have had the changes not been made to the calculations," White said, adding that the cap was implemented as a temporary measure to help the state with its budget shortfall.
"The impact directly to Maui is that we've received $28 million less than we would have over the last two years," White said.
He said that adding an extra $10 million to the cap would only benefit Maui by about $2.2 million next year, "less than a tenth of what we've lost in the last two years."
"It is the counties that provide water and sewer service; police, fire and ocean safety protection; development and upkeep of most roads; and park development and maintenance - all of which are used to provide visitors with a quality experience," White wrote in a Maui News Viewpoint last month. "The clear majority of visitor needs are filled by the counties, not the state."
White said Friday that he did not know how the bill would affect the council's ongoing budget deliberations, if at all.
At the state Capitol, it was a mad dash to the finish, as House and Senate leaders scrambled to pass bills before the 6 p.m. deadline Friday.
"We had to make some tough cuts, so, in the end, not everybody's happy but that's how it always is," Souki said via phone an hour after the deadline passed.
The Maui Democrat said that one of the biggest issues that arose this session was raising the minimum wage, for which lawmakers agreed to increase from $7.25 to $10.10 per hour over four years.
Bills that made it out of conference committee by Friday will appear before the Legislature for final reading either Tuesday or Thursday, the last day of the session.
A bill that didn't make it out of conference committee would have allowed state public hospitals, including Maui Memorial Medical Center, to enter into a public-private partnership. A similar bill proposed last session also died in conference committee.
"We'll keep working on it," West and South Maui Sen. Roz Baker said. "Sometimes, we let trying to do things perfectly right get in the way of doing something that's serviceable. I kind of think that's what happened with this one."
Baker, who chairs the Senate's Commerce and Consumer Protection Committee and is vice chairwoman of the Health Committee, said that the two chambers just couldn't agree on the final draft of the bill, a common occurrence especially in the final "hectic" hours before the deadline.
Baker said that next session she hopes to start focusing in on some of the problem areas earlier "so we don't end up at the end with people not feeling comfortable as time runs out."
"I don't think the issue with health care at HHSC (Hawaii Health Systems Corp.) and resources, or lack thereof, is going away," Baker said.
HHSC manages and operates Neighbor Island public hospitals, including Maui Memorial, Kula Hospital and Clinic, and Lanai Community Hospital. It also manages and operates three facilities on Oahu.
Overall, Baker, McKelvey and Souki said they were "happy" with the bills that did make it through this session, and optimistic going into the final week of the legislative session.
"There are some disappointments along the way, but I think when the dust settles and we can assess all of the things that we did pass, we got some really good things for Maui and the state," Baker said.
She said that Maui lawmakers were able to secure funds for the pier at Maalaea, the Lahaina bypass and two positions for the boarding program at Lahainaluna High School.
Several Central Maui projects were included in the $12 billion state budget lawmakers advanced Friday.
Lawmakers appropriated $32.5 million for design and construction of a new parking garage at Maui Memorial. They also approved $10 million for the construction of a new access road to Kahului Airport from Hana Highway, and an additional $6 million for other improvements at the airport.
Other Central Maui capital improvement projects include:
* $10 million for the widening of Puunene Avenue from Kamehameha Avenue to Kuihelani Highway that will increase the current two lanes to four lanes.
* $9.7 million for the design and construction of the Central Maui Regional Park and Sports Complex.
* $4 million to Hale Mahaolu for construction of senior affordable rental housing at Kulamalu Town Center subdivision.
* $2.7 million for a new Maui Food Innovation Center at the University of Hawaii Maui College.
* $2.5 million for planning and design for a new middle school in Central Maui.
* $2 million for construction of a new gymnasium at Maui Family YMCA.
* $750,000 for Maui High School for weight training/wrestling rooms and to renovate band/choir building.
March 14, 2014
Lawmakers look to ban ticket scalping
HONOLULU (HawaiiNewsNow) -
Bruno Mars ticket sales have inspired government legislation. Some lawmakers now want to create an anti-scalping law.
Hawaii used to have a scalping law 15 years ago but it was repealed. Now we're one of the few states in the country where scalping is legal.
Bruno Mars is the hottest ticket in town. So much so a pair of seats in the second row are going for $11,000 on StubHub. If prices seems excessive you're not alone. A bill at the State Capitol today would make scalping or reselling a ticket for more than face value against the law.
"I think what we're trying to do is stop this wholesale scalping movement," said Rep. Angus McKelvey, (D) West Maui
State Rep. Angus McKelvey actually introduced the bill before the Bruno Mars tickets skyrocketed and it's getting much more attention now.
"We plan to be very methodical and look to what other states have done since they have worked through a lot of these issues themselves," said Rep. McKelvey.
He says it would help with counterfeiting problems and also wants to outlaw computer bots buying up the tickets.
"We want to use the opportunity of anti scalping to look at the bot phenomenon, especially when you may, not to say that's its happened, have a situation where bots seize up all the tickets simply because the person wants to resell them for scalping purposes," said Rep. McKelvey.
Enforcement is a big question especially for online sales.
"Can they put it into effect in Arizona if someone in Arizona bought a couple of tickets and is selling, scalping them? I don't think it would have an effect. It just wouldn't work," said Tom Moffatt, A Tom Moffatt Production.
Promoter Tom Moffatt's office is all for protecting people but doesn't want lawmakers to rush a flawed law and prevent future blockbusters from coming to town.
The scalping law applies to all events in the State.
The bill was heard at the Capitol today. No vote was taken. Lawmakers plan to work with the parties involved to craft the bill correctly.
The following statement was released by Barbara Saito, with A Tom Moffatt Production:
"As longtime promoters in this state, we welcome protections that aid residents in purchasing tickets to shows they wish to see. The resale of tickets far in excess of their face value hurts everyone connected with a promotion except for the scalper, but there are circumstances, particularly charitable fundraising, where such a resale is of benefit to the community. What comes to mind first and foremost is the donation situation surrounding Elvis' "Aloha from Hawaii" concert to benefit the Kui Lee Cancer Fund, which had =no= ticket price but was driven solely by donations...all of which were "in excess" of the face value of the ticket.
A rush to pass any resolution or especially a piece of law without an extensive understanding of the way the industry works -- from the promoters, to the venues, to the primary ticket brokers, to charities, to hotel room sales, to the measures already in place within the industry itself -- could cause more harm than good. A flawed law could potentially cause entertainers to bypass Hawaii altogether, which is not a solution of any kind.
Attempting to push legislation through based on one event, as opposed to looking at a history of events for which scalping has been an issue, puts undue pressure on the one event to prove the merit of the law. Each event is its own set of circumstances and there's not typically a "one size fits all" approach to the scalping issue. So it's a proposed law that needs to do its homework, and we're happy to be a part of that process."