The Supreme Court Decision’s Impact on Hawaii

The US Supreme Court AP PHOTO
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The US Supreme Court AP PHOTO

BY SEN. SAM SLOM, R-HAWAII KAI – DIAMOND HEAD – A day after yesterday’s historic (and Constitutionally flawed) 5-4 Supreme Court decision upholding part of President Obama’s Health Care, all of the pundits have weighed in with their opinions of the decision. Few issues drew as much media and internet coverage as did the run up to, and the decision aftermath of, the decision.

The June 28 ruling was truly historic but probably for reasons other than the decision itself. It is safe to say EVERYONE was surprised at the rationale for the decision, both government proponents and taxpayer opponents of the Patient Affordability and Care Act (i.e., “Obamacare”).


Court watchers were surprised that “conservative” Chief Justice Roberts sided with the liberals to form the majority while “liberal” Justice Kennedy, sided with the generally conservative, or limited government wing, of the Court. They should not have been so surprised if they had listened to what Roberts, a Bush appointee, recently said about controversial measures, such as Arizona’s immigration law, and his view of the Court’s role in general.

Very few Court watchers or mainstream media, seemed to have a problem with the conflict of interest of Justice Kagan, the former Obama U.S. Solicitor General who aggressively had advocated for Obamacare.

Most observers (except for journalist Byron York) also paid little attention back on March 26, 2012. That was the first day of oral arguments and several of the Justices openly questioned whether or not the “penalty” for not having the insurance mandate was a “tax.” The Government argued absolutely not a tax. The issue was always thought to be about the Commerce Clause.

The genuine surprise was Roberts’ statement that it was not the Constitution’s Commerce Clause but the federal government’s right to tax that allows the law to stand. The entire Obama legal argument for his health plan was that it was a legitimate part of the Commerce Clause, and the continued insistence that the law was NOT a tax. Roberts said otherwise: it is a tax and that is why it is allowed.

This tax law now accounts for the largest tax increase in American history, and despite earlier political protestations, it will affect the middle class. And the medical profession. And small business. All negatively.

We can discuss or debate various parts of the ruling and the law itself. But the more important question is what will the impact be on Hawaii IF the law is not over turned by a President Romney?

Hawaii enacted the Nation’s first (and only) mandatory, compulsory, Prepaid Health Care Act in 1974. At the time, it was hailed as the wave of the future with the prediction that every state would adopt a similar law. It was to amount to “universal coverage” with 100% of the population covered. In fact, at one point, the law did cover about 96% of the population but Hawaii’s residents were already at 90% before the law. Today, the coverage amount has slipped to under 90% as insurance premiums continue to soar.

Hawaii’s law was challenged in court by Standard Oil. They lost. It was actually Republican President Nixon that made Hawaii’s law possible through an exemption to the federal ERISA law. Under the law, every employer must cover every employee who works “nineteen hours or more per week.” Over the years, many employers chose only to hire employees for less than 19 hours. Many more small business owners couldn’t pay for their own family insurance after covering employees.

To date, no other state adopted such a law, although ironically, Massachusetts, under Governor Romney, came closest, though not as comprehensive. Romney was criticized early by conservatives for passing the bill that they said president Obama later copied for his federal measure. Romney has consistently argued that individual states should pass legislation unique to their circumstances.

In Hawaii, pre-existing medical conditions were covered from the outset, although medical providers could set terms (usually 12 months of coverage before certain procedures were paid). There are medical, dental, drug and vision components but from the outset, big business and government were treated better than small businesses and individuals. At one time, a business had to have a minimum of 5 non-related employees to qualify for a drug rider. Many small businesses never qualified fro “group” rates.

Over the decades, the State Legislature has continuously added additional costly mandates for every provider. Some really have nothing to do with “health” but were powered by lobbyists and special interests, such as the expensive in vitro fertilization mandate. The providers then passed along the extra costs to rate payers. Proposals to adopt a “cafeteria style” medical plan that allows the insured to choose only what they desire, has never been adopted.

There is also a Prepaid Health Care Advisory Council, initially including the existing insurance providers. They were in a position to veto the market entry of any new competitors. And they did.

When Obamacare was first proposed, Hawaii’s all-Democrat Congressional team, joined and lobbied Obama to exempt Hawaii from the new federal act, arguing that our law was superior.  The whole point of Obamacare is federal control. An exemption as such was not granted but perks were given to Hawaii and other states in order to secure its passage.

There are many negative and costly details in this 2,000-page law, now opposed by more than 2/3 of the American public. There will be no effective cost reduction, only additional costs. There will be no individual choices, no opting out, no keeping your doctor and so forth. For many Doctors, they will likely retire or give up their practice. Even in Hawaii, where we have a serious medical shortage—especially on the Neighbor Islands— already.

One of the major provisions of Obamacare is the requirement for state-based Health Insurance Exchanges. The big winner in Obamacare, besides the Federal Government, is the insurance industry. They will be given millions of new clients, can still raise their premiums, receive federal grants and must act as tax collectors for the government.

The Health Insurance Exchange will forcibly facilitate this process. In 2011, the State Legislature passed Act 205 creating the Hawaii Health Connector as a private, non-profit corporation—and a quasi-governmental agency.

Hawaii became the first state in the Nation to declare its intent to develop a state-based insurance exchange. On June 7, 2012, Governor Neil Abercrombie sent a “declaration letter” to the U.S. Health & Human Services Center announcing the Connector.

The 2012 Legislature passed additional legislation allowing for funding of the Connector and its recently legislatively-approved Board. Millions of tax dollars will go for salaries, staff, offices, websites, PR and equipment before one person is helped medically.

The Legislature also approved a Connector Board, to be officially seated on July 1. Like its predecessor, this panel includes voting representatives from the current existing insurance companies. They will determine who can or cannot sell insurance to the 100,000+ Hawaii uninsured, valued at more than $300 million. The Exchange will also receive government subsidies. It has received two federal grants to date.

This prompted organizations such as the Hawaii AARP, League of Women Voters and others to cry foul, and point out the Board’s conflict of interest and urged lawmakers to allow these insurance reps as “advisory members” only. The Legislature refused to adopt the reforms. (I was the only State Senator to vote NO on the creation of the Connector and the Board).

Hawaii, like other states, will suffer the fiscal and unforeseen costs of Obamacare if left standing. Hawaii, however, would be more surprised that its “firsts” in government regulation would not ultimately pay benefits. Patients and the medical profession would be in the trash heap.

What the Supreme Court did not overturn yesterday, an enlightened and rational electorate must do November 6.

Here’s to your health.


State Senator Sam Slom, is Minority Senate Leader, and serves on all 15 Senate Committees. He represents O’ahu’s  newly reapportioned 9th district—Hawaii Kai, Niu, Kuliouou, Aina Haina, Waialae Kahala and Diamondhead. He is also a consulting economist, small business owner and president of the Small Business Hawaii Entrepreneurial Education Foundation.





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