One of the key elements of the Obama administration’s Affordable Care Act is creating health insurance exchanges — marketplaces in each state for insurance purchase by individuals and employees of small businesses who otherwise can’t access coverage.

Legislators and other state officials are now in the midst of setting up Hawaii’s exchange, dubbed the Hawaii Health Connector, but they need to take a breath and reconsider what they’re doing.

A group of public-interest organizations has rightly sounded an alarm about how Act 205, which enabled the setup of the exchange, passed last year without sufficient scrutiny and debate.

At the center of this year’s storm is the issue of incorporating insurance-industry advice in the formation of the health plans without leaving consumers and their advocates out in the cold.

Advocates say that the current slate of appointees nominated by Gov. Neil Abercrombie include representatives of the Hawaii Medical Service Association, Kaiser Permanente, Hawaii Primary Care Association, Maui Medical Group, HMA Inc. and Hawaii Dental Service, and that all these entities have a conflict of interest as voting members of the board.

Those advocates are pressing for amendments to the law.

A key change would bar the inclusion of exchange board members who have a financial interest in the plans.

That argument — being advanced in Senate Bill 2434 — undoubtedly will continue until conference committees meet, but meanwhile the Senate is due at 9 a.m. today to consider confirming voting members Abercrombie appointed to the board.

The Senate Commerce and Consumer Protection Committee should defer a vote until the composition of the Health Connector is revised, through enactment of the SB 2434 amendments.

State Rep. Ryan Yamane, vice chairman of the House Committee of Consumer Protection and Commerce, was helming the panel on Monday when the changes were approved, 12-0. Before calling for the vote, Yamane said the changes would "make the insurers as well as providers advisory position only — they will all be replaced by consumers."

Consumer groups are also worried about the fact that Act 205 created the exchange as a private nonprofit.

Once it incorporates as it is due to do in July, it would no longer be subject to the state’s Sunshine Law, with requirements for public openness.

Yamane said this decision was made last year when the state was in the throes of a budgetary crisis, and when the creation of a new state agency did not seem to be in the cards.

He told the committee he believed it would be possible to enact rules requiring similar advance meeting notice and open-meeting procedures of the nonprofit.

If that is not possible, the Legislature should rethink that fundamental decision. Hawaii is currently the only state that is proceeding with a private nonprofit running the exchange.

A better model would be one similar to the California Health Benefit Exchange, described as an "independent public entity within state government."

Before the House vote this week, state Rep. Joseph Souki expressed his misgivings about the private nonprofit setup and his preference for a "quasi-government" exchange.

"This is extremely important because you are going to be providing health services for people who cannot qualify for other health services," Souki said.

He’s right. SB 2434 attempts to incorporate a measure of public transparency into a private nonprofit structure.

The ideal solution would be a broader revision of Act 205, one that would both allow for industry consultation on the creation of health plans without conflicts among the voting members, and for the public to be engaged.

The Abercrombie administration has stated a commitment to Hawaii health care reform, regardless of the fate of the federal law, to go shortly before the U.S. Supreme Court.

While such resolve is admirable, the public will only fully benefit with a truly careful plan.