This week the U.S. Supreme Court began hearing oral arguments about the constitutionality of the Federal Affordable Care Act (ACA), a major federal health care reform.

While the outcome of the court’s deliberations can’t be predicted, here in Hawaii the Legislature is taking steps to implement ACA, to comply with timelines required by the act.

The League of Women Voters of Hawaii appreciates efforts by the Star-Advertiser ("Red flags raised over setup of insurance exchange," Star-Advertiser, March 12) and other media to alert people to the importance of these first steps and to risks to the public interest in some of the decisions being made now.

This public market is an exchange, "consisting of an interactive website with buyers and sellers, together with human "navigators" who assist buyers in real time.

Hawaii’s exchange, dubbed "the Connector," was established in 2011 as a private, nonprofit organization.

The Connector is to be designed and managed by a board of directors. Good governance principles (and common sense) require boards with such responsibilities to include representatives of the people who will be affected by the decisions to be made. In the context of Hawaii’s Connector, a "consumer" is a prospective buyer on the exchange — a small group purchaser (like a small business employer) or an individual.

The governor’s list of nominees disappoints us. The eleven nominees include only two consumer representatives: Clementine Ceria-Ulep, a nurse from Faith Action for Community Equity, and Michael Gleason, an advocate with the ARC of Hawaii island.

Our Connector should have more representatives of likely buyers — i.e. small business owners, and those not already covered through their employers, such as the unemployed or under-employed, rural residents who have fewer health care options, and people who may be subject to discrimination in the individual health insurance market, such as those with pre-existing conditions.

There is a second problem with the board membership: No reasonable person thinks the financial interest of the health insurers and the financial interest of the consumer are the same.

Health insurers have a legitimate interest in marketing insurance products at a price that covers the cost of health care and returns a reasonable profit; consumers are looking for insurance value at the lowest possible cost.

Yet representatives of health insurance businesses sit on the current board, which will determine the marketplace both they and their competitors will use to reach consumers.

To its credit, the interim board has drafted a conflict-of-interest policy. But the board’s conflict-of-interest policy falls short even though the critical decision on selection of which qualified health plans can sell insurance on the exchange is left to the state insurance commissioner.

Fortunately, effective July 1 the commissioner will no longer be a voting member of the board, so we expect he will proceed with approving providers after his typical, independent assess- ment.

The draft conflict-of-interest policy still leaves unclear the commissioner’s ability to regulate the behavior of insurers who are directors of the Connector nonprofit.

When are they acting as licensed insurers, under the commissioner’s scrutiny, and when as directors?

The draft conflict-of-interest policy does not appear to cover operation of the Connector itself, such as prudent oversight over the sellers and navigators; it appears to speak only to the most obvious aspects of individual board member, officer and employee behavior.

Can consumer complaints about sellers be handled in a fair, impartial manner when the insurer representatives sit on the board? Is it possible for the Connector to enforce compliance with the conflict of interest provisions, since it has no state regulatory authority?

Eventually, some of these conflicts of interest can be resolved, but not the most fundamental one — the fact that board members from insurance companies have a duty of loyalty to their employer, which isn’t the same as their fiduciary duty to the Connector. While we have no doubt all members of the Connector board are people of integrity, in this case their insurance employer puts the bread on the table, not the Connector.

Last week an amended bill seeking to immediately exclude health insurers from the board, Senate Bill 2434, HD2, made its way through the House. We hope the House Finance Committee will retain all the provisions of the bill and send it to the House floor for a vote, and that the full Legislature will pass it. A Connector designed and governed in the interests of health insurance consumers will have the best chance of advancing health care reform in Hawaii.