STAND. COM. REP. NO. 861-04

Honolulu, Hawaii

, 2004

RE: S.B. No. 1322

S.D. 1

H.D. 2

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred S.B. No. 1322, S.D. 1, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION OF PREMIUMS,"

begs leave to report as follows:

The purpose of this bill is to encourage competition in the health insurance market by eliminating the premium tax on health insurers who have for at least 200 consecutive days maintained a Hawaii office or branch, 80 percent of the employees of which are state residents.

Testimony in support of this bill was received from the Department of Commerce and Consumer Affairs, Summerlin Life & Health Insurance Co., Times Super Market, Hawaii Transportation Association, H2O Transportation, Hawaii Financial Store, Inc., PSH Insurance, Olsten Staffing Services, ProService Hawaii, Akahi Services, Inc., Kona Paradise Candies, Alice's Barber Shop, HTH Corporation, Alaka'i Mechanical Corporation, Retail Merchants of Hawaii, the National Federation of Independent Businesses, PKF Hawaii LLP, Hawaii Automobile Dealers' Association, Queen Kapiolani Hotel, and concerned individuals.

Kaiser Permanente supported the intent of this bill. Testimony in opposition was received from HMAA and the Hawaii Primary Care Association. Aloha Care commented and expressed concerns. The Tax Foundation of Hawaii commented.

Your Committee finds that the cost of employee health insurance coverage in Hawaii continues to rise, and is increasingly difficult for small companies and employers to afford. The elimination of the premium tax on health insurers may be a sufficient incentive for additional health insurers to enter the Hawaii market. If so, any consequent increase in competition should help to stabilize the cost of health insurance. In any event, the State currently generates no income from the premium tax and therefore risks nothing by this gambit.

Your Committee has amended the bill by redefining "health care plan contract" to exclude agreements "relating to health care services furnished through the QUEST medical assistance program." The effect is to retain the premium tax on health insurers that furnish their services through the QUEST program. Mutual benefit societies, organized under Chapter 432, Hawaii Revised Statutes (HRS), and health maintenance organizations, organized under Chapter 432D, HRS, are not currently subject to the premium tax and will not become subject to the premium tax for services furnished through QUEST.

In addition, an amendment has been made to sunset the premium tax exemption in five years to allow a review of the effect of the exemption on Hawaii's health insurance market.

Technical, nonsubstantive amendments were also made for consistency and style.

As affirmed by the record of votes of the members of your Committee on Consumer Protection and Commerce that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1322, S.D. 1, H.D. 1, as amended herein, and recommends that it be referred to the Committee on Finance in the form attached hereto as S.B. No. 1322, S.D. 1, H.D. 2.

 

 

Respectfully submitted on behalf of the members of the Committee on Consumer Protection and Commerce,

 

____________________________

KENNETH T. HIRAKI, Chair