Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committees on Consumer Protection and Commerce and Judiciary and Hawaiian Affairs, to which was referred H.B. No. 201 entitled:

beg leave to report as follows:

The purpose of the bill is to delay the effective date of the Privacy of Health Care Information Act, Act 87, Session Laws of Hawaii 1999, to January 1, 2003.

Testimony in support of the measure was submitted by the Department of Labor and Industrial Relations, Healthcare Association of Hawaii, Hawaii Civil Rights Commission, Health Insurance Association of America, University of Hawaii Professional Assembly, and the Building Industry Association.

Comments were provided by the Office of Information Practices, American Council of Life Insurers, Kaiser Permanente, Society of Human Resource Management, Chamber of Commerce of Hawaii, Hawaii Attractions Association, Retail Merchants of Hawaii, Hawaii Association of Independent Schools, University of Phoenix - Hawaii Campus, Hawaii Business Roundtable, Office of the Lieutenant Governor, State Farm Insurance Companies, Hawaii Employers' Mutual Insurance Company, Honolulu Department of the Prosecuting Attorney, Kona-Kohala Chamber of Commerce, Glaxo Smithkline, and National Association of Insurance and Financial Advisors.

Testimony in opposition was submitted by Queen's Health Systems, Legislative Information Services of Hawaii, ILWU Local 142, Hawaii Insurance Association of America, Hawaii State Teachers Association, Hawaii Medical Association, Hawaii Insurers Council, Hawaii Independent Insurance Agents Association, Hawaii Bankers Association, Kokua Council, Diagnostic Laboratory Services, Inc., Honolulu Department of Human Services, Advocates for Consumer Rights, and Hawaii Hotel Association.

Your Committees find that Act 87 was adopted in 1999 to protect the privacy of personal health care information and imposed a complex scheme of notification, authorization, and record-keeping enforced by civil and criminal penalties. When the law became effective in July 2000, confusion about the law and concern about the Act's criminal penalties effectively halted workers' compensation litigation and paralyzed certain relationships among employers, employees, doctors, patients, and insurers, and resulted in high compliance costs. In August of 2000, a Special Session of the Legislature enacted a one-year moratorium of the law to allow amendments to be made.

Since then, proposed amendments were developed by the Medical Privacy Task Force (Task Force), which was established by Act 140, Session Laws of Hawaii 2000. The amendments were submitted to the Legislature in December 2000. Among the amendments proposed by the Task Force were those simplifying and reducing notice requirements, exempting specific uses and disclosures of protected information from authorization requirements, providing a more gradual system of criminal penalties, and repealing the civil remedy for noncompliance with the law.

Pursuant to the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the federal Department of Health and Human Services in December 2000, issued final privacy regulations applicable to all individually identifiable health information handled by certain health plans, health care providers, and health care clearinghouses. These regulations will go into effect in February 2003, although small health plans will have an additional year to comply. HIPAA regulations will supersede all contrary state laws except: laws that are more stringent than the regulations; laws that serve a compelling need related to public health, safety or welfare; laws that serve to regulate controlled substances; or laws that relate to certain state reporting requirements.

Your Committees find that the final form and impact of HIPAA regulations remain unsettled. In light of this uncertainty, your Committees find that an outright repeal of Act 87 would be premature and would unnecessarily limit the options available to the Legislature in responding to HIPAA medical privacy regulations. Accordingly, your Committees have amended this bill to delay the effective date of Act 87 until July 1, 2004, one and a half years after HIPAA medical privacy regulations take effect on February 26, 2003.

As affirmed by the records of votes of the members of your Committees on Consumer Protection and Commerce and Judiciary and Hawaiian Affairs that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 201, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 201, H.D. 1, and be placed on the calendar for Third Reading.