Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

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

begs leave to report as follows:

The purpose of this measure is to exempt gross premiums received by health insurers from the premium tax.

The Department of Commerce and Consumer Affairs, Royal State National Insurance Company, Limited, Health Insurance Association of Hawaii, and Kaiser Permanente testified in support of the measure. The Tax Foundation of Hawaii commented on the measure.

Health insurers organized under chapter 431, Hawaii Revised Statutes (HRS), are subject to a premium tax rate of 4.265 per cent on gross premiums received, while mutual benefit societies and health maintenance organizations, organized respectively under chapters 432 and 432D, HRS, are exempted from the tax requirement.

This measure establishes a premium tax exemption for health insurers. Your Committee finds that this exemption will help to level the playing field among health insurance providers in the State and encourage more health insurers to enter the Hawaii market.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection and Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1322 and recommends that it pass Second Reading and be referred to the Committee on Ways and Means.