Establishes a 2.13% insurance premium tax on all health care plan premiums. Removes cap to QUEST to cover 24,458 uninsured adults. Adds dental benefits for children and adults. Raises SCHIP eligibility to 300% of poverty level to add 2,874 uninsured children. Uses premium tax to fund QUEST/SCHIP costs.

A BILL FOR AN ACT

SECTION 1. The legislature finds that it is critical to achieve universal health coverage for Hawaii's residents. Hawaii's QUEST program goes a long way toward this goal. However, the program cannot handle all eligible uninsured adults and a cap has been placed on participation in the QUEST program, thus leaving out an estimated 24,458 eligible uninsured adults. Similarly, the state children's health insurance program cannot cover all uninsured children. It is estimated that 19,548 uninsured children are eligible for the state children's health insurance program. By raising the family income eligibility threshold from two hundred to three hundred per cent of the federal poverty level for Hawaii, an estimated 2,874 additional uninsured children can be covered.

The purpose of this Act is to establish and use the health insurance premium tax to assist the QUEST program and state children's health insurance program to address the additional costs of covering uninsured adults and children.

Part I

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

§ -1 Definitions. For the purposes of this chapter:

"Director" means the director of taxation.

"Managed care plan" or "plan" has the same meaning as that term is defined under section 431:14F-102.

§ -2 Imposition of health insurance premium tax. There is levied and shall be assessed and collected each month a tax of 2.13 per cent of the gross proceeds derived from insurance premiums received by a managed care plan.

All remittances of taxes imposed under this chapter shall be made by cash, bank drafts, cashier's check, money order, or certificate of deposit to the office of the taxation district to which the return was transmitted.

§ -3 Return and payments; penalties. (a) On or before the last day of each calendar month, the plan liable under this chapter during the preceding calendar month shall file a sworn return with the director in such form as the director shall prescribe together with a remittance for the amount of the tax. Sections 237-30 and 237-32 shall apply to returns and penalties made under this chapter to the same extent as if the sections were set forth specifically in this section.

(b) Notwithstanding subsection (a), the director, for good cause, may permit a plan to file the tax return required under this section and make payments thereon:

The director, for good cause, may permit a plan to make monthly payments based on the plan's estimated quarterly or semiannual liability; provided that the plan files a reconciliation return at the end of each quarter or at the end of each six-month period during the calendar or fiscal year, as provided in this section.

(c) If a plan filing a return on a quarterly or semiannual basis, as provided in this section, becomes delinquent in either the filing of the return or the payment of the taxes due thereon exceeds $ in health insurance premium taxes during the calendar year or exceeds $ in health insurance premium taxes during the calendar year if making payments on a quarterly basis, or if the director determines that any quarterly or semiannual filing of a return would unduly jeopardize the proper administration of this chapter, including the assessment or collection of the health insurance premium tax, the director, at any time, may penalize the plan according to rules adopted pursuant to chapter 91.

(d) Section 232-2 does not apply to a monthly return.

§ -4 Annual return. On or before the twentieth day of the fourth month following the close of the taxable year, the plan that is liable for the payment of the taxes under this chapter during the preceding tax year shall file a return summarizing the plan's liability under this chapter for the year, in a form as the director prescribes. The plan shall transmit with the return a remittance covering the residue of the tax chargeable to the plan, if any, to the office of the appropriate state district tax assessor designated in section     -5. The return shall be signed by the plan's president, vice-president, secretary, or treasurer. The department, for good cause shown, may extend the time for making the return on the application of any plan and grant reasonable additional time to make the return as the department may deem advisable.

Section 232-2 applies to the annual return, but not to a monthly return.

§ -5 Filing of returns. All monthly, quarterly, semiannual, and annual returns shall be transmitted to the office of the taxation district in which the taxes arose or to the office of the first taxation district in Honolulu.

§ -6 Reconciliation; form requirement. On or before the twentieth day of the fourth month following the close of the taxable year, every person who has become liable for the payment of taxes under this chapter during the preceding taxable year shall file a reconciliation as prescribed by the director indicating the amount of proceeds that was subject to the insurance premium tax.

§ -7 Assessment of tax upon failure to make return; limitation period; exceptions; extension by agreement. (a) If any plan fails to make a return as required by this chapter, the director shall make an estimate of the tax liability of the plan from any information the director obtains, and according to the estimate so made, assess the taxes, interest, and penalty due the State from the plan, give notice of the assessment and demand payment. The assessment shall be presumed to be correct until and unless, upon an appeal duly taken as provided in section     -9, the contrary shall be clearly proved by the plan assessed, and the burden of proof upon the appeal shall be upon the plan assessed to disprove the correctness of assessment.

(b) After a return is filed under this chapter the director shall cause the return to be examined, and may conduct further audits or investigation as necessary. If the director determines that there is a deficiency with respect to the payment of any tax due under this chapter, the director shall assess the taxes and interest due the State, give notice of the assessment to the plan, and demand payment.

(c) Except as otherwise provided by this section, the amount of taxes imposed by this chapter shall be assessed or levied within three years after the annual return was filed, or within three years of the due date prescribed for the filing of the return, whichever is later, and no proceeding in court without assessment for the collection of any such taxes shall be begun after the expiration of the period.

(d) In the case of a false or fraudulent return with intent to evade tax, or of a failure to file the annual return, the tax may be assessed or levied at any time; however, in the case of a return claimed to be false or fraudulent with intent to evade tax, the determination as to the claim shall first be made by a judge of the circuit court as provided in section 235-111(c) which shall apply to the tax imposed by this chapter.

(e) Where, before the expiration of the period prescribed in subsection (c), both the department and the plan have consented in writing to the assessment or levy of the tax after the date fixed by subsection (c), the tax may be assessed or levied at any time prior to the expiration of the period agreed upon. The period agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.

§ -8 Overpayment; refunds. Upon application by a plan, if the director determines that any tax, interest, or penalty has been paid more than once, or has been erroneously or illegally collected or computed, the tax, interest, or penalty shall be credited by the director on any taxes then due from the plan under this chapter. The director shall refund the balance to the plan in accordance with section 231-23. No credit or refund shall be allowed for any tax imposed by this chapter, unless a claim for the credit or refund is filed as follows:

Paragraphs (1) and (2) are mutually exclusive. The preceding limitation shall not apply to a credit or refund pursuant to an appeal, provided for in section -9.

As to all tax payments for which a refund or credit is not authorized by this section (including, without prejudice to the generality of the foregoing, cases of unconstitutionality), the remedies provided by appeal or by section 40-35 are exclusive. § -9 Appeals. Any person aggrieved by any assessment of the tax for any month or any year may appeal from the assessment in the manner and within the time and in all other respects as provided in the case of income tax appeals by section 235-114. § -10 Records to be kept; examination. Every plan shall keep in the English language within the State, and preserve for a period of three years, suitable records of gross proceeds taxable under this chapter, and other books, records of account, and invoices as may be required by the department, and all books, records, and invoices shall be open for examination at any time by the department.

§ -11 Disclosure of returns unlawful; destruction of returns. (a) All tax returns and return information required to be filed under this chapter, and the report of any investigation of the return or of the subject matter of the return, shall be confidential. It shall be unlawful for any person or any officer or employee of the State to intentionally make known information imparted by any tax return or return information filed pursuant to this chapter, or any report of any investigation of the return or of the subject matter of the return, or to wilfully permit any return, return information, or report, or any copy thereof, to be seen or examined by any person; provided that for tax purposes only the plan or persons with a material interest in the return, return information, or report may examine them. Unless otherwise provided by law, persons with a material interest in the return, return information, or report shall be identified by the department according to rules adopted pursuant to chapter 91.

Any violation of this subsection shall be a misdemeanor. Nothing in this subsection shall prohibit the publication of statistics so classified as to prevent the identification of particular reports or returns and the items of the reports or returns.

(b) The department may destroy the monthly, quarterly, or semiannual returns filed pursuant to section -3, or any of them, upon the expiration of three years after the end of the calendar or fiscal year in which the taxes so returned accrued.

§ -12 Collection by suit; injunction. The department may collect taxes due and unpaid under this chapter, together with all accrued penalties, by action in assumpsit or other appropriate proceedings in the circuit court of the judicial circuit in which the taxes arose. After delinquency shall have continued for sixty days, the department may proceed in the circuit court of the judicial circuit in which the plan is located and obtain an injunction restraining the operation of the plan until full payment shall have been made of all taxes and penalties and interest due under this chapter.

§ -13 Application of tax. The tax imposed by this chapter shall be in addition to any other taxes imposed by any other laws of the State.

§ -14 Health insurance premium tax trust fund. (a) There is established in the state treasury the health insurance premium tax trust fund to be administered by the director of finance, into which shall be deposited the revenues collected under chapter .

(b) The purpose of the trust fund is to serve as a holding account for health insurance premium tax revenues. The director of finance shall transmit the proceeds of the trust fund to the department of human services on July 1 of every year to finance the purposes of part II of Act .

§ -15 Administration and enforcement; rules. (a) The director of taxation shall administer and enforce this chapter in respect of:

The director of taxation shall have all rights and powers with respect to taxes thereby or thereunder imposed; and, without restriction upon these rights and powers, sections 237-8 and 237-36 to 237-41 are made applicable to and with respect to the taxes, taxpayers, tax officers, and other persons, and the matters and things affected or covered by this chapter, insofar as not inconsistent with this chapter, in the same manner, as nearly as may be, as in similar cases covered by chapter 237.

(b) The director may adopt rules under chapter 91 to effectuate the provisions of this chapter."

Part II

SECTION 3. The director of human services, pursuant to the director's general duties under section 346-14, shall:

For the purposes of this Act, the term "QUEST" means the state program that provides health coverage through health plans for eligible residents under the Med-QUEST division of the department of human services.

SECTION 4. This Act shall take effect upon its approval.