Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Consumer Protection & Commerce, to which was referred H.B. No. 1259 entitled:

begs leave to report as follows:

The purpose of this bill is to eliminate the insurance premium tax for Prepaid Health Care Plan contracts.

Testimony in support of the bill was received from the Department of Commerce and Consumer Affairs and Summerlin Life and Health Insurance Company. Royal State National Insurance Company, Limited supported the intent of the bill, and requested an amendment. AlohaCare opposed the bill.

Your Committee finds that it has become increasingly difficult to obtain affordable health care insurance from the limited pool of health insurers in Hawaii. Presently, for-profit health insurers are subject to general excise taxes (GET) on their gross premiums. However, mutual benefit societies and health maintenance organizations are exempt from the GET. Your Committee notes that this disparity may discourage new companies from entering Hawaii's market.

This bill proposes to provide for-profit health insurers with the same exemption from the GET on premiums that is now enjoyed by mutual benefit societies and health maintenance organizations. The expected result will be greater competition among health insurance companies, and increased availability of affordable health insurance for consumers.

Your Committee has amended this bill by affixing an effective date of July 1, 2099, in the interest of facilitating further discussion on this matter.

As affirmed by the record of votes of the members of your Committee on Consumer Protection & Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1259, as amended herein, and recommends that it be referred to the Committee on Finance in the form attached hereto as H.B. No. 1259, H.D. 1.