STAND. COM. REP. NO. 2692

Honolulu, Hawaii

RE:    S.B. No. 2155

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2008

State of Hawaii

Madam:

     Your Committee on Ways and Means, to which was referred S.B. No. 2155, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO GENERAL EXCISE TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to clarify that reimbursements received by managed care support contractors for advances made on behalf of the federal government are not subject to the Hawaii general excise tax.

     Specifically, this measure clarifies that any amounts received by a managed care support contractor as reimbursements of costs or advances made by the contractor, pursuant to a contract with the federal government for the administration of the TRICARE program, are exempt from the Hawaii general excise tax.

     Your Committee finds that the TRICARE program augments the health care services provided by the United States Department of Defense personnel at military facilities and contracts with third-party administrators, known as "managed care support contractors", to establish and maintain networks of TRICARE-authorized civilian health care providers in various regions of the United States.  These managed care support contractors make advances to doctors, hospitals, and other providers for costs of health care services provided to TRICARE beneficiaries.  The United States Department of Defense then reimburses managed care support contractors the amounts they have advanced.

     Your Committee received testimony in support of this measure from the Hawaii Medical Services Association and Goodsill, Anderson, Quinn, and Stifel LLP.  The Department of Taxation, Tax Foundation of Hawaii, and two individuals offered comments.

     Your Committee finds that the clarification provided by this measure will prevent the costs of health care services delivered through the TRICARE program from increasing and will further preclude any adverse consequences on the members of our uniformed services and their families from the increased costs of health care.

     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2155, S.D. 1, and recommends that it pass Third Reading.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

____________________________

ROSALYN H. BAKER, Chair