SB1040 SD2

SECTION 1. The legislature finds that medical debt has become a widespread issue across the United States. Approximately four out of every ten Americans, including individuals with health insurance, have some form of medical debt. According to a 2022 report from the Peterson-KFF Health System Tracker, approximately three million Americans have medical debt in amounts exceeding $10,000. Although Hawaii residents generally have less medical debt than residents in other states, approximately one in ten residents have outstanding medical debt on their credit report. In other states and cities that have acquired and forgiven unpaid medical debt, most of the forgiven debt was owed by those with health insurance, indicating that many families in the State may also have medical debt, despite having health insurance coverage.

The legislature also finds that medical debt is a social determinant of health as patients with burdensome medical debt often delay the care they need, may experience issues obtaining employment and housing, have difficulty escaping poverty, and experience increased mental stress. The legislature recognizes that, due to the significant amount of outstanding debt owed to hospitals and service providers, a secondary market has emerged in which commercial debt buyers purchase outstanding and dormant debt owed to health care providers and take aggressive action to collect from families who find themselves unable to pay, further exacerbating the severity of the medical debt crisis.

The legislature further finds that other states and cities in the United States have partnered with a nonprofit organization that has successfully purchased billions of dollars in medical debt from health care providers and collection agencies for about 0.01 per cent of the overall cost and abolished the respective patients' debts altogether. Health care providers whose owed debt is sold to third parties for abolishment can equally benefit by receiving revenue for dormant patient accounts, while mitigating the effects of social determinants of health and enhancing community well-being.

Accordingly, the purpose of this Act is to require the office of wellness and resilience to develop, implement, and administer a program to acquire and forgive outstanding medical debt.

SECTION 2. Chapter 27, Hawaii Revised Statutes, is amended by adding a new section to part IX to be appropriately designated and to read as follows:

"§27- Medical debt acquisition and forgiveness program. (a) The office of wellness and resilience shall develop, implement, and administer a medical debt acquisition and forgiveness program to acquire and forgive outstanding medical debt for households in the State.

(b) The program shall:

(1) Acquire and forgive the medical debt of households having a household income not to exceed four hundred per cent of the federal poverty level for the State, or households having a medical debt balance greater than or equal to five per cent of the household's income; and

(2) Ensure that any specific personal identifying information or health data is collected in compliance with the Health Insurance Portability and Accountability Act of 1996, as amended, and is used for no purpose other than the acquisition and forgiveness of medical debt, or the provision of financial education, insurance, preventative measures, or similar assistance.

(c) The office of wellness and resilience shall contract with an entity having demonstrated experience and success in partnering with hospitals, and with the Hawaii health systems corporation or any of its regional systems, in acquiring and forgiving outstanding medical debt on behalf of state and municipal governments.

(d) The office of wellness and resilience may receive appropriations from the legislature, private funds, or federal funds for the purpose of acquiring and forgiving outstanding medical debt pursuant to this Act.

(e) The office of wellness and resilience shall submit a report of its findings and recommendations on the medical debt acquisition and forgiveness program, including its progress, to the legislature no later than twenty days prior to the convening of each regular session. The report shall also include an analysis of actions taken by other states in the preceding year that are reasonably related to the cancellation of medical debt, including prohibiting medical debt from appearing on credit reports; any related recommendations; and any proposed legislation."

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for the development, implementation, and administration of the medical debt acquisition and forgiveness program established pursuant to section 2 of this Act.

The sums appropriated shall be expended by the office of wellness and resilience for the purposes of this Act.

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect on December 31, 2050; provided that section 3 shall take effect on July 1, 2025.

THE SENATE	S.B. NO.	1040
THIRTY-THIRD LEGISLATURE, 2025		S.D. 2
STATE OF HAWAII