Hawaii-2018-SB2924-Amended

SECTION 1. The legislature finds that the Patient Protection and Affordable Care Act of 2010 (Affordable Care Act) includes an individual coverage requirement, commonly known as the individual mandate, that requires most people in the country to have health insurance and imposes tax penalties on those without an exemption who do not comply. The individual mandate is an important part of the overall health reforms established under the Affordable Care Act, which was designed to extend insurance to nearly all people, including those with medical conditions that require expensive care and who may have previously been denied coverage. However, to pay for care, insurance companies need to have a large enrollment pool of consumers, especially young people and healthy people who use fewer services, as these individuals broaden the risk pool and reduce premium costs for all insured persons. Thus, the individual mandate was adopted to guarantee this broad enrollment base and ensure that health insurance premiums remain more affordable for everyone. The legislature notes that because the majority of the United States population receives health insurance coverage either through employer-sponsored health insurance or through public programs such as medicaid and medicare, the people most impacted by the mandate are those who purchase insurance through the individual market.

The legislature further finds that Congressional Republicans recently passed a sweeping tax bill that effectively repealed the individual mandate, by reducing the tax penalty in the existing law to $0 or zero per cent of household income above a certain threshold. Insurance companies and Congressional Democrats have warned that premiums will increase and insurance markets will be weakened if the tax penalties for going without health insurance are eliminated. The Congressional Budget Office has estimated that repealing the mandate penalties would increase premiums by ten per cent and leave 4,000,000 more people uninsured in 2019 and 13,000,000 more uninsured by 2027.

The legislature additionally finds that it is important to preserve Hawaii's insurance market and ensure that insurance premiums remain stable and affordable for Hawaii's consumers. Establishing a state-level individual mandate, similar to the one adopted by Massachusetts in 2006, will help achieve these goals.

Accordingly, the purpose of this Act is to:

(1) Establish an individual mandate for certain qualified taxpayers to sign up for and maintain health insurance throughout the year, or pay a penalty on their individual income tax return, subject to certain exceptions; and

(2) Authorize the insurance commissioner to develop a process to determine whether a health plan is affordable.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Creditable coverage; qualified taxpayers. (a) For each month beginning after December 31, 2018, the following qualified taxpayers age eighteen and over shall obtain and maintain creditable coverage so long as it is deemed affordable by the insurance commissioner, pursuant to section 431:2- :

(1) Residents of the State; or

(2) Individuals who became residents of the State within sixty-three days, in the aggregate;

provided that residents who within sixty-three days have terminated any prior creditable coverage shall obtain and maintain creditable coverage within sixty-three days of the termination.

(b) Every qualified taxpayer who files or is required to file an individual income tax return as a resident of the State shall indicate on the return, in a manner prescribed by the director of taxation, whether the qualified taxpayer:

(1) Had creditable coverage in force for each of the twelve months of the taxable year for which the return is filed as required under subsection (a), whether covered as an individual or as a named beneficiary of a policy covering multiple individuals; or

(2) Had a certificate issued by the insurance commissioner, pursuant to section 431:2- .

(c) If a qualified taxpayer fails to indicate on the income tax return whether the qualified taxpayer had the coverage required under subsection (a), or indicates on the income tax return that the qualified taxpayer did not have the coverage required under subsection (a) in force, then a penalty shall be assessed on the return. If the qualified taxpayer indicates that the qualified taxpayer had the coverage in force but the director of taxation determines, based upon the information available, that the requirement of subsection (a) was not met, then the director of taxation shall assess the penalty.

(d) If in any taxable year, in whole or in part, a qualified taxpayer does not comply with the requirement of subsection (a), the director of taxation shall retain any amount overpaid by the qualified taxpayer and apply it toward any penalty payment required by this subsection; provided that the amount retained shall not exceed . The penalty shall be assessed for each of the months the qualified taxpayer did not meet the requirement of subsection (a); provided that any lapse in coverage of sixty-three days or less shall not be counted in calculating the penalty; provided further that nothing in this subsection shall authorize the commissioner to retain any amount for purposes that otherwise would be paid to a claimant agency or agencies as debts recoverable under sections 231-51 to 231-59.

(e) If the amount retained pursuant to subsection (d) is insufficient to meet the penalty assessed, the director of taxation shall notify the qualified taxpayer of the balance due on the penalty and related interest.

(f) The department of taxation shall have all enforcement and collection procedures available under this chapter to collect any penalties assessed under this section.

(g) A qualified taxpayer who disputes the determination of applicability or affordability, as enforced by the department, may seek a review of this determination through an appeals process established by the insurance commissioner pursuant to section 431:2- ; provided that no additional penalties shall be enforced against a qualified taxpayer seeking review until the review is complete and any subsequent appeals are exhausted.

(h) An individual shall be exempt from the requirement to maintain creditable coverage and shall not be subject to a penalty under this section for any month if the individual is a member of a health care sharing ministry for the month. As used in this subsection, "health care sharing ministry" means an organization:

(1) That has been certified to be tax exempt under section 501(a) of the Internal Revenue Code of 1986, as amended;

(2) In which members share a common set of ethical or religious beliefs and share medical expenses among members in accordance with those beliefs and without regard to the state in which a member resides or is employed;

(3) In which members retain membership even after they develop a medical condition;

(4) Which, or a predecessor of which, has been in existence at all times since December 31, 1999, and medical expenses of its members have been shared continuously and without interruption since at least December 31, 1999; and

(5) That conducts an annual audit, which is performed by an independent certified public accounting firm in accordance with generally accepted accounting principles and which is made available to the public upon request.

(i) This section shall not apply to any individual, who pursuant to the teachings, faith, or religious beliefs of any group, depends upon prayer or other spiritual means for healing if the individual:

(1) Files a sworn affidavit with the individual's income tax return stating that the individual did not have creditable coverage and that the refusal to obtain and maintain creditable coverage during the twelve months of the taxable year for which the return was filed was based on the individual's sincerely held teachings, faith, or religious belief; and

(2) Does not receive medical health care during the taxable year for which the return is filed.

(j) For purposes of this section, the following definitions shall apply:

"Creditable coverage" means coverage of a qualified taxpayer under any of the following health insurance plans or as a named beneficiary receiving coverage on another's health insurance plan with no lapse of coverage for more than sixty-three days:

(1) An individual or group health insurance plan that meets the requirements for mandatory health care benefits under section 393-7(a) or (b);

(2) An individual or group health insurance plan available from the State's health insurance marketplace;

(3) Part A or Part B of Title XVIII of the Social Security Act;

(4) Title XIX or XXI of the Social Security Act, other than coverage consisting solely of benefits under section 1903(v) or section 1928 of Title XIX of the Social Security Act;

(5) Title 10 United States Code chapter 55;

(6) A medical care program of the Indian Health Service or of a tribal organization authorized under section 102 of the Indian Self-Determination and Education Assistance Act;

(7) A state health benefits risk pool;

(8) A health plan offered under title 5 United States Code chapter 89;

(9) A public health plan as defined in federal regulations authorized by the Public Health Service Act, section 2701(c)(1)(I), as amended by Public Law 104-191;

(10) A health benefit plan under the Peace Corps Act, title 22 United States Code section 2504(e); or

(11) Any other qualifying coverage required by the Health Insurance Portability and Accountability Act of 1996, as amended, or by regulations promulgated under that Act.

The term "creditable coverage" shall not include: a limited benefit health insurance plan, as that term is defined under section 431:10A-102.5; insurance arising out of a workers' compensation law or similar law; motor vehicle medical payment insurance; insurance under which benefits are payable with or without regard to fault and which is statutorily required to be contained in a liability insurance policy or equivalent self-insurance; or coverage supplemental to the coverage provided under title 10 United States Code chapter 55, if offered as a separate insurance policy.

"Health insurance marketplace" means a service that helps individuals and small businesses shop for and enroll in affordable health insurance, as established by the federal Patient Protection and Affordable Care Act of 2010, or any similar successor service available at the federal or state level.

"Qualified taxpayer" means an individual:

(1) Who files an individual income tax return for the taxable year;

(2) Who is not claimed or is not otherwise eligible to be claimed as a dependent by another taxpayer for federal or Hawaii state individual income tax purposes;

(3) Who has been physically present in the State for more than nine months during the taxable year;

(4) Whose household income for the taxable year does not exceed per cent of the federal poverty guideline for Hawaii, as most recently published by the United States Department of Health and Human Services for the taxpayer's family size; or

(5) Who, if married at the close of the taxable year, files a joint return for the taxable year; provided that this paragraph shall not apply to a married taxpayer who is unable to file a joint return because the taxpayer is a victim of domestic abuse or spousal abandonment and is living apart from the taxpayer's spouse at the time the taxpayer files the return."

SECTION 3. Chapter 431, Hawaii Revised Statutes, is amended by adding a new section to part II of article 2 to be appropriately designated and to read as follows:

"§431:2- Creditable coverage; powers of commissioner. (a) The commissioner shall establish a process to determine which health plans shall be considered affordable, for purposes of complying with the creditable coverage requirements under section 235- .

(b) The list of health plans deemed to be creditable coverage shall be updated annually and posted on the insurance division's website.

(1) Establish procedures for granting an annual certification upon request of a qualified taxpayer who has sought health insurance coverage through Hawaii's insurance marketplace, attesting that, for the purposes of enforcing section 235- , no health benefit plan that meets the definition of creditable coverage was deemed affordable by the commissioner for that qualified taxpayer. The commissioner shall maintain a list of qualified taxpayers for whom the certificates have been granted; and

(2) Establish an appeals procedure for enforcement actions taken by the department of taxation under section 235‑ , including standards to govern appeals based upon the assertion that imposition of the penalty under section 235- would create extreme hardship.

(d) The insurance commissioner, in conjunction with the department of taxation, may adopt rules pursuant to chapter 91, for purposes of implementing this section and section 235- .

(e) For purposes of this section:

"Creditable coverage" shall have the same meaning as in section 235- .

"Health insurance marketplace" shall have the same meaning as in section 235- .

"Qualified taxpayer" shall have the same meaning as in section 235- ."

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 3000; provided that this Act shall be repealed on December 31, 2023.

THE SENATE	S.B. NO.	2924
TWENTY-NINTH LEGISLATURE, 2018		S.D. 2
STATE OF HAWAII		H.D. 2