RELATING TO MEDICAL DEBT.

SB1040

THE SENATE

S.B. NO.

1040

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

relating
to medical debt
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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SECTION 1.
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The
legislature finds that medical debt has become a widespread issue across the
United States.
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Approximately four out of
every ten Americans, including individuals with health insurance, have some
form of medical debt.
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According to a
2022 report from the Peterson-KFF Health System Tracker, approximately three
million Americans have medical debt in amounts exceeding $10,000.
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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.
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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.

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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.
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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.

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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.
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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 determinant of
health and enhancing community well-being.

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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.

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SECTION 2.
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(a)
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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.

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(b)
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The
program shall:

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

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

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(c)
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The office of wellness and resilience shall contract with an entity with
demonstrated experience and success partnering with hospitals and 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.

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

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(e)
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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
.
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The report shall also include an analysis of
actions taken by other states in the preceding year which are reasonably
related to the cancellation of medical debt, including prohibiting medical debt
from appearing on credit reports, and any related recommendations, including
any proposed legislation.

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SECTION 3.
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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.

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The sums

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

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SECTION 4.
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This Act shall take effect on July 1, 2026; provided that section 3
shall take effect on July 1, 2025.

INTRODUCED BY:

_____________________________

Report Title:

Office of
Wellness and Resilience; Medical Debt Acquisition and Forgiveness Program;
Reports; Appropriations

Description:

Requires
the Office of Wellness and Resilience to develop, implement, and administer a Medical
Debt Acquisition and Forgiveness Program to acquire and forgive medical debt owed
by certain households in the State.
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Requires
annual reports to the Legislature.
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Appropriates funds.
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Effective
7/1/2026.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.