SB3025 HD3

SECTION 1. The legislature finds that medical debt has become a widespread issue in the State. According to a 2022 report from the Peterson-KFF Health System Tracker, more than one in twenty adults in the State have outstanding medical debt on their credit report. In states and cities that have acquired and forgiven unpaid medical debt, most of the forgiven debt was owed by those with health insurance, further suggesting that despite many families in the State having health insurance coverage, inability to pay medical debt is a serious problem.

The legislature further 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 also finds and declares that the appropriation in this Act is in the public interest and for the public health, safety, and general welfare of the State. Due to a rising cost of living and a health care system built on a for-profit model, many families are never able to repay medical debt.

The legislature recognizes that due to the significant amount of outstanding debt owed to hospitals and other health care 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.

However, the legislature further finds that twenty‑seven 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 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.

The legislature finds that a medical debt consolidation and cancellation non-profit organization has already acquired the unpaid medical debt of 50,016 residents of the State, totaling $91,310,664. This includes 39,401 individuals on Oahu, 6,654 individuals on Hawaii Island, 3,597 individuals on Maui, Molokai, and Lanai, and three hundred sixteen individuals on Kauai.

Accordingly, the purpose of this Act is to authorize the office of wellness and resilience to develop, implement, and oversee the administration of a medical debt acquisition and forgiveness program to acquire and forgive outstanding medical debt for certain Hawaii residents, subject to the availability of program funds.

SECTION 2. Chapter 346, Hawaii Revised Statutes, is amended by adding a new section to part XXI to be appropriately designated and to read as follows:

"§346- Medical debt acquisition and forgiveness program. (a) The office may develop, implement, and administer a medical debt acquisition and forgiveness program to acquire and forgive outstanding medical debt of residents of the State that is identified as available for acquisition, subject to the availability of program funds.

(b) The office may partner with other relevant state agencies and programs to develop, implement, and administer the program.

(1) Acquire and forgive the medical debt of individuals who are residents of the State:

(A) With a household income less than or equal to four hundred per cent of the federal poverty level for the State; and

(B) With an adjusted gross income of less than $100,000 who have a medical debt balance of no less than five per cent of their household income; and

(2) Ensure that any specific personally identifiable information or protected health information is collected in compliance with applicable federal and state laws, regulations, and rules, and is used only for the purposes of acquiring and satisfying or discharging medical debt, or providing financial education, insurance enrollment assistance, preventive measures, or similar support services. Information collected subject to this paragraph shall be confidential and not disclosed under chapter 92F without the consent of the individual or as otherwise provided by law.

(d) The office may, without regard to chapter 103D or 103F, as applicable, contract with entities that hold existing medical debt of state residents and have demonstrated experience and success partnering with hospitals and health systems in acquiring and satisfying or forgiving outstanding medical debt on behalf of state and county governments for the purposes of developing, implementing, and administering the medical debt acquisition and forgiveness program.

(e) Any acquisition and forgiveness of medical debt under the program shall be negotiated to ensure the best possible value for the State.

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

SECTION 3. The office shall submit a report of its progress in developing, implementing, and administering the medical debt acquisition and forgiveness program, including any proposed legislation, to the legislature no later than twenty days prior to the convening of the regular session of 2027.

SECTION 4. 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 2026-2027 for the office of wellness and resilience to develop, implement, and administer the medical debt acquisition and forgiveness program established pursuant to section 2 of this Act to acquire and forgive outstanding medical debt for certain individuals who are residents of the State; provided that no funds shall be expended unless matched on a dollar-for-dollar basis by funds from a private source; provided further that the appropriation made by this Act shall not lapse at the end of the fiscal biennium for which the appropriation is made; provided further that all moneys from the appropriation unencumbered as of June 30, 2027, shall lapse as of that date.

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

SECTION 5. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 3000.

THE SENATE	S.B. NO.	3025
THIRTY-THIRD LEGISLATURE, 2026		S.D. 2
STATE OF HAWAII		H.D. 3