SB 2431: Department of Taxation; Health Insurance; Health Savings Account-Eligible High Deductible Health Plan; Bronze Plan; Catastrophic Plan; Tax Credit; Medically Underserved Areas

A BILL FOR AN ACT

RELATING TO HEALTH SAVINGS ACCOUNTS.

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

     SECTION 1.  The legislature finds that access to preventive care, telehealth, and urgent care improves health outcomes and helps to control long-term health costs.  Recent changes at the federal level will result in the loss of medicaid coverage for many residents of the State, causing many policyholders to transition between public, employer-sponsored, and individual insurance plans.  The legislature further finds that during periods in which a great number of policyholders transition between insurance plans, commercial health insurance prices spike and often become unaffordable.

     The legislature recognizes that these reforms are intended to preserve the protections of the Prepaid Health Care Act for full-time workers while modernizing coverage options for others, and that direct payment agreements for routine primary care services are not insurance and may be used in combination with coverage offered under this Act, to the extent permitted under federal law.

     The legislature also finds that, due to federal rule changes effective January 1, 2026, federally qualified health savings-account eligible high deductible health plans, including low-premium bronze and catastrophic plans, when paired with health saving accounts, may offer an affordable, flexible, and portable coverage option.  The legislature additionally finds that rural and medically underserved areas face ongoing access and market participation challenges and targeted incentives may encourage insurers to offer coverage options to individuals in these communities.

     Accordingly, the purpose of this Act is to expand affordable coverage options and promote continuity of care by:

     (1)  Establishing a tiered, nonrefundable tax credit for qualified insurers offering federally qualified health savings account-eligible high deductible health plans in the State, with enhanced incentives for plans written for residents in rural and medically underserved areas; and

     (2)  Requiring qualified insurers to match up to a certain amount of a policyholder's first-time contribution into a health savings account.

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

     "§235-    Health savings account-eligible high deductible health plan tax credit; first-time contribution match.  (a)  There shall be allowed to each qualified taxpayer subject to the tax imposed under this chapter, a health savings account‑eligible high deductible health plan tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

     (b)  The tax credit shall be:

     (1)  $           for each federally qualified health savings account-eligible high deductible health plan that is written by a qualified taxpayer for an insured residing in an area of the State that is not medically underserved;

     (2)  $           for each federally qualified health savings account-eligible high deductible health plan that is written by a qualified taxpayer for an insured residing in a non-rural area of the State that is medically underserved;

     (3)  $           for each federally qualified health savings account-eligible high deductible health plan that is written by a qualified taxpayer for an insured residing in a partially rural area of the State that is medically underserved; and

     (4)  $           for each federally qualified health savings account-eligible high deductible health plan that is written by a qualified taxpayer for an insured residing in a rural area of the State that is medically underserved;

provided that the tax credit shall only apply to each federally qualified health savings account-eligible high deductible health plan written in the State by a qualified taxpayer on or after January 1, 2026; provided further that the total amount of tax credits claimed by a qualified taxpayer shall not exceed $           for the taxable year.

     (c)  To be eligible for the tax credit under this section, a qualified taxpayer shall match an amount of up to $           for a policyholder's first-time contribution into a health savings account.

     (d)  The director of taxation:

     (1)  Shall prepare any forms that may be necessary to claim a tax credit under this section;

     (2)  May require a qualified taxpayer to furnish reasonable information to verify the claim for the tax credit made under this section; and

     (3)  May adopt rules pursuant to chapter 91 necessary to carry out the purposes of this section.

     (e)  The credit allowed under this section shall be claimed against the net income tax liability for the taxable year.  If the tax credit under this section exceeds the taxpayer's net income liability, the excess of credit over liability may be used as a tax credit against the taxpayer's net income tax liability in subsequent years until exhausted.  All claims for tax credits under this section, including any amended claims, shall be filed within five years following the close of the taxable year for which the credit may be claimed.  Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

     (f)  The department of taxation shall adopt rules pursuant to chapter 91 to require a qualified taxpayer claiming a tax credit under this section to report to the department the value of benefits provided to insureds under this section.

     (g)  For the purposes of this section:

     "Health savings account" has the same meaning as defined under section 223(d)(1) of the Internal Revenue Code of 1986, as amended.

     "High deductible health plan" means a plan that is:

     (1)  Available as individual coverage through an exchange under section 1311 or 1321 of the Patient Protection and Affordable Care Act; and

     (2)  A bronze plan, as described in section 1302(d)(1)(A) of the Patient Protection and Affordable Care Act, or a catastrophic plan, as described in section 1302(e) of the Patient Protection and Affordable Care Act.

     "Medically underserved area" means a geographic area or population group designated by the United States Department of Health and Human Services as an area with a shortage of primary care health services or a population group experiencing a shortage of primary care health services and facing economic, cultural, or linguistic barriers to access health care.

     "Qualified taxpayer" means a taxpayer that:

     (1)  Offers one or more health savings account-eligible high deductible health plans that are in compliance with section 223 of the Internal Revenue Code of 1986, as amended, for residents of the State, including those in rural and medically underserved areas; and

     (2)  Enrolls at least       policyholders in one or more federally qualified health savings account-eligible high deductible health plans.

     "Rural" means an area that is not delineated as an urbanized area by the United States Census Bureau."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 2050, and shall apply to taxable years beginning after December 31, 2025; provided that this Act shall be repealed on December 31, 2030.

Report Title:

Department of Taxation; Health Insurance; Health Savings Account-Eligible High Deductible Health Plan; Bronze Plan; Catastrophic Plan; Tax Credit; Medically Underserved Areas

Description:

For taxable years beginning 1/1/2026, establishes a tiered nonrefundable tax credit for qualified taxpayer insurers that offer one or more federally qualified health savings account‑eligible high deductible health plans in the State, under certain conditions, and increasing the tax credit to incentivize more plans being written for residents in rural medically underserved areas of the State.  Requires qualified taxpayer insurers to match up to a certain amount of a policyholder's first-time contribution into a health savings account.  Sunsets 12/31/2030.  Effective 7/1/2050.  (SD1)

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

A BILL FOR AN ACT

relating to health savings accounts.

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

     SECTION 1.  The legislature finds that access to preventive care, telehealth, and urgent care improves health outcomes and helps to control long-term health costs.  Recent changes at the federal level will result in the loss of Medicaid coverage for many residents of the State, causing many policyholders to transition between public, employer-sponsored, and individual insurance plans.  The legislature further finds that during periods in which a great number of policyholders transition between insurance plans, commercial health insurance prices spike and often become unaffordable.

     The legislature recognizes that these reforms are intended to preserve the protections of the Prepaid Health Care Act for full-time workers while modernizing coverage options for others, and that direct payment agreements for routine primary care services are not insurance and may be used in combination with coverage offered under this Act, to the extent permitted under federal law.

     The legislature also finds that, due to federal rule changes effective January 1, 2026, federally qualified health savings-account eligible high deductible health plans, including low-premium bronze and catastrophic plans, when paired with health saving accounts, may offer an affordable, flexible, and portable coverage option.  The legislature additionally finds that rural and medically underserved areas face ongoing access and market participation challenges, and that targeted incentives may encourage insurers to offer coverage options to individuals in these communities.

     Accordingly, the purpose of this Act is to expand affordable coverage options and promote continuity of care by:

     (1)  Establishing a tiered, nonrefundable tax credit for qualified insurers offering federally qualified health savings account-eligible high deductible health plans in the State, with enhanced incentives for plans written in rural and medically underserved areas; and

     (2)  Requiring qualified insurers to match up to a certain amount of a policyholder's first-time contribution into a health savings account.

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

     "§235-    Health savings account-eligible high deductible health plan tax credit; first-time contribution match.  (a)  There shall be allowed to each qualified taxpayer subject to the tax imposed under this chapter, a health savings account‑eligible high deductible health plan tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

     (b)  The tax credit shall be:

     (1)  $           for each federally qualified health savings account-eligible high deductible health plan that is written by a qualified taxpayer in an area of the State that is not medically underserved area;

     (2)  $           for each federally qualified health savings account-eligible high deductible health plan that is written by a qualified taxpayer in a non-rural medically underserved area of the State;

     (3)  $           for each federally qualified health savings account-eligible high deductible health plan that is written by a qualified taxpayer in a partially rural medically underserved area of the State; and

     (4)  $           for each federally qualified health savings account-eligible high deductible health plan that is written by a qualified taxpayer in a rural medically underserved area of the State;

provided that the tax credit shall only apply to each federally qualified health savings account-eligible high deductible health plan written in the State by a qualified taxpayer on or after January 1, 2026; provided further that the total amount of tax credits claimed by a qualified taxpayer shall not exceed $           for the taxable year.

     (c)  To be eligible for the tax credit under this section, a qualified taxpayer shall match an amount of up to $           for a policyholder's first-time contribution into a health savings account.

     (d)  The total amount of tax credits allowed under this section shall not exceed $           for all qualified taxpayers in any taxable year; provided that any qualified taxpayer who is ineligible to claim the credit in a taxable year due to the $           cap having been exceeded for that taxable year shall be eligible to claim the credit in the subsequent taxable year.

     (e)  The director of taxation:

     (1)  Shall prepare any forms that may be necessary to claim a tax credit under this section;

     (2)  May require a qualified taxpayer to furnish reasonable information to verify the claim for the tax credit made under this section; and

     (3)  May adopt rules pursuant to chapter 91 necessary to carry out the purposes of this section.

     (f)  The credit allowed under this section shall be claimed against the net income tax liability for the taxable year.  If the tax credit under this section exceeds the taxpayer's net income liability, the excess of credit over liability may be used as a tax credit against the taxpayer's net income tax liability in subsequent years until exhausted.  All claims for tax credits under this section, including any amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed.  Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

     (g)  For the purposes of this section:

     "Health savings account" has the same meaning as defined under section 223(d)(1) of the Internal Revenue Code of 1986, as amended.

     "High deductible health plan" means a plan that is:

     (1)  Available as individual coverage through an exchange under section 1311 or 1321 of the Patient Protection and Affordable Care Act; and

     (2)  A bronze plan, as described in section 1302(d)(1)(A) of the Patient Protection and Affordable Care Act, or a catastrophic plan, as described in section 1302(e) of the Patient Protection and Affordable Care Act.

     "Medically underserved area" or "population" means a geographic area or population group designated by the United States Department of Health and Human Services as an area with a shortage of primary care health services or a population group experiencing a shortage of primary care health services and facing economic, cultural, or linguistic barriers to access health care.

     "Qualified taxpayer" means a taxpayer that:

     (1)  Offers one or more health savings account-eligible high deductible health plans that are in compliance with section 223 of the Internal Revenue Code of 1986, as amended, for residents of the State, including those in rural and medically underserved areas; and

     (2)  Enrolls at least       policyholders in one or more federally qualified health savings account-eligible high deductible health plans."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2025, and shall be repealed on December 31, 2030.

Report Title:

Department of Taxation; Health Insurance; Health Savings Account-Eligible High Deductible Health Plan; Bronze Plan; Catastrophic Plan; Tax Credit; Medically Underserved Areas

Description:

For taxable years beginning 1/1/2026, establishes a tiered nonrefundable tax credit for qualified taxpayer insurers that offer one or more federally qualified health savings account‑eligible high deductible health plans in the State, under certain conditions, and increasing the tax credit to incentivize more plans being written in rural medically underserved areas of the State.  Requires qualified taxpayer insurers to match up to a certain amount of a policyholder's first-time contribution into a health savings account.  Sunsets 12/31/2030.

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

STAND. COM. REP. NO. 2967

Honolulu, Hawaii

RE:     S.B. No. 2431

        S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred S.B. No. 2431, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO HEALTH SAVINGS ACCOUNTS,"

begs leave to report as follows:

     The purpose and intent of this measure is to expand affordable health coverage options in the State.

     More specifically, this measure:

     (1)  Establishes a tiered, nonrefundable tax credit for qualified insurers offering federally qualified health savings account-eligible high deductible health plans in the State, with enhanced incentives for plans written for residents in rural and medically underserved areas; and

     (2)  Requires qualified insurers to match up to a certain amount of a policyholder's first-time contribution into a health savings account.

     Your Committee received written comments on this measure from the Department of Labor and Industrial Relations, Department of Taxation, Aloha Independent Living Hawaii, and Hawaii Medical Association.

     Your Committee finds that recent changes at the federal level will result in the loss of Medicaid coverage for many of the State's residents, causing many policyholders to transition between public, employer-sponsored, and individual insurance plans.  Your Committee also finds that, during periods in which a great number of policyholders transition between insurance plans, commercial health insurance prices spike and often become unaffordable.  Your Committee believes that federally qualified health savings-account eligible high deductible health plans, when paired with health saving accounts, will offer an affordable, flexible, and portable coverage option.

     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. 2431, S.D. 1, and recommends that it pass Third Reading.

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

STAND. COM. REP. NO. 2549

Honolulu, Hawaii

RE:     S.B. No. 2431

        S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which was referred S.B. No. 2431 entitled:

"A BILL FOR AN ACT RELATING TO HEALTH SAVINGS ACCOUNTS,"

begs leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Establish a temporary tiered nonrefundable tax credit for qualified taxpayer insurers that offer one or more federally qualified health savings account‑eligible high deductible health plans, particularly in rural medically underserved areas of the State, for taxable years beginning January 1, 2026; and

     (2)  Require qualified taxpayer insurers to match up to a certain amount of a policyholder's first-time contribution into a health savings account.

     Your Committee received testimony in support of this measure from two individuals.

     Your Committee received comments on this measure from the Department of Taxation, Department of Labor and Industrial Relations, Tax Foundation of Hawaii, and Hawaii Medical Association.

     Your Committee finds that recent federal changes may result in loss of Medicaid coverage and higher health care insurance costs for many residents of the State.  This measure would make health care insurance options more affordable and accessible, particularly in rural and medically underserved areas of the State, by providing tiered tax incentives for insurers that provide certain health care plans.

     Your Committee has amended this measure by:

     (1)  Inserting language that clarifies that a health plan must be written for an insured residing in certain areas of the State;

     (2)  Deleting language that would have capped the total aggregate amount of tax credits claimed in any taxable year;

     (3)  Inserting language that requires a tax credit to be claimed within five years of the taxable year in which the credit may be claimed;

     (4)  Inserting language that requires the Department of Taxation to adopt rules to require a qualified taxpayer claiming a tax credit to report certain information to the Department;

     (5)  Inserting a definition of "rural";

     (6)  Amending section 1 to reflect its amended purpose;

     (7)  Inserting an effective date of July 1, 2050, to encourage further discussion; and

     (8)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the record of votes of the members of your Committee on Commerce and Consumer Protection that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2431, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2431, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Commerce and Consumer Protection,