Hawaii is set to become the latest state to get into the business of buying and forgiving medical debt. Governor Josh Green is scheduled to sign Senate Bill 3025 into law tomorrow, authorizing the state’s Office of Wellness and Resilience to develop and administer a medical debt acquisition and forgiveness program funded with a $500,000 general fund appropriation.
Why it matters: For collection agencies and debt buyers holding medical debt portfolios in Hawaii, the state is about to become an active purchaser in the secondary market. The bill explicitly authorizes contracts with entities that hold existing medical debt of state residents, and it exempts those contracts from the state’s standard procurement requirements under chapters 103D and 103F.
The details: The program will acquire and forgive medical debt owed by Hawaii residents who meet one of two eligibility thresholds: a household income at or below 400% of the federal poverty level, or an adjusted gross income under $100,000 with a medical debt balance of at least 5% of household income. The law takes effect July 1, 2026, and requires the office to report its progress to the legislature before the 2027 session convenes.
The backdrop: The legislature pointed to a nonprofit model already operating in the state. According to the bill’s findings, a medical debt consolidation and cancellation nonprofit has already acquired the unpaid medical debt of 50,016 Hawaii residents, totaling more than $91.3 million, with the bulk of affected individuals on Oahu. Lawmakers noted that 27 states and cities nationwide have partnered with a nonprofit that purchases medical debt from providers and collection agencies for roughly a penny on the dollar before canceling it outright.
The findings also took aim at the industry directly, citing a secondary market in which commercial debt buyers purchase outstanding and dormant health care debt and, in the legislature’s words, take aggressive action to collect from families unable to pay.
The bottom line:
