It is the position of the Office of Consumer Protection that providers may NOT base the general excise tax on an amount which exceeds the eligible charges, and that to do so would violate State of Hawaii consumer protection laws.

The Hawaii General Excise Tax (GET)

Health care providers contracting with insurance companies may have the amount of GET which they may visibly pass on to their patients limited by those contracts. If the contract allows the GET to be visibly passed on to the patient, the Office of Consumer Protection believes providers must inform their patients of the tax and the specific percentage which is being charged as "excise tax". If the contract provides for the insurance company to reimburse the health care provider for the GET due on the amount of the reimbursement, then the health care provider only may visibly pass on to the patient the amount of GET due on the patient's co-payment.

The following are some common questions asked regarding the Hawaii GET on medical and dental charges.

1. Health care providers must pay the GET on their gross income. What is their gross income if part of the total charge is paid by the insurance company and the balance paid by the patient?

The health care provider's gross income subject to the GET is the total combined amount received from the insurance company and the patient for the service provided.
 
2. May health care providers visibly pass the Hawaii GET on to their patients?

The GET is an expense of doing business and is generally passed on to patients. Separately stating the amount of general excise tax passed on, a practice known as the "visible passing on of the GET", is not required though it is commonly done. Some health care providers, however, may have contracts with insurers that establish limits on the providers' ability to visibly pass on the GET.
 
3. Can health care providers contracting with insurance companies compute the amount of GET to visibly pass on to their patients based on an amount which is more than the eligible charge?

No. If health care providers compute the tax on an amount greater than their gross income (i.e., greater than the plan's eligible charge), then the result will exceed the actual GET due on that transaction. Visibly passing on an amount of GET which is greater than the actual tax due on the transaction is a misrepresentation prohibited by State consumer protection laws.
 
4. My statement shows that the doctor originally filed a claim for $150 with the insurance company, but that the insurance company reduced this amount to the eligible charge of $110. The insurance company paid $88 to the doctor, and my co-payment is $22. On what amount does the doctor compute the GET visibly passed on to me?

If the doctor's contract with the insurance company does not include the GET in the reimbursement and also does not limit the amount of GET which the doctor can visibly pass on to patients, then the doctor would compute the GET to visibly pass on based on the full $110 eligible charge. If the doctor's contract with the insurance company includes the GET in the reimbursement, then the doctor would compute the GET to visibly pass on based on your $22 co-payment.
 
5. Due to an emergency, I was treated by a nonparticipating doctor (i.e., a doctor who does not have a contract with my insurance carrier) who can thus charge more than the $300 eligible charge set by my insurance carrier. I was eventually billed for $500 plus 4.166% GET on the full $500. Can the doctor compute the GET on more than the eligible charge in this case?

Yes, the doctor may use the $500 amount to compute the GET to visibly pass on to you. The doctor's gross income in this case is the total billed to you rather than the eligible charge. Computing the GET to visibly pass on to you on the entire $500 will not result in an amount greater than the actual tax due, and thus will not violate State consumer protection laws.
 
6. If the tax rate on medical services is 4%, why does my statement show a GET charge of 4.166%?

The GET is levied on the health care provider's total gross income, including any amount visibly passed on and represented to be the GET. The additional 0.166% accounts for the GET due on the tax visibly passed on. For more information, see Tax Facts No. 96-1, General Excise vs. Sales Tax.
 
7. My bill shows that 4.167% was added onto my bill. Is that permitted?

No. The Office of Consumer Protection has ruled that the amount visibly passed on cannot exceed the actual tax due. The 4.167% rate results from rounding UP the optimal percentage of 4.1666% to 4.167%. This is not permitted because it may result in an amount visibly passed on which is more than the actual GET due on the transaction, and thus violate State consumer protection laws. NOTE: The 4.166% rate used to compute the tax visibly passed on will change if the 4% GET rate is increased.
 
8. Are there any amounts normally charged by health care providers which are exempt from the GET?

Yes. Gross income from the sale of prosthetic devices and prescription drugs to patients (including vaccines administered to patients) generally may be exempted from the GET if the charge for the device/prescription is clearly separated from any related administrative and service charges. Health care providers may not compute the GET to visibly pass on to their patients on amounts exempt from the GET.

STATE DISTRICT TAX OFFICE ADDRESSES & TELEPHONE NUMBERS