Pre-heat oven to 400 degrees.
Heat olive oil in a large skillet over medium heat and add onion and habanero pepper. Cook until soft, about 5 minutes. Add garlic and cook for another 1-2 minutes. Set aside to cool a bit.
In a large bowl, mix together chicken, panko, parmesan, milk, habanero mixture, basil, egg, paprika, salt, and pepper.
Form 12 golf ball-sized meatballs from mixture and place in a lightly oiled baking dish.
Bake meatballs for 20-25 minutes, until cooked through.