United States: ACA Proposed Rule To Require Health Insurers To Certify Compliance With HIPAA Electronic Transaction Requirements

The U.S. Department of Health and Human Services issued a proposed rule to implement the ACA requirement that health insurers and other HIPAA-covered health plans certify compliance with the standards and operating rules for the HIPAA-standardized transactions for eligibility for a health plan, health care claim status and health care electronic funds transfers and remittance advice. Health plans would certify compliance by obtaining one of two credentials from the Council for Affordable Quality Healthcare Committee on Operating Rules for Information Exchange (CAQH CORE). In anticipation of a future final rule, health plans should assess their information systems to identify any gaps in compliance and ability to obtain one of the CAQH CORE credentials.


On December 31, 2013, the U.S. Department of Health and Human Services (HHS) issued a proposed rule (proposed rule) to implement Section 1104(h) of the Affordable Care Act (ACA). Section 1104(h) requires health insurers and other Health Insurance Portability and Accountability Act of 1996 (HIPAA)-covered health plans (Health Plans) to certify compliance with the standards and operating rules for the following electronic transactions adopted under HIPAA: eligibility for a health plan, health care claim status, and health care electronic funds transfers (EFT) and remittance advice (ERA). The proposed rule would also implement the per covered life, per day civil penalties for Health Plans that fail to certify compliance. Under the proposed rule, a Health Plan that is a controlling health plan (CHP) (as defined below) would certify compliance with the standards and operating rules for the three electronic transactions by obtaining one of two credentials from the Council for Affordable Quality Healthcare (CAQH) Committee on Operating Rules for Information Exchange (CORE).

A CHP that obtains a Health Plan Identifier (as defined in the HIPAA health plan identifier final rule) before January 1, 2015, would be required to submit documentation of the credentials to HHS on or before December 31, 2015. A CHP that obtains a Health Plan Identifier on or after January 1, 2015 (and on or before December 31, 2016), would have 365 days to submit documentation to certify compliance. The health plan identifier final rule requires an existing Health Plan (other than certain Health Plans that meet the definition of "small health plans") to obtain a health plan identifier by November 5, 2014. Small health plans must obtain an HPID by November 5, 2015.

HHS notes that it hopes the certification requirements will move the health care industry toward a consistent, industry-wide testing framework that will support a more seamless transition to new and modified standards and operating rules.

Notably, the Proposed Rule does not implement the ACA requirement that HHS conduct periodic audits to ensure that Health Plans and entities that have service contracts with Health Plans are in compliance with the standards and operating rules. The proposed rule offers no time frame for adoption of the required audit program.

Interested persons may submit comments about the proposed rule to HHS on or before March 3, 2014.

Statutory and Regulatory Background

HIPAA Electronic Transaction Requirements
HIPAA requires a Health Plan, a health care clearinghouse and certain health care providers (collectively, covered entities) that transmit electronic health information in an electronic transaction standardize under HIPAA to conduct the transaction in accordance with the standards and operating rules adopted by HHS for the transaction under HIPAA (collectively, electronic transaction requirements). Covered entities may be subject to civil money penalties and criminal penalties for violations of the electronic transaction requirements. The potential penalties under HIPAA are separate from the penalties required by the ACA for a Health Plan's failure to certify compliance with the electronic transaction requirements. The ACA penalties are described below.

Certification Requirements Under the Affordable Care Act
Section 1104(h) of the ACA requires Health Plans to file a statement with HHS by December 31, 2013, certifying that their data and information systems comply with the standards and operating rules for the following HIPAA-standardized transactions: eligibility for a health plan; health care claim status; and health care EFT and ERA. The proposed rule would implement these requirements, albeit with a deadline two years after the statutory deadline.

The ACA also mandates that Health Plans certify by December 31, 2015, compliance with the following other HIPAA-standardized transactions: health care claims or equivalent encounter information, enrollment and disenrollment in a health plan, health plan premium payments, health claims attachments, and referral certification and authorization. In addition, the ACA mandates certification of compliance requirements for later versions of the electronic transaction requirements. HHS will address these certification of compliance requirements in future rule makings.

Penalties for Noncompliance with Certification Requirements
The ACA specifies new penalties for Health Plans that fail to comply with the certification and documentation of compliance requirements. The penalties equal the product of one dollar times the number of the plan's "covered lives" times the number of days the plan's data and information systems are not in compliance from the certification deadline to the date that certification is complete. The penalties are subject to annual caps of $20 per covered life or, in the event of misrepresentation when certifying compliance, $40 per covered life.

The ACA requires HHS to determine the number of covered lives under a Health Plan based upon the plan's most recent statements and filings with the Securities and Exchange Commission. However, HHS determined this approach to be unworkable, particularly for Health Plans owned by non-public companies. The proposed rule includes a different regulatory definition of "covered lives," which is discussed below.

Proposed Rule

Which Health Plans Are CHPs?
Under the proposed rule, HHS requires CHPs to certify compliance with the certification requirements on their own behalf and on behalf of subhealth plans (as defined below). As defined in the HIPAA health plan identifier final rule issued September 5, 2012, a CHP is a Health Plan that: "(1) Controls its own business activities, actions, or policies; or (2)(i) Is controlled by an entity that is not a health plan; and (ii) If it has a subhealth plan(s) ..., exercises sufficient control over the subhealth plan(s) to direct its/their business activities, actions, or policies." A subhealth plan is "a health plan whose business activities, actions, or policies are directed by a controlling health plan."

In the health plan identifier final rule, HHS stated that an entity is a CHP if (1) the entity itself meets the definition of a Health Plan under the HIPAA regulations and (2) the entity itself or a non-Health Plan organization controls the business activities, actions or policies of the entity.

Certification Options
The ACA authorizes HHS to designate an independent, outside entity to certify that Health Plans have complied with the certification requirements, so long as the entity uses certification standards in accordance with the HIPAA standards and operating rules. Consistent with this authority, HHS proposes to require CHPs to certify compliance with the operating rules for the eligibility for a health plan, health care claim status, and health care EFT and ERA transactions by obtaining one of two credentials from the CAQH CORE:

  • Phase III CORE Seal: A CHP may certify compliance by obtaining a Certification Seal for Phase III CAQH CORE EFT and ERA operating rules (Phase III CORE Seal). To obtain the Phase III CORE Seal, a CHP must apply for the credential and successfully complete certification testing with a CORE-authorized vendor. CAQH CORE currently accepts applications for the Phase III CORE Seal.
  • HIPAA Credential: Alternatively, a CHP may certify compliance by obtaining a HIPAA Credential. According to the CAQH website, CAQH CORE intends to accept applications for the HIPAA Credential after HHS defines the documentation and other HIPAA Credential requirements in a final rule. CAQH CORE will require a CHP to submit an application to CAQH CORE, successfully complete required testing of the operating rules with health care providers and other trading partners and attest to compliance with the operating rules.

More information about obtaining the credentials from CAQH CORE is available on CAQH's website at http://corecertification.caqh.org/CORE_certification.

Business Associates of Health Plans
HHS states in the proposed rule that when a CHP certifies compliance, the CHP would also be certifying that the CHP's and its subhealth plans' business associates (as defined in the HIPAA regulations) that conduct all or part of the HIPAA-standardized transactions on its behalf are compliant with the HIPAA standards and operating rules. This is because the HIPAA electronic transaction rule requires covered entities that use business associates to conduct HIPAA-standardized transactions on their behalf to require those business associates to comply with the requirements of the electronic transactions rule. Consequently, it would be prudent for Health Plans to incorporate into their business associate agreements or other contracts with business associates the obligation of the business associates to comply with the electronic transaction requirements.

Submission Requirements
After a CHP has obtained one of the two credentials from CAQH CORE, the proposed rule would require the CHP to submit: (1) documentation to HHS demonstrating that it has obtained either a Phase III CORE Seal or a HIPAA Credential from CAQH CORE and (2) the CHP's number of covered lives on the submission date. At the time of submission, the CHP may not be under CORE IT Exemption Policy (which permits CAQH Core to issue the CORE Seal despite non-compliant data and information systems). The proposed rule does not include the specific format for the submission, but it does indicate that HHS intends to set up an online submission process near the time that it issues a final rule.

HHS proposes that a CHP would have up to 12 months prior to the certification of compliance deadlines (i.e., anytime during 2015) to satisfy the submission requirements.

Penalty Provisions
The proposed rule would implement the ACA's per covered life per day penalty scheme described above, including, without limitation, the $20 and $40 per covered life caps on the penalties. The proposed rule would define "covered lives" to mean individuals (including, without limitation, the individuals' dependents) covered by or enrolled in major medical policies of a CHP and the subhealth plans of that CHP. "Major medical policy" would mean "an insurance policy that covers accident and sickness and provides outpatient, hospital, medical and surgical expense coverage."

Next Steps

In anticipation of a future final rule, Health Plans and their business associates that conduct any of the electronic transactions covered by the proposed rule should begin to assess their claim processing systems and other data and information systems to identify any gaps in compliance (by the CHP, subhealth plans and their business associates) and develop and implement corrective action plans for any gaps. In addition, Health Plans that do not already possess the Phase III CORE Seal should begin to consider which CAQH CORE credential to pursue. Health Plans should also plan to submit applications for the credentials well in advance of the certification deadlines to avoid any application processing and Health Plan information system testing capacity challenges of CAQH CORE and its authorized vendors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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