United States: HIPAA Privacy And Security Compliance For Group Health Plan Sponsors


This report focuses on the final regulations issued under the Health Insurance Portability and Accountability Act of 1996 (HIPAA),1 in January 2013,2 HIPAA enforcement and audit programs, HIPAA-related additional requirements of group health plan sponsors, and the actions that must be taken by group health plan sponsors to ensure compliance with the final regulations and requirements and to prepare for potential audits and enforcement actions.3

The HIPAA privacy and security rules govern the use and disclosure of an individual's protected health information, or PHI.4 The final HIPAA regulations made many changes to the existing HIPAA privacy and security rules that are applicable to covered entities, which include group health plans.5

Action Items for Plan Sponsors

Sponsors of group health plans should take the following steps to ensure compliance with the changes made by the final regulations, discussed in more detail below:

  • Review vendor list and ensure a business associate agreement is in place with all individuals or entities that meet the definition of business associate under the final regulations.
  • Review existing business associate agreements and ensure the agreements comply with the final regulations. For example, ensure any business associate agreement requires business associates to enter into a business associate agreement with any subcontractors who are business associates under the final regulations that is at least as stringent as the business associate agreement between the group health plan and the business associate.
  • Establish or review existing HIPAA policies and procedures, and train employees on these policies and procedures. These policies should include HIPAA-compliant forms such as authorization forms, access request forms, accounting request forms, and personal representative forms.
  • Review breach notification and identification policies to ensure any breaches under the new standard are being reported. Breach notification and identification policies should include a risk assessment that evaluates at least the four factors mandated by the final regulations. Consider breach reporting requirements when entering into or revising business associate agreements, and ensure business associates are adequately assessing breaches and are required to notify the group health plan in enough time to give the plan adequate time to fulfill its obligations regarding breaches.

    Practice Tip: Keep in mind that state breach laws may be more stringent than the requirements under HIPAA. Thus, research applicable state laws and be sure and comply with them if they are more stringent.
  • Review the plan's notice of privacy practices and any policies regarding electronic posting of the notice of privacy practices to ensure compliance with the final regulations. Ensure updates due to material changes are distributed in compliance with the final regulations.

Business Associates

Many of the changes made by the final regulations apply to business associates.6 The final regulations extend many of the privacy and security requirements directly to business associates, along with penalties for noncompliance.7 In addition, the final regulations expand the definition of business associate.8 A business associate is now defined as a person who, on behalf of a covered entity, creates, receives, maintains, or transmits protected health information for a function or activity covered by the final regulations.9

The expanded definition now explicitly provides that a business associate includes a subcontractor of a business associate who creates, receives, maintains, or transmits protected health information on behalf of the business associate.10 As a result of the expanded definition of a business associate, business associate agreements governing the use and disclosure of protected health information should now be entered into by a business associate and any subcontractor who meets the definition of a business associate under the final regulations.11 This requirement extends down the line to any subcontractor of a subcontractor who meets the business associate definition. Any business associate agreements entered into by business associates and subcontractors must be at least as stringent regarding the use and disclosure of protected health information as the original agreement between the covered entity and business associate.12

The final regulations also apply vicarious liability to a covered entity for HIPAA violations of its business associate who is determined to be acting as an agent of the covered entity.13 Whether the business associate is acting as an agent of the covered entity is determined using common law agency principles.14

Practice Tip: Provisions in a business associate agreement that allow the plan sponsor or health plan to direct or control the conduct of the business associate should be avoided, as these provisions could be evidence of an agency relationship between the covered entity and business associate. However, provisions in the business associate agreement that explicitly state that the business associate is not an agent of the covered entity are not controlling for the purpose of applying this vicarious liability rule.


The final regulations revise the rules regarding breaches of unsecured protected health information.15

A breach is now presumed unless the covered entity or business associate, as applicable, demonstrates there is a low probability that the security or privacy of the protected health information was compromised based on a risk assessment that considers, at a minimum,

  1. the nature and extent of the protected health information involved, including the types of identifiers and the likelihood of re-identification;
  2. the unauthorized person to whom the protected health information was disclosed or who used the protected health information;
  3. whether or not the protected health information was actually acquired or viewed; and
  4. the extent to which the risk to the protected health information was mitigated.16

Notice of Privacy Practices

A group health plan's notice of privacy practices must be provided to an individual at the time of enrollment in the plan, and at least every three years individuals must be notified of the availability of the notice and how to obtain the notice.17

The final regulations change the rules applicable to distribution of a group health plan's notice of privacy practices when a material change is made to the notice.18 Under the final regulations, if a material change is made to the notice and the plan posts its notice to the plan's website, the revised notice or material change must be prominently posted on the website on or before the effective date of the change.19

In addition, the plan must provide the revised notice or information about the material change and how to obtain the revised notice in its next annual mailing to individuals covered under the plan.20

If the plan does not post its notice on the plan's website and a material change is made to the notice, the plan must, within 60 days of the material revision to the notice, provide the revised notice, or information about the material change and how to obtain the revised notice, to individuals covered under the plan.21

Genetic Information Nondiscrimination Act

The final regulations incorporate the Genetic Information Nondiscrimination Act by prohibiting plans from using or disclosing genetic information for underwriting purposes, even with an authorization.22

This prohibition does not apply to long-term care insurance.23

Expanded Access to Electronic Protected Health Information

Individuals generally have a right of access to inspect and obtain a copy of the individual's protected health information maintained in a designated record set.24

The final regulations expand this right for electronic protected health information. Under the final regulations, the plan must provide an electronic copy of any protected health information contained in a designated record set that is maintained electronically.25

HIPAA Audits and Expanded Enforcement Action

HIPAA enforcement action has increased in the years following the issuance of the final HIPAA regulations, due to a concerted effort by the Department of Health and Human Services.26 In March 2016, the Department of Health and Human Services Office for Civil Rights announced it would soon begin ''Phase 2 audits'' of both covered entities (including group health plans) and business associates of covered entities, to ensure compliance with HIPAA privacy, security, and breach notification standards.27 Group health plan sponsors should prepare for these potential audits by ensuring they have continued to maintain compliance with the final HIPAA regulations by completing the action items discussed earlier in this report. In addition, group health plan sponsors should ensure compliance with the group health plan's existing HIPAA policies and procedures, including documentation of HIPAA training of work force members. Group health plans can also, in advance of a potential audit, perform assessments of potential security risks and vulnerabilities to the plan sponsor, and complete all action items resulting from such assessments.

Health Plan Identifier

Under the Patient Protection and Affordable Care Act (as amended by the Health Care and Education Reconciliation Act of 2010),28 self-insured group health plans are subject to the requirement to obtain a Health Plan Identifier (HPID) to serve as a way to identify health plans in electronic transactions.29 Although this requirement was to be effective Nov. 5, 2014 (Nov. 5, 2015 for small plans),30 the Centers for Medicare and Medicaid Services (CMS) delayed this requirement until further notice.31

[Updated June 2016]


1 Pub. L. No. 104-191, enacted on Aug. 21, 1996.

2 This report in part focuses on the actions required due to the changes made by the final regulations. The term ''final regulations'' is used herein to refer to the regulations issued on Jan. 17, 2013, by the Department of Health and Human Services and published in the Federal Register on Jan. 25, 2013 (78 Fed. Reg. 5566 (January 25, 2013)).

3 78 Fed. Reg. 5566 (January 25, 2013). These final regulations were effective March 26, 2013, and group health plans generally had until Sept. 23, 2013, to comply. However, the final regulations provided a one-year extension of this compliance date for HIPAA-compliant business associate agreements in existence prior to Jan. 25, 2013, as long as the agreement was not renewed or modified between March 26, 2013, and Sept. 23, 2013. 45 C.F.R. § 164.532(e). Such an existing agreement was deemed compliant with the final regulations until the earlier of (i) the date the agreement is renewed or modified on or after Sept. 23, 2013, and (ii) Sept. 22, 2014. Id.

4 PHI is defined as individually identifiable health information that is transmitted by electronic media, maintained in electronic media, or transmitted or maintained in any other form or medium, excluding such information (i) in education records covered by the Family Educational Rights and Privacy Act, (ii) in records described at 20 U.S.C. § 1232g(a)(4)(B)(iv), (iii) in employment records held by a covered entity in its role as employer, and (iv) regarding a person who has been deceased for more than 50 years. 45 C.F.R. § 160.103. The exclusion of information regarding persons deceased longer than 50 years was added by the final regulations. Individually identifiable health information is an individual's health information that (i) is created or received by a health care provider, health plan, employer, or health care clearinghouse; and (ii) relates to the past, present, or future physical or mental health or condition of an individual; the provision of health care to an individual; or the past, present, or future payment for the provision of health care to an individual; and (1) identifies the individual or (2) with respect to which there is a reasonable basis to believe the information can be used to identify the individual. Id.

5 The final regulations define a covered entity as (1) a health plan, (2) health care clearinghouse, or (3) health care provider who transmits any health information in electronic form in connection with a transaction covered by the final regulations. 45 C.F.R. § 160.103. This article uses the terms covered entity and group health plan interchangeably.

6 Business associates are generally contractors or vendors that will use or disclose PHI in performing services for the group health plan.

7 See, e.g. 45 C.F.R. § 160.310 (setting forth various responsibilities of covered entities and business associates); 45 C.F.R. § 160.316 (prohibiting a business associate from intimidation or retaliation); 45 C.F.R. § 160.402 (applying civil penalties to business associates); 45 C.F.R. § 164.302 (requiring business associates to comply with the requirements for electronic protected health information); 45 C.F.R. § 164.500 (applying to business associates various provisions governing the use and disclosure of protected health information).

8 45 C.F.R. § 160.103.

9 Id. The final regulations state that such activities include claims processing or administration, data analysis, processing, or administration, utilization review, quality assurance, patient safety activities listed at 42 C.F.R. § 3.20, billing, benefit management, practice management, and repricing. Id. The preamble to the final regulations emphasizes that entities that maintain protected health information, such as data storage companies, are business associates under this new definition even if they do not actively access or view the protected health information. 78 Fed. Reg. 5566, Preamble (January 25, 2013). The final regulations leave unchanged the provision that a business associate is also, with respect to a covered entity, a person who provides (other than as a member of the covered entity's workforce) legal, actuarial, accounting, consulting, data aggregation, management, administrative, accreditation, or financial services to or for the covered entity, and the performance of such services involves the disclosure of protected health information. 45 C.F.R. § 160.103.

10 Id.

11 45 C.F.R. § 164.308(b)(2). The covered entity is not required to enter into a business associate agreement with a subcontractor of its business associate. 45 C.F.R. § 164.308(b)(1).

12 45 C.F.R. § 164.308(b).

13 45 C.F.R. § 160.402(c).

14 45 C.F.R. § 160.402(c)(1).

15 45 C.F.R. § 164.402. The final regulations retain the definition of breach as the acquisition, access, use, or disclosure of protected health information in a manner not permitted under the final regulations that compromises the privacy or security of the protected health information, but remove (i) the requirement that the use or disclosure poses a significant risk of financial, reputational, or other harm to the individual and (ii) the exclusion from the definition of breach of uses or disclosures that do not include identifiers listed at 45 C.F.R. § 164.514(e)(2) (the limited data set direct identifiers), date of birth, and zip code. Id. However, the final regulations add a presumption of a breach unless certain factors are present to show only a low probability that the privacy or security of the protected health information has been compromised. Id.

16 Id. The four factors required to be assessed are not the only factors that may be considered during the assessment. The preamble to the final regulations notes that ''given the circumstances of the impermissible use or disclosure, additional factors may need to be considered to appropriately assess the risk that the protected health information has been compromised.'' 78 Fed. Reg. 5566, Preamble (January 25, 2013). For example, a plan could consider information such as the number of individuals affected by the use or disclosure.

17 45 C.F.R. § 164.520(c)(1).

18 45 C.F.R. § 164.520.

19 45 C.FR. § 164.520(c)(1)(v)(A).

20 Id.

21 45 C.FR. § 164.520(c)(1)(v)(B). For example, a plan that mails or otherwise distributes the notice to participants would be subject to this standard.

22 45 C.F.R. § 164.502(a)(5). The final regulations define _genetic information_ at 45 C.F.R. § 160.103 as information about an individual's genetic tests, the genetic tests of family members of the individual, the manifestation of a disease or disorder in family members of the individual, or any request for, or receipt of, genetic services, or participation in clinical research that includes genetic services, by the individual or any family member of the individual.

23 45 C.F.R. § 164.502(a)(5)(i).

24 45 C.F.R. § 164.524(a)(1).

25 45 C.F.R. § 164.524(c)(2)(ii). If the information is not readily producible in the electronic form and format requested by the individual, the plan must provide the information in a readable electronic form and format agreed to by the plan and individual. Id.

26 In September 2015, the Department of Health and Human Services Office of the Inspector General released a report titled ''OCR Should Strengthen its Oversight of Covered Entities' Compliance With the HIPAA Privacy Standards'', available at http://www.oig.hhs.gov/oei/reports/oei-09-10-00510.pdf (last visited June 28, 2016).

27 See http://www.hhs.gov/hipaa/for-professionals/compliance-enforcement/audit/phase2announcement/index.html (last visited June 28, 2016).

28 Pub. L. No. 111-148 (2010); Pub. L. No. 111-152 (2010).

29 Pub. L. No. 111-148, § § 1104(c)(1).

30 The HHS issued a final rule on the HPID on Sept. 5, 2012 (77 Fed. Reg. 54664).

31 See https://www.cms.gov/Regulations-and-Guidance/Administrative-Simplification/Unique-Identifier/HPID.html (last visited June 28, 2015). On May 29, 2015, CMS released a ''Request for Information Regarding the Requirements for the Health Plan Identifier'', indicating that notwithstanding the delayed effective date, the HPID program may still become effective in the future (80 Fed. Reg. 30646).

Originally published by Benefits Practice Resource Center", Bloomberg BNA.

HIPAA Privacy And Security Compliance For Group Health Plan Sponsors

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