The time has come to take out and refresh those business associate agreements, HIPAA privacy and security compliance manuals, and HIPAA privacy notices. On January 25, 2013, the Department of Health and Human Services (HHS) issued final rules that will require additional compliance efforts by group health plans (and the employers that sponsor them) by September 23, 2013, and the penalties for non-compliance are steep. Although employers may be focusing primarily on changes necessary to comply with the Affordable Care Act in 2014, they will also need to devote time and resources to update their HIPAA privacy and security documentation and procedures.

These new final rules are sometimes referred to as the "HIPAA Omnibus Rule", primarily because of the number of rules they implement and modify. Specifically, the HIPAA Omnibus Rule:

  • Modifies and finalizes the HIPAA privacy, security, and enforcement rules proposed July 2010;
  • Adopts changes to reflect amendments made by the Health Information Technology for Economic and Clinical Health Act (HITECH) and finalizes interim rules provided in October 2009;
  • Supplants the interim final Breach Notification Rule issued in 2009 that applies to unsecured protected health information (Breach Notification Rule); and
  • Finalizes rules proposed in October 2009 to implement Title I of the Genetic Information Nondiscrimination Act of 2008 (GINA).

All of the changes and modifications made by the HIPAA Omnibus Rule are too numerous to review in a single Legal Alert. Therefore, for brevity sake, we have focused this Alert on what we consider to be the most significant takeaways for sponsors – changes in the breach notification rules and the steps needed to bring a health plan into compliance by September.

Breach Notification Rule

The Breach Notification Rule requires plans to provide notice to affected individuals, the Department of Health and Human Services (HHS), and, sometimes, the media when there is a breach with respect to unsecured (e.g., unencrypted) health information. If the breach occurs at or by the business associate, the business associate must provide notice to the covered entity. Examples of situations where breaches may occur are when laptops are misplaced or stolen or when an EOB is sent by a claims administrator to the wrong individual.

The previous, interim final rule provided that a breach occurs if there is an unauthorized use or disclosure of protected health information (PHI) which poses a significant risk of harm (such as financial or reputational harm) to the individual. Under this "harm standard," covered entities and business associates who experienced an impermissible use or disclosure of protected health information (PHI) were often able to conclude no notice was required. The HIPAA Omnibus Rule makes a significant change to the definition of a breach. This change will require covered entities to review and update their policies and procedures regarding (a) impermissible uses or disclosures of PHI and (b) how to perform a risk assessment of unauthorized uses or disclosures of PHI to determine if a reportable breach has occurred.

Updates to business associate agreements will also be needed, as well as a possible re-evaluation of the use of encryption to secure electronic PHI.

Under the final rules, a breach is deemed to occur if there is an impermissible use or disclosure of PHI, unless the covered entity or business associate can show there is a low probability that the information was compromised. Given that a breach now is deemed to occur, unless a risk analysis can support a conclusion that there is a low probability of compromise (and without regard to whether there is harm to the individual), covered entities and business associates will likely find more incidents of reportable breaches. In each instance, they will need to decide whether to err on the side of caution and provide notice of the breach without undertaking a risk assessment, or to undertake an objective risk assessment, considering the following factors provided under the HIPAA Omnibus Rule, to determine if there is a low probability that the information was compromised:

  • What was the nature and extent of PHI involved, including types of identifiers and likelihood of re-identification? (For example, does it involve social security numbers, detailed clinical information or patient discharge dates?)
  • Who was the unauthorized person who accessed the PHI or to whom was the unauthorized disclosure made? (For example, is the person obligated to protect the information? Do they have other information that would allow re-identification of the information?)
  • Was the PHI actually acquired or viewed?
  • What is the extent to which the risk has been mitigated? (For example, has the covered entity received assurances that the PHI was destroyed or will not be further used or disclosed?)

HHS has announced that it will provide guidance on some common scenarios to help with this analysis. If there is a breach, notice is required (as under the prior interim rules) within 60 days. This period starts running on the first day the breach is known to the covered entity (or would have been known by exercising reasonable diligence); not when management knows about the breach and not from the end of the investigation to determine if a breach in fact occurred. If the breach occurs at or by the business associate, the 60-day period starts running on the date notice is provided by the business associate to the covered entity, except that if a business associate is also an agent of the covered entity (e.g., the covered entity has control over the services), the 60-day period begins to run on the date of discovery by the business associate.

The responsibility for providing the notice lies with the covered entity, even if the breach occurred at the business associate level. Business associates can agree, in the business associate agreement, to provide this notice on behalf of the covered entity.

Compliance Steps for Group Health Plans

The HIPAA Omnibus Rule affects many other aspects of complying with the HIPAA privacy and security rules which will require a thorough review and updates to processes, policies, agreements and procedures relating to these rules. The following general steps will be required for compliance –

Business Associate Agreements

  • Identify all current business associates (BA)
  • Gather all existing BA agreements
  • Identify if any BA is missing an agreement
  • Determine the applicable compliance date for each BA agreement
    • This will require determining which agreements are eligible for the transition rule which in turn requires determining which agreements in effect on January 25, 2013 have been updated for HITECH and whether it was (or will be) modified or renewed after that date
    • The general compliance date is September 23, 2013
      • An extension until September 22, 2014 is provided for agreements that existed on January 25, 2013, and that are not renewed or modified prior to that date (otherwise they must be updated when modified or renewed)

  • Review agreements and services to determine if any BA is an agent (covered entities are directly liable for the acts of their agents; agency generally exists if the covered entity can direct and control the services provided by the BA)
  • Determine if the plan engages in marketing or the sale of PHI, as those concepts are described in the final rules (additional rules apply under the final rule to these activities)
  • Amend agreements as required to comply with the HIPAA Omnibus Rule
  • Review agreements to determine who provides notice in the event of a breach; modify as desired
  • Prepare new form agreements for future BAs
    • HHS has provided a sample form agreement, but this will not be sufficient for many covered entities

HIPAA Privacy Notice

  • Review and update Notice of Privacy Practices
  • Post to website for benefits information by September 23, 2013
  • Distribute revised notice in next mailing to participants, such as 2014 annual enrollment materials
  • If no benefits website is maintained, the notice must be provided within 60 days of September 23, 2013 or the effective date of the revised notice, whichever is earlier

HIPAA Authorization Form and Workforce Training

  • Review and update authorization form, if necessary
  • Confirm all members of workforce with access to PHI have been trained
  • Review and update training material if necessary

HIPAA Privacy and Security Policies and Procedures

  • Review and update policies as necessary to reflect the final rule
  • Update policies regarding individual rights, including access to electronic PHI
  • Reassess procedures for risk assessments and addressing potential breaches of unsecured PHI
  • Consider whether to encrypt ePHI due to the modified breach notification rules

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.