HIPAA – What You Need to Know

HIPAA, THE 1996 HEALTH Insurance Portability and Accountability Act, was designed to  guarantee that employees could keep their health insurance after leaving a job; protect an individual’s health information from inappropriate disclosure; and streamline health care transactions. Most of the rules applied to health care companies and larger organizations; however, all of that changed in April 2004 when many small businesses were required to comply with HIPAA’s privacy rules — even if an outside insurance company did all the administrative work. While the rules apply largely to those companies that self-insure, here are the crucial things to know:

• Your biggest exposure to HIPAA is related to an individual’s health information (known as PHI, or Protected Health Information). Even though most PHI is communicated between the insured employee and insurance companies, there may be times when someone in your company is exposed to PHI (when providing explanations of benefits or assisting employees with disputed claims, or in the case of medical leaves, etc).

• Your insurance company is responsible if it violates HIPAA, but your business is responsible if your employee discloses PHI inappropriately.

• Your staff must be trained. This includes human resource employees and any managers who potentially have access to PHI. Use this simple rule of thumb: If it relates to employee health information, keep it confidential. HR employees in particular will need detailed training.

• Execute a business associate agreement with any third parties that have access to your employees’ PHI on a regular basis (benefits broker, TPA, etc). Your broker or TPA may already have one if you don’t. Make sure your legal counsel reviews it first.

• If you are self-insured, there is a lot more you need to know. Don’t forget, most flexible savings accounts (FSAs) are considered to be self-insured. Consult an experienced HIPAA advisor. Your insurance broker can point you in the right direction.

Penalties are severe; they can run up to $250,000 with prison terms if a violation is intentional. Most small businesses will also need to comply with HIPAA’s security rules by April 2006 (the security rule applies to PHI in electronic form; the privacy rule covers PHI in all forms).

For additional information on HIPAA and Small Businesses, see www.dol.gov/ebsa/publications/caghp.html,smallbusinesscomputing.com/news/article.php/3313751  and www.nfib.com/object/3870498.html.

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