HIPAA, HITECH & HIT :: Fox Rothschild LLP

On February 7, 2013, our partner Keith McMurdy, Esq., posted an excellent entry on the Employee Benefits Blog of Fox Rothschild LLP that merits republishing for our readers as well. The post outlines some direct effects of the new HIPAA Omnibus Rule on employers and their health plans. 

Keith McMurdy writes as follows:

On January 25, the new (final?) rules about HIPAA Privacy under the HITECH Act were issued in the Federal Register.  While the effect of the new rules may not be to substantially change the way HIPAA privacy is viewed, there are a number of action items for employers as plan sponsors that have to be accomplished when these rules go into effect.

There are two pieces of good news.  The first is that the general purpose of compliance remains the same.  Plan sponsors have to ensure PHI is properly protected, refrain from impermissible disclosures and provide notices of security breaches.  The second is that the earliest possible deadline for compliance with the new rules is September 23, 2013, so there is some time to prepare.  But it is not a bad idea to start preparing now.  So let's consider the key changes.

1. Tougher Security Breach Notification Standard

Under the old rule, the standard for notification to participants of a security breach was only necessary if the release of information "posed a significant risk of financial, reputational or other harm" to a covered person.  Now, that standard is tightened to apply to ANY security breach unless the plan sponsor can prove "a low probability that the [PHI] has been compromised based on a risk assessment."  This should encourage plan sponsors to tighten their security breach protections because any release, even things like accidental e-mails, can potentially become reportable events.  So the first step in compliance would be to review security standards and document steps taken to avoid security breaches.

2. Tougher Standards for Business Associates Agreements

Because the new rule provides for penalties to a covered entity for breaches by business associates, the default position is that plan sponsors should be much more concerned about how compliant their business associates really are.  Where in the past, plan sponsors may have felt comfortable simply handing off certain protection functions to service providers, the new rule makes it pretty clear that plan sponsors have to actually know that their business associates are HIPAA compliant and diligently seek to confirm that compliance.

3.  New Privacy Notices for 2013 Open Enrollment

The new rule also requires that plan sponsors add or amend their privacy notices:

1. The notice must specifically state that the covered health plans are required to obtain plan participants' authorization to use or disclose psychotherapy notes, to use PHI for marketing purposes, to sell PHI, or to use or disclose PHI for any purpose not described in the notice as well as a statement explaining how plan participants may revoke an authorization.
2. The notices must state that the plans (other than a long-term care plan) are prohibited from using PHI that is genetic information for underwriting purposes
3. The notice must inform plan participants of their right to receive a notice when there is a breach of their unsecured PHI.

The new rules makes it clear that since this new language is a "material change," plan sponsors are required to distribute this revised notice, even if they had just recently sent the old notice. 

4. Genetic Information and the GINA Notice

The Genetic Information Non-Discrimination Act of 2008 (GINA) prohibits discrimination based on genetic information.  The HIPAA Privacy Rule now similarly prohibits HIPAA-covered plans from taking genetic information into consideration when offering incentives or discounts through a health risk assessment.  Because this modification of the Privacy Rule materially affects how a plan may use PHI, the HIPAA Privacy Rule requires that plan participants be informed in the plan's privacy notice of the prohibition on the use of PHI for underwriting purposes.  See the second item under Part 3, above.

So in the midst of our struggles to comply with PPACA, plan sponsors should not forget about HIPAA medical privacy concerns.  Start pulling together privacy notices, business associates agreements and plan documents for review and amendment.  Review your security practices to avoid even accidental breaches.  And be prepared to issue new notices as necessary for your next open enrollment.  For more detailed information about HIPAA and HITECH Compliance, please make sure to check out our HIPAA Blog as well.  More information means better compliance, which is always a good thing.

• Print
• Comments
• Trackbacks
• Share Link

Elizabeth Litten and Michael Kline write:

We have posted several blogs, including those here and here, tracking the reported 2011 theft of computer tapes from the car of an employee of Science Applications International Corporation (“SAIC”) that contained the protected health information (“PHI”) affecting approximately 5 million military clinic and hospital patients (the “SAIC Breach”).  SAIC’s recent Motion to Dismiss (the “Motion”) the Consolidated Amended Complaint filed in federal court in Florida as a putative class action (the “SAIC Class Action”) highlights the gaps between an incident (like a theft) involving PHI, a determination that a breach of PHI has occurred, and the realization of harm resulting from the breach. SAIC’s Motion emphasizes this gap between the incident and the realization of harm, making it appear like a chasm so wide it practically swallows the breach into oblivion. 

SAIC, a giant publicly-held government contractor that provides information technology (“IT”) management and, ironically, cyber security services, was engaged to provide IT management services to TRICARE Management Activity, a component of TRICARE, the military health plan (“TRICARE”) for active duty service members working for the U.S. Department of Defense (“DoD”).  SAIC employees had been contracted to transport backup tapes containing TRICARE members’ PHI from one location to another.

According to the original statement published in late September of 2011 ( the “TRICARE/SAIC Statement”) the PHI “may include Social Security numbers, addresses and phone numbers, and some personal health data such as clinical notes, laboratory tests and prescriptions.” However, the TRICARE/SAIC Statement said that there was no financial data, such as credit card or bank account information, on the backup tapes. Note 17 to the audited financial statements (“Note 17”) contained in the SAIC Annual Report on Form 10-K for the fiscal year ended January 31, 2012, dated March 27, 2012 (the “2012 Form 10-K”), filed with the Securities and Exchange Commission (the “SEC”) includes the following:

There is no evidence that any of the data on the backup tapes has actually been accessed or viewed by an unauthorized person. In order for an unauthorized person to access or view the data on the backup tapes, it would require knowledge of and access to specific hardware and software and knowledge of the system and data structure.  The Company [SAIC] has notified potentially impacted persons by letter and is offering one year of credit monitoring services to those who request these services and in certain circumstances, one year of identity restoration services.

While the TRICARE/SAIC Statement contained similar language to that quoted above from Note 17, the earlier TRICARE/SAIC Statement also said, “The risk of harm to patients is judged to be low despite the data elements . . . .” Because Note 17 does not contain such “risk of harm” language, it would appear that (i) there may have been a change in the assessment of risk by SAIC six months after the SAIC Breach or (ii) SAIC did not want to state such a judgment in an SEC filing.

Note 17 also discloses that SAIC has reflected a $10 million loss provision in its financial statements relating to the  SAIC Class Action and various other putative class actions respecting the SAIC Breach filed between October 2011 and March 2012 (for a total of seven such actions filed in four different federal District Courts).  In Note 17 SAIC states that the $10 million loss provision represents the “low end” of SAIC’s estimated loss and is the amount of SAIC’s deductible under insurance covering judgments or settlements and defense costs of litigation respecting the SAIC Breach.  SAIC expresses the belief in Note 17 that any loss experienced in excess of the $10 million loss provision would not exceed the insurance coverage.  

Such insurance coverage would, however, likely not be available for any civil monetary penalties or counsel fees that may result from the current investigation of the SAIC Breach being conducted by the Office of Civil Rights of the Department of Health and Human Services (“HHS”) as described in Note 17.

Initially, SAIC did not deem it necessary to offer credit monitoring to the almost 5 million reportedly affected individuals. However, SAIC urged anyone suspecting they had been affected to contact the Federal Trade Commission’s identity theft website. Approximately 6 weeks later, the DoD issued a press release stating that TRICARE had “directed” SAIC to take a “proactive” response by covering a year of free credit monitoring and restoration services for any patients expressing “concern about their credit as a result of the data breach.”   The cost of such a proactive response easily can run into millions of dollars in the SAIC Breach. It is unclear the extent, if any, to which insurance coverage would be available to cover the cost of the proactive response mandated by the DoD, even if the credit monitoring, restoration services and other remedial activities of SAIC were to become part of a judgment or settlement in the putative class actions.

We have blogged about what constitutes an impermissible acquisition, access, use or disclosure of unsecured PHI that poses a “significant risk” of “financial, reputational, or other harm to the individual” amounting to a reportable HIPAA breach, and when that “significant risk” develops into harm that may create claims for damages by affected individuals. Our partner William Maruca, Esq., artfully borrows a phrase from former Defense Secretary Donald Rumsfeld in discussing a recent disappearance of unencrypted backup tapes reported by Women and Infants Hospital in Rhode Island. If one knows PHI has disappeared, but doubts it can be accessed or used (due to the specialized equipment and expertise required to access or use the PHI), there is a “known unknown” that complicates the analysis as to whether a breach has occurred. 

As we await publication of the “mega” HIPAA/HITECH regulations, continued tracking of the SAIC Breach and ensuing class action litigation (as well as SAIC’s SEC filings and other government filings and reports on the HHS list of large PHI security breaches) provides some insights as to how covered entities and business associates respond to incidents involving the loss or theft of, or possible access to, PHI.   If a covered entity or business associate concludes that the incident poses a “significant risk” of harm, but no harm actually materializes, perhaps (as the SAIC Motion repeatedly asserts) claims for damages are inappropriate. When the covered entity or business associate takes a “proactive” approach in responding to what it has determined to be a “significant risk” (such as by offering credit monitoring and restoration services), perhaps the risk becomes less significant. But once the incident (a/k/a, the ubiquitous laptop or computer tape theft from an employee’s car) has been deemed a breach, the chasm between incident and harm seems to open wide enough to encompass a mind-boggling number of privacy and security violation claims and issues.

• Print
• Comments
• Trackbacks
• Share Link

The requirements under the HIPAA/HITECH statutes and regulations for public disclosure of breaches of Protected Health Information (“PHI”) have brought to light an increasing volume of breaches of PHI involving highly respected and sophisticated providers and insurers. On November 21, 2010, a posting on this blog discussed a PHI security breach (the “September 2010 Breach”) involving Henry Ford Health System in Michigan (“Henry Ford” or the “health system”) that was discovered by the health system on September 24, 2010. A follow-up posting in this series on November 24, 2010 reported that 3,700 individuals had been affected in the September 2010 Breach.

On February 25, 2011, Robin Erb, Medical Writer at the Detroit Free Press, wrote an article entitled, “Lost Device Compromises Medical Information of 2,777 Patients” relative to another security lapse in less than a year within Henry Ford (the “January 2011 Breach”). According to Ms. Erb, an employee of the health system lost a flash drive with information on 2,777 patients on January 31, 2011.

As Ms. Erb reported,

Hospital officials said it's unclear how the flash drive was lost. The device is not encrypted, as required to protect individual patients' information, officials said.

The information involved patients tested for urinary tract infections between July and October 2010 and included names, medical record numbers, test information and results.

While the first blog posting in this series about the November 2010 Breach gave a link to the Henry Ford posting of on its Web site about the security breach, that posting and link have apparently been already taken down by the health system. However, more than 500 other earlier stories dating back as far as March of 2005 remain on the Henry Ford News list. A visit today to the News list on the health system’s Web site also reveals that Henry Ford has made no posting to date about the January 2011 Breach.

HIPAA/HITECH provides that the time frame for insurers and providers to give notice to affected individuals and the U.S. Department of Health and Human Services (“HHS”) of a PHI security breach involving 500 or more individuals is “without unreasonable delay and in no case later than 60 days from discovery of a breach.” The maximum time, therefore, for Henry Ford to notify the HHS about the January 2011 Breach is 60 days after the discovery date of January 31,2011 or April 1, 2011. Soon after notification by the health system to the HHS, the HHS Web site that lists breaches of unsecured PHI affecting 500 or more individuals would add the January 2011 Breach. 

It is interesting that, while Ms. Erb’s article was published almost three weeks ago, nothing has apparently been published by Henry Ford about the January 2011 Breach on its Web site. Nor has the January 2011 Breach yet appeared on the HHS Web site. This matter warrants further monitoring.

• Print
• Comments
• Trackbacks
• Share Link