Beginning this fall, employer health plans—or their business associates—will have to make more comprehensive and methodical risk assessments following the discovery of an impermissible use or disclosure of unsecured “protected health information” under revised Health Insurance Portability and Accountability Act of 1996 (HIPAA) breach notification rules recently issued by the U.S. Department of Health and Human Services (HHS).

And upon completing those more systematic risk assessments, a plan or business associate will have to follow all the rules related to a “breach” of unsecured protected health information (PHI), including notification to participants and HHS, unless the plan—or more likely the business associate determines that there is a low probability that PHI has actually been compromised.

These final breach notification rules, which were published on January 25, 2013 in the Federal Register, update the final interim regulations that took effect for breaches occurring on or after September 23, 2009. The updated breach notification rules are part of a final omnibus regulation designed to bring HIPAA privacy, security, and breach notification rules up to date following significant changes, including those made by the Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009 (click here for more information on the HITECH Act).

Facing a compliance date of September 23, 2013 for the breach notification rules (the same date that applies to the other three parts of the omnibus final HIPAA rules), employers will want to review and revise:

  • Existing business associate agreements with service providers such as claims administrators, pharmacy benefit managers, and benefit consultants;
  • Internal privacy policies and procedures that health plans already are required to have in place;
  • The “Notices of Privacy Practices” that plans are required to distribute periodically to participants; and
  • Training modules or other materials that may discuss breaches and how they are to be handled.

This article focuses on the changes in the breach notification rules and the impact those changes will have in coming months on employer-sponsored health plans. The new rules indicate that either an employer-sponsored plan or a business associate can perform the breach notification duties. We assume that many plan sponsors will continue to delegate to business associates the responsibility to evaluate potential breaches and provide most or all required notices in the event of a breach of PHI maintained by that business associate. Plan sponsors would most likely retain breach notification responsibilities for any breach of PHI that they maintained themselves and for any breaches that were not appropriately addressed by a business associate to whom that responsibility was nominally outsourced.

Evaluating Whether There Has Been a “Breach”

The most notable change relates to the definition of “breach.” Under the earlier 2009 rules, an impermissible use or disclosure of PHI including electronic PHI was only a breach if it posed a “significant risk of financial, reputational, or other harm to the individual.” Known as the “harm” standard, this threshold focused on the individual and has been difficult to apply consistently to an array of business associates and uses and disclosures.

The new final rules modify the breach definition in several ways. First, there is now a presumption that an impermissible use or disclosure of PHI is a breach subject to the HIPAA rules on breach notifications. Second, the harm standard is replaced with the requirement to demonstrate that there is a “low probability that the protected health information has been compromised.”

To demonstrate that there is in fact a “low probability” that PHI has been compromised, a health plan or business associate must perform a risk assessment of at least the following factors:

  • The nature and extent of the PHI involved, including the types of identifiers and the likelihood of re-identification;
  • The unauthorized person who used the PHI or to whom the disclosure was made;
  • Whether the PHI was actually acquired or viewed; and
  • The extent to which the risk to the PHI has been mitigated.

A plan’s or business associate’s analysis of the probability that PHI has been compromised must address all four factors. Other factors can be (and may need to be) considered. After considering each factor individually, the plan or business associate must evaluate the overall probability that PHI has been compromised by considering all the factors in combination. HHS indicates that it expects the risk assessments to be thorough and completed in good faith and for the conclusions they reach to be reasonable. If an evaluation of the factors fails to demonstrate that there is a low probability that PHI has been compromised, breach notification is required.

HHS says plans and business associates had misinterpreted its original guidance as setting a very high threshold for breach notification. HHS reports that this new standard is intended to produce more objective and consistent determinations than the old standards did.

What a Risk Assessment Will Look Like

In the preamble to the new rules, HHS provides some helpful descriptions and examples with respect to the new required risk factors.

Factor 1: Nature and extent of PHI involved

A plan or its business associate should consider the type of PHI involved, such as whether it is of a sensitive nature. HHS points out that certain financial information (such as credit card or social security numbers) increases the risk of identity theft or financial fraud. And, with respect to clinical information, HHS indicates that the nature of services as well as the amount of detail involved (e.g., treatment plan, diagnosis, medication, medical history information, and test results) should be considered. Also, considering the type of PHI will help entities determine the likelihood that the PHI could be used by an unauthorized recipient to further its own interests.

Also, under this factor, a plan or business associate must determine the likelihood that the PHI could be re-identified based on the context and ability to link the information with other available information. A list of patient names, addresses, and hospital identification numbers, for example, is obviously identifiable, and a risk assessment likely would determine that there is more than a low probability that PHI has been compromised.

Factor 2: Unauthorized person who impermissibly used or received PHI

A plan or business associate will need to consider the identity of person who impermissibly used or received PHI and whether the recipient is otherwise obligated to protect the privacy and security of PHI (such as a medical practice or other HIPAA covered entity). The preamble also instructs that this factor should be considered in combination with the first factor regarding the risk of re-identification. If the information impermissibly used or disclosed is not immediately identifiable, a plan or business associate should determine whether the unauthorized person who received PHI has the ability to re-identify the information.

Factor 3: Whether the PHI was actually acquired or viewed

A plan or business associate needs to distinguish uses or disclosures where PHI was actually compromised from those that merely involved the potential for improper access to PHI. Consider the common case of the stolen laptop. If the computer is later recovered and forensic analysis shows that the relevant PHI was never accessed or otherwise compromised, the probability that a breach occurred is reduced. By contrast, a business associate may send PHI to the wrong person, who reads the information and calls the business associate to report receiving the information. In this case, the fact that the PHI was actually read increases the probability that a breach occurred.

Factor 4: Extent to which the risk of the breach has been mitigated

A plan or business associate must also consider the extent and efficacy of any mitigation steps that have been taken. For example, an individual who impermissibly received PHI may have indicated that he did not access or copy the information. This factor may lead to different results when considered in combination with the identity of the unauthorized recipient (Factor 2). For example, a health plan may be able to obtain and rely on the assurances of an employee, affiliated entity, business associate, or another covered entity that the entity or person destroyed information that it received in error, while such assurances from certain third parties may not be sufficient or reasonable.

Other Considerations

  • Assessing whether a breach of unsecured PHI has occurred is not new to plan sponsors or business associates. However, under the new rules, these assessments will need to consider all the relevant factors to determine whether PHI has been compromised. Additional training may also be needed to ensure that the workforces of plans and business associates are up to speed.
  • The new rules do not substantively change the definition of “unsecured PHI,” which will continue to mean PHI that “is not rendered unusable, unreadable, or indecipherable to unauthorized persons through the use of a technology or methodology” specified by HHS. Thus, one way to avoid PHI breaches is for a plan to ensure that all its PHI is encrypted to HHS standards. Note that PHI stored in paper form cannot presently be “secured” as defined by HHS.
  • The provisions of the 2009 rules concerning notification to individuals and the media and notification by a business associate were by and large adopted in the new rules without modification. The requirements concerning notification to HHS were revised to clarify that covered entities are required to notify HHS of all breaches of unsecured PHI affecting fewer than 500 individuals not later than 60 days after the end of the calendar year in which the breaches were “discovered,” not in which the breaches “occurred.” This clarification is welcome assurance for covered entities and business associates that they will not be penalized for breaches that went undiscovered until a subsequent calendar year.
  • Though it is not addressed in the new rules, one ongoing challenge for plan sponsors will be how to handle impermissible uses or disclosures that in addition to any HIPAA issues may trigger liability under state breach notification or similar laws. Plan sponsors may want to discuss these state law concerns with business associates as part of the process of updating business associate agreements under the new rules.


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