What is HIPAA? A comprehensive guide

Organizations dealing with personal medical information in any form must comply with a set of federal regulatory standards called HIPAA laws. HIPAA stands for the Health Insurance Portability and Accountability Act.

HIPAA’s purpose is to protect patient information from disclosure. This keeps patients’ data out of the wrong hands and safeguards their right to privacy. Violating HIPAA laws can lead to significant fines and reputational issues.

Knowing what HIPAA is and following its guidelines allows healthcare industry players to avoid penalties and contribute to building trust in the healthcare sector.

What is HIPAA?

The Health Insurance Portability and Accountability Act is a federal law designed to protect the privacy of health-related data. HIPAA outlines standards for the electronic exchange, storage, and confidentiality of protected health information (PHI) to ensure this privacy.

HIPAA provides clear guidelines for handling, protecting, and disclosing PHI. Besides keeping the data safe from criminals, HIPAA also gives patients certain rights related to their medical information.

Today, HIPAA consists of five titles:

• Title I—Health Care Access, Portability, and Renewability: protects healthcare workers and their families when they change or lose their jobs.
• Title II—Administrative Simplification: requires standardization of the healthcare transaction processes across the country. This title seeks to protect private patient information.
• Title III—Tax-Related Health Provisions: sets guidelines for medical care and tax-related provisions.
• Title IV—Application and Enforcement of Group Health Plan Requirements: regulates group health plans for people with pre-existing conditions and provides clarity on continuous coverage requirements.
• Title V—Revenue Offsets: provisions for life insurance offered by businesses and for the treatment of patients who lose US citizenship.

When healthcare industry players and patients discuss HIPAA, they usually refer to Title II.

What is protected health information (PHI)?

PHI is information that a HIPAA-covered entity receives, creates, or processes. This information can be related to the patient’s past, present, or future

• Medical conditions
• Provision of healthcare services
• Payment for healthcare services

Examples of PHI are medical records, lab results, insurance information, and even demographic details. PHI’s key defining characteristic is that it can be used to identify a specific person.

What is a HIPAA-covered entity?

HIPAA-covered entities are organizations and individuals who have to follow the regulations outlined by HIPAA. These entities are subject to various penalties if they fail to comply with HIPAA regulations and guidelines.

Below are examples of HIPAA-covered entities:

• Healthcare provider—this includes doctors, hospitals, clinics, pharmacies, nursing homes, and other healthcare professionals or facilities that provide medical services
• Health plan—health insurance companies, health maintenance organizations (HMOs), employer-sponsored health plans, government programs such as Medicare and Medicaid, and other entities that provide or pay for healthcare services
• Healthcare clearinghouse—an entity that processes non-standard health information into standard formats, such as converting paper claims into electronic formats or vice versa

HIPAA also applies to HIPAA-covered entities’ business associates. Business associates are individuals or organizations that perform certain functions on behalf of covered entities. These functions have to involve the use or disclosure of PHI. Examples of such associates are billing companies, IT service providers, medical transcriptionists, and legal consultants.

Hybrid entities perform both covered and non-covered functions. Such entities would have to designate certain parts of their operations as subject to HIPAA through a formal designation process.

Five rules of HIPAA

Title II of HIPAA consists of five compliance requirements. Their goal is to provide guidance to medical organizations and other companies that handle private patient information.

Here are the five rules of HIPAA:

National Provider Identifier Rule

Requires all healthcare organizations, individuals, employers, health plans, and other entities to have a unique 10-digit National Provider Identifier (NPI). It’s not possible to process or handle PHI without an NPI.

Transactions and Code Sets Rule

A healthcare entity wanting to handle PHI needs to appoint a standardized number for each electronic transaction according to the American National Standards Institute (ANSI)-accredited standards committee, X12.

Security Rule

To share and process PHI electronically, entities need to follow the security requirements listed in the rule. The rule outlines the detailed steps entities should take to safeguard data, including security plans, encryption, documentation, and written security guidelines.

Enforcement Rule

This rule outlines the penalties an entity would incur if it breaks HIPAA rules. In addition to fines, the rule sets out procedures for investigations and hearings.

Privacy Rule

The HIPAA Privacy Rule outlines federal standards aimed at protecting the privacy of personal health data. It gives patients rights related to this data, including the right to

• Examine health records
• Obtain a copy of health records
• Request corrections to health records

The rule defines specific situations where it’s possible to disclose PHI. Here are some of these exceptions:

1. Disclosure to the patient who the data applies to
2. For treatment, payment, and healthcare operations
3. When a patient gives permission
4. When the use is incidental
5. When disclosure benefits the public interest
6. When PHI is removed

The Office of Civil Rights (OCR) oversees compliance with the HIPAA Privacy Rule.

What is the HIPAA Omnibus Rule?

Implemented in 2013, the Omnibus Rule made significant changes to the HIPAA Privacy, Security, and Enforcement rules. It aims to strengthen the existing HIPAA regulations and address specific gaps.

The new rule expanded the scope of HIPAA requirements to include business associates and their subcontractors. Since 2013, these entities have been directly accountable for safeguarding PHI.

Another adjustment included the expansion of individuals’ rights and protections regarding their PHI. Under this rule, patients have the right to obtain electronic copies of their health records, request restrictions on certain disclosures of their PHI, and be notified if a breach related to their PHI occurs.

The Omnibus Rule also increases penalties for noncompliance. The rule sets higher fines for violations based on the level of negligence (this ranges from “unknowing” to “willful neglect”).

HIPAA noncompliance penalties

HIPAA-covered entities should follow HIPAA rules closely to prevent incurring significant penalties. The consequences of violations depend on several factors, including the following:

• The extent of the violation
• Whether the covered entity knew that HIPAA rules were about to be violated
• Whether the entity took action to rectify the violation
• Malicious intent
• Harm brought by the violation
• How many people were affected by breaking the rules
• Nature of the violation (whether the criminal provision of HIPAA was violated)

To prevent penalties, entities need to make HIPAA compliance an integral part of their operations. To do that, they need to be aware of the most common HIPAA violations.

• Unauthorized access: when employees access PHI without proper authorization or a legitimate reason
• Lack of employee training: failure to provide adequate HIPAA training to employees causes a lack of awareness and related internal policy violations
• Improper PHI disposal: incorrectly disposing of physical documents or electronic devices containing PHI—for example, not shredding paper records or wiping data from hard drives
• Lost or stolen devices: misplacing or enabling the theft of electronic devices containing PHI without the appropriate encryption or safeguards in place to protect the data
• Insider threats: employees or individuals with authorized access intentionally or inadvertently disclosing PHI
• Lack of business associate agreements: failing to establish written agreements with business associates that handle PHI on an entity’s behalf
• Insufficient risk assessment: failing to conduct regular risk assessments to identify vulnerabilities and potential security breaches related to PHI processing
• Inadequate security measures: not implementing appropriate technical and physical safeguards (such as passwords and encryption) to protect PHI
• Unauthorized disclosure: accidentally or intentionally sharing PHI with unauthorized parties—for example, discussing patients with friends or family
• Failure to provide breach notification: neglecting to promptly notify appropriate parties in the event of a PHI data breach (such as affected individuals, the Department of Health and Human Services, and the media)

Depending on the circumstances of the violation, the fine can range from $100 to $50,000 per incident. The size of these fines is adjusted annually according to inflation.

If the HIPAA violation has a criminal nature, penalties can vary from several months to 10 years in prison. The extent of the punishment depends on multiple factors, including reasonable cause and malicious intent.

Besides incurring civil and criminal penalties for breaking HIPAA rules, both individual healthcare providers and large organizations could face significant reputational damage.

HIPAA’s impact on healthcare

Over the past decade, the focus on data security has been especially intense. Personal data in the wrong hands can cause wide-ranging problems. Below are some of the ways the implementation of HIPAA rules has improved the healthcare sector:

Protecting patient privacy

HIPAA establishes strict guidelines for safeguarding PHI.  By requiring covered entities to obtain patient consent and follow specific protocols for handling PHI, HIPAA means patients don’t have to worry about their personal information becoming accessible to unauthorized entities.

Enhancing data security

The regulations require covered entities to implement technical and physical safeguards to protect PHI from unauthorized access.

By enforcing measures like encryption, access controls, and regular risk assessments, HIPAA helps prevent data breaches and ensure PHI confidentiality.

Promoting healthcare interoperability

HIPAA plays a vital role in promoting interoperability among healthcare providers and entities. It simplifies communication and streamlines the exchange of health information through standard formats and protocols for electronic transactions. This interoperability improves efficiency, reduces errors, and enhances the overall quality of care.

Building trust and confidence

HIPAA helps build trust and confidence in the healthcare system. Patients don’t have to worry about their personal information being exposed to unauthorized parties that may have malicious intentions.

When patients feel safe, they are more likely to seek treatment and receive continuous care. This significantly affects health outcomes.

Staying HIPAA-compliant pays off

HIPAA is a versatile set of regulations that help protect all healthcare-related entities. Even though HIPAA has many components, the safety of patient data is the main focus.

Implementing holistic steps to HIPAA compliance from scratch may seem complex at first, but the process has a significant return on investment.

By staying HIPAA-compliant, healthcare providers, health plans, and other organizations don’t just avoid penalties—they foster trust, keep patients happy, and improve their bottom line.