Health plans, insurers and other health plan industry service providers need to ensure that their Internet applications properly safeguard protected health information (PHI), based on a recent warning from Department of Health and Human Services (HHS) Office of Civil Rights (OCR).
The warning comes in a resolution agreement with St. Elizabeth’s Medical Center (SEMC) that settles OCR charges that it breached the Health Insurance Portability and Accountability Act (HIPAA) by failing to protect the security of personal health data when using Internet applications. The agreement shows how complaints filed with OCR by workforce members can create additional compliance headaches for covered entities or their business associates.
With recent reports on massive health plan and other data breaches fueling widespread regulatory concern, covered entities and their business associates should prepare to defend the adequacy of their own HIPAA and other health data security practices. Accordingly, health plans and their employer or other sponsors, health plan fiduciaries, health plan vendors acting as business associates and others dealing with health plans and their management should contact legal counsel experienced in these matters for advice within the scope of attorney-client privilege about how to respond to the OCR warning and other developments to manage their HIPAA and other privacy and data security legal and operational risks and liabilities.
SEMC Resolution Agreement Overview
The SEMC resolution agreement settles OCR charges that SEMC violated HIPAA. The charges stem from an OCR investigation of a Nov. 16, 2012, complaint by SEMC workforce members and a separate data breach report that SEMC made to OCR of a breach of unsecured electronic PHI (ePHI). The information was stored on a former SEMC workforce member’s personal laptop and USB flash drive, and 595 individuals were affected.
In their complaint, SEMC workers complained that SEMC violated HIPAA by allowing workforce members to use an Internet-based document application to share and store documents containing electronic protected health information (ePHI) of at least 498 individuals without adequately analyzing the risks. OCR says its investigation of the complaint and breach report revealed among other things that:
- SEMC improperly disclosed the PHI of at least 1,093 individuals;
- SEMC failed to implement sufficient security measures regarding the transmission of and storage of ePHI to reduce risks and vulnerabilities to a reasonable and appropriate level; and
- SEMC failed to identify and respond to a known security incident, mitigate the harmful effects of the security incident and document the security incident and its outcome in a timely manner.
To resolve OCR’s charges, SMCS agreed to pay $218,400 to OCR and implement a “robust corrective action plan.” Although the required settlement payment is relatively small, the resolution agreement merits attention because of its focus on security requirements for Internet application and data use and sharing activities engaged in by virtually every covered entity and business associate.
HIPAA-Specific Compliance Lessons
OCR Director Jocelyn Samuels said covered entities and their business associates must “pay particular attention to HIPAA’s requirements when using Internet-based document sharing applications.” She stated that, “to reduce potential risks and vulnerabilities, all workforce members must follow all policies and procedures, and entities must ensure that incidents are reported and mitigated in a timely manner.”
The resolution agreement makes clear that OCR expects health plans and other covered entities and their business associates to be able to show both their timely investigation of reported or suspected HIPAA susceptibilities or violations as well as to self-audit and spot test HIPAA compliance in their operations. The SEMC corrective action plan also indicates covered entities and business associates must be able to produce evidence showing a top-to-bottom dedication to HIPAA, to prove that a “culture of compliance” permeates their organizations.
Covered entities and business associates should start by considering the advisability for their own organization to take one or more of the steps outlined in the “robust corrective action plan,” starting with the specific steps that SEMC must take:
- Conducting self-audits and spot checks of workforce members’ familiarity and compliance with HIPAA policies and procedures on transmitting ePHI using unauthorized networks; storing ePHI on unauthorized information systems, including unsecured networks and devices; removal of ePHI from SEMC; prohibition on sharing accounts and passwords for ePHI access or storage; encryption of portable devices that access or store ePHI; security incident reporting related to ePHI; and
- Inspecting laptops, smartphones, storage media and other portable devices, workstations and other devices containing ePHI and other data devices and systems and their use; and
- Conducting other tests and audits of security and compliance with policies, processes and procedures; and
- Documenting results, findings, and corrective actions including appropriate up-the-ladder reporting and management oversight of these and other HIPAA compliance expectations, training and other efforts.
Broader HIPAA Compliance and Risk Management Lessons
Covered entities and their business associates also should be mindful of more subtle, but equally important, broader HIPAA compliance and risk management lessons.
One of the most significant of these lessons is the need for proper workforce training, oversight and management. The resolution agreement sends an undeniable message that OCR expects covered entities, business associates and their leaders to be able to show their effective oversight and management of the operational compliance of their systems and members of their workforce with HIPAA policies.
The resolution agreement also provides insights to the internal corporate processes and documentation of compliance efforts that covered entities and business associates may need to show their organization has the required “culture of compliance.” Particularly notable are terms on documentation and up-the-ladder reporting. Like tips shared by HHS in the recently released Practical Guidance for Health Care Governing Boards on Compliance Oversight, these details provide invaluable tips.
Risks and Responsibilities of Employers and Their Leaders
While HIPAA places the primary duty for complying with HIPAA on covered entities and business associates, health plan sponsors and their management still need to make HIPAA compliance a priority for many practical and legal reasons.
HIPAA data breach or other compliance reports often trigger significant financial, administrative, workforce satisfaction and other operational costs for employer health plan sponsors. Inevitable employee concern about health plan data breaches undermines employee value and satisfaction. These concerns usually require employers to expend significant management and financial resources to respond.
The costs of investigation and redress of a known or suspected HIPAA data or other breach typically far exceed the actual damages to participants resulting from the breach. While HIPAA technically does not make sponsoring employers directly responsible for these duties or the costs of their performance, as a practical matter sponsoring employers typically can expect to pay costs and other expenses that its health plan incurs to investigate and redress a HIPAA breach. For one thing, except in the all-too-rare circumstances where employers as plan sponsors have specifically negotiated more favorable indemnification and liability provisions in their vendor contracts, employer and other health plan sponsors usually agree in their health plan vendor contracts to pay the expenses and to indemnify health plan insurers, third party administrators and other vendors for costs and liabilities arising from HIPAA breaches or other events arising in the course of the administration of the health plan. Because employers typically are obligated to pay health plan costs in excess of participant contributions, employers also typically would be required to provide the funding their health plan needs to cover these costs even in the absence of such indemnification agreements.
Sponsoring employers and their management also should be aware that the employer’s exception from direct liability for HIPAA compliance does not fully insulate the employer or its management from legal risks in the event of a health plan data breach or other HIPAA violation.
While HIPAA generally limits direct responsibility for compliance with the HIPAA rules to a health plan or other covered entity and their business associates, HIPAA hybrid entity and other organizational rules and criminal provisions of HIPAA, as well as various other federal laws, arguably could create liability risks for the employer. See, e.g., Cyber Liability, Healthcare: Healthcare Breaches: How to Respond; Restated HIPAA Regulations Require Health Plans to Tighten Privacy Policies and Practices; Cybercrime and Identity Theft: Health Information Security Beyond. For example, hybrid entity and other organizational provisions in the HIPAA rules generally require employers and their health plan to ensure that health plan operations are appropriately distinguished from other employer operations for otherwise non-covered human resources, accounting or other employer activities to avoid subjecting their otherwise non-covered employer operations and data to HIPAA Rules. To achieve this required designation and separation, the HIPAA rules typically also require that the health plan include specific HIPAA language and the employer and health plan take appropriate steps to designate and separate health plan records and data, workforces and operations from the non-covered business operations and records of the sponsoring employer. Failure to fulfill these requirements could result in the unintended spread of HIPAA restrictions and liabilities to other aspects of the employer’s human resources or other operations. Sponsoring employers will want to confirm that health plan and other operations and workforces are properly designated, distinguished and separated to reduce this risk.
When putting these designations and separations in place, employers also generally will want to make arrangements to ensure that their health plan includes the necessary terms and that the employer implements the policies necessary for the employer to provide the certifications to the health plan that HIPAA will require that the health plan receive before HIPAA will allow health plan PHI to be disclosed to the employer or its representative for the limited underwriting and other specified plan administration purposes permitted by the HIPAA rules.
Once these arrangements are in place, employers and their management also generally will want to take steps to minimize the risk that their organization or a member of the employer’s workforce honors these arrangements and does not improperly access or use health plan PHI systems in violation of these conditions or other HIPAA rules. This or other wrongful use or access of health plan PHI or systems could violate criminal provisions of HIPAA or other federal laws making it a crime for any person – including the employer or a member of its workforce – to wrongfully access health plan PHI, electronic records or systems. Because health plan PHI records also typically include personal tax, Social Security information that the Internal Revenue Code, the Social Security Act and other federal laws generally would require the employer to keep confidential and to protect against improper use, employers and their management also generally should be concerned about potential exposures for their organization that could result from improper use or access of this information in violation of these other federal laws. Because HIPAA and some of these other laws under certain conditions make it a felony to violate these rules, employer and their management generally will want to treat compliance with these federal rules as critical elements of the employer’s federal sentencing guideline and other compliance programs.
Employers or members of their management also may have an incentive to promote health plan compliance with HIPAA or other health plan privacy or data security requirements.
For instance, health plan sponsors and management involved in health plan decisions, administration or oversight could face personal fiduciary liability risks under ERISA for failing to act prudently to ensure health plan compliance with HIPAA and other federal privacy and data security requirements.. ERISA’s broad functional fiduciary definition encompasses both persons and entities appointed as “named” fiduciaries and others who functionally exercise discretion or control over a plan or its administration. This fiduciary status and risk can occur even if the entity or individual is not named a named fiduciary, expressly disclaims fiduciary responsibility or does not realize it bears fiduciary status or responsibility. Because fiduciaries generally bear personal liability for their own breaches of fiduciary duty as well as potential co-fiduciary liability for fiduciary breaches committed by others that they knew or prudently should have known, most employers and members of their management will make HIPAA health plan compliance a priority.
Furthermore, most employers and their management also will appreciate the desirability of taking reasonable steps to manage potential exposures that the employer or members of its management could face if their health plan or the employer violates the anti-retaliation rules of HIPAA or other laws through the adoption and administration of appropriate human resources, internal investigation and reporting, risk management policies and practices. See Employee & Other Whistleblower Complaints Common Source of HIPAA Privacy & Other Complaints.
Manage HIPAA and Related Risks
At minimum, health plans and their business associates should move quickly to conduct a documented assessment of the adequacy of their health plan internet applications and other HIPAA compliance in light of the Resolution Agreement and other developments. Given the scope and diversity of the legal responsibilities, risks and exposures associated with this analysis, most health plan sponsors, fiduciaries, business associates and their management also will want to consider taking other steps to mitigate various other legal and operational risks that lax protection or use of health plan PHI or systems could create for their health plan, its sponsors, fiduciaries, business associates and their management. Health plan fiduciaries, sponsors and business associates and their leaders also generally will want to explore options to use indemnification agreements, liability insurance or other risk management tools as a stopgap against the costs of investigation or defense of a HIPAA security or other data breach.