Tag Archives: Premera

More Pressure to Protect Health Data

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.

Yet Another Data Breach in Healthcare

CareFirst BlueCross BlueShield stepped forward on Wednesday to disclose yet another major breach of a health care insurer, this one affecting 1.1 million people.

Hackers accessed a database to steal the names, user names, birth dates, email addresses and subscriber ID numbers of about 1.1 million current and former CareFirst customers and business partners.

The company said that no passwords were taken because those are encrypted and stored in a separate system, and that no Social Security numbers, medical claims or credit cards appeared to be compromised.

But Richard Blech, CEO of encryption company Secure Channels, was critical of CareFirst, saying the company trivialized what was hacked in the data breach.

“The data stolen is enough to ruin someone’s life,” Blech says. “Trying to mitigate the damage should not be the goal. Heath insurance firms cannot ignore the responsibility to protect their customers.”

Dave Frymier, chief information security officer at Unisys, concurs. “Breaches like this can literally create life-or-death issues for consumers,” Frymier says. “If stolen health records are used to obtain care by a criminal, fraudulently purchased medical procedures are listed on the records of people who did not have the procedures. That can create critical medical issues in the future. Organizations seem to only invest in cybersecurity after they are attacked. Few seem willing to invest to prevent the attacks in the first place.”

Baltimore-based CareFirst is the third health care insurer to disclose a major data breach this year, following Anthem, which had the records of 80 million people compromised, and Premera Blue Cross, which saw data for 11 million people exposed.

Why is the healthcare industry being targeted by data thieves? The basic explanation is two-fold: The type of data that health care organizations amass – ranging from research work to patient records – has high value in the cyber underground; and the industry currently exhibits uniformly poor security policies and practices.

​“Healthcare companies are prime targets for hackers,” says Greg Kazmierczak, CTO of data security vendor Wave Systems. “Not only should the database have been encrypted, but access to the database should have been protected by two-factor authentication. Without strong encryption and access management, expect medical fraud and identity theft to run unchecked.”

The question of the moment: How many more major data breaches will have to be disclosed before healthcare organizations move assertively to shore up security?

“It’s time for the healthcare entities to shift gears to modern data-security defenses and join their peers in other industries who’ve already learned how to mitigate these threats,” says Mark Bower, global product management director at HP Security Voltage.

The data breach was discovered after CareFirst retained forensics firm Mandiant to audit its security systems. Mandiant found evidence of access to a single database containing data originating from CareFirst’s websites and online services. Anyone who created profiles on the insurer’s website before June 20, 2014, was affected.

Other healthcare organizations are likely to conduct similar audits. Security experts predict that disclosure of other major hacks will be forthcoming, for some time to come.

“The medical industry as a whole has to up its game in security maturity, especially basics like patching, security controls and incident detection,” says Gavin Reid, vice president of threat intelligence at network security firm Lancope.

Ken Westin, senior security analyst at Tripwire, adds: “In general, healthcare organizations are not prepared for the level of sophistication associated with the attacks that are coming at them. As we saw with the recent tidal wave of retail breaches, attackers often take advantage of vulnerabilities that are endemic within an industry.”

In the meantime, the burden rests with the individual consumer to limit dissemination of personal data in the health care field.

“Share only with trusted providers that have a need to know,” Lancope’s Reid advises. “Be vigilant if you ever come across a medical bill in your name that covers services you didn’t receive – even if there is no associated bill or charge.”

Meanwhile, healthcare organizations need to embrace a security mindset from the board room to the patient room. Until that happens, data thieves will continue to plunder their employee, patient and partner data.

“Ongoing assessments and tests are critical to identifying areas of vulnerability before sensitive data is at risk, especially since many breaches aren’t obvious to the organization,” says Jay Schulman,  managing principal at Cigital. ‘It’s not only about building effective software that adhere to compliance standards, but healthcare  organizations also need to build security in so that applications and software can tell you when something is going wrong.”

Social Security Numbers Are Dead

I am a senior citizen. While this distinction entitles me to a variety of perks like discounted movies and bus fare – as well as the occasional free doughnut (seriously) — it’s also a ticket to the identity theft lottery.

Turning 50 gets you an invitation to AARP, and turning 65 gets you a Medicare card. What’s this have to do with identity theft? Take a close look at a Medicare card. The identification number? It’s a combination of the cardholder’s Social Security number and one or two letters.

Health insurers no longer include Social Security numbers on the cards they issue to people. The concern was that using SSNs needlessly increased the risk of identity theft, which was, and continues to be, rising exponentially. When health insurers made the change, they stopped being co-conspirators in what has become a national epidemic.

According an article by reporter Robert Pear in the New York Times, private insurers under contract with Medicare are not permitted to use SSNs on insurance cards when providing medical or prescription drug benefits. But in a serious case of “Do as I say, not as I do,” Medicare has used Social Security numbers on more than 50 million benefit cards, heedless of the warnings of privacy advocates, consumer protection officials, federal auditors and investigators working on identity theft cases.

Section 501 of the Medicare Access and CHIP Reauthorization Act of 2015, a bipartisan provision written by Rep. Sam Johnson (R-TX) and Rep. Lloyd Doggett (D-TX), signed into law recently by President Obama, finally mandates the removal of Social Security numbers from our Medicare cards. (Well, let’s just say it begins the process — and, like all processes in Washington, let’s hope it actually gets done before my toddler is eligible for Medicare.) The new law is clear: Social Security numbers must not be “displayed, coded or embedded on the Medicare card.”

More than 4,500 of my fellow seniors enroll in Medicare every day. It is estimated that over the next 10 years, some 18 million more of us are projected to qualify, which will bring the total Medicare enrollment to 74 million by 2025.

What Lit the Fire?

After years of begging, cajoling and warning to no avail, what finally forced both parties in Washington to get off their butts and get it right?

Pear speculates that is wasn’t one thing but a set of circumstances starting with the nearly universal digitization of medical records and, of course, ending with a culture plagued by highly effective hackers. Consider that in just the first quarter of 2015 more than 91 million Social Security numbers were exposed to unauthorized persons in just two data compromises: Anthem and Premera.

What the new system will look like is still anyone’s guess. Here’s what we know, according to the New York Times article: SSNs will be replaced by a “randomly generated Medicare beneficiary identifier.” Additionally, Medicare officials have eight years to get the new system completely up and running—four years to issue cards to new beneficiaries and four more years to reissue cards to existing beneficiaries. It was unclear whether those two four-year items were to happen simultaneously, but since we’re talking about a government timeline there is an argument for erring on the side of forever.

Like all major government initiatives, this will be no small feat. But it is a critical one if we are to stop hearing the pitter-patter of scammer feet tap dancing on the finances of senior citizens.

Why did it take so long? Why does the IRS still require SSNs? Because we’re talking about the government.

The record speaks for itself:

  • 2004 – The Government Accountability Office warns we must reduce our dependence on Social Security numbers as individual identifiers.
  • 2007 – The White House Office of Management and Budget directs federal agencies to “eliminate the unnecessary collection and use of Social Security numbers” within two years.
  • 2008 – The inspector general of Social Security calls for the immediate removal of Social Security numbers from Medicare cards. The departments of Defense and Veterans Affairs launch major initiatives to delete Social Security numbers from their identification cards.

How about the Department of Health and Human Services, which supervises the Medicare program? Well, let’s just say that according to the Times, the GAO felt that HHS was moving—shall we say—glacially and that it really was all about money. (Forget the fact that identity theft costs America and Americans billions annually.)

The Medicare agency is no small operation. It pays close to 1 billion claims from 1.5 million healthcare providers every year. While I understand that the HHS has considerable budgetary and logistical issues when dealing with the identification quagmire, it is nothing compared with the expense and uproar caused by identity theft in the lives of the people HHS serves. That’s a long way of saying that this identification card “modification” is long overdue.

In the meantime, what can you do if you’re concerned that your Social Security number is in the wrong hands? Because the number can be used to perpetrate many types of crimes, not just credit-related, the problem can be difficult to track. But it’s still important to check your credit reports regularly for signs of fraud — like new accounts you didn’t authorize. You can get your free annual credit reports from AnnualCreditReport.com, and you can get a free credit report summary, updated every month on Credit.com, to watch for changes.

That said, we are not living in a “So it is written, so it is done” age. Congress has to sit on the HHS to get 100% compliance with the law as it was passed. And we have to sit on Congress. And while we are sitting on our favorite 535 federal lawmakers, perhaps they can ask the IRS what’s taking it so long to make some changes — including killing the SSN as identifier — so Americans can stop being such sitting ducks in the sights of miscreants.

Healthcare Breaches: How to Respond

The news of a data breach at Premera Blue Cross, following on the heels of the recent announcements of large-scale,  healthcare breaches at Anthem, is another reminder that employers and other health plan sponsors, fiduciaries and insurers need to take immediate steps to assess and tighten up their privacy, data security and data breach compliance and risk management.

Health plans and their employers, administrators, insurers and other vendors and service providers need to take immediate steps to conduct documented investigations, provide mandated breach notifications and take other actions that are required by the Privacy, Security & Breach Notification Rules imposed by the Health Insurance Portability & Accountability Act and other potentially applicable laws.

Employers or other plan sponsors, fiduciaries, administrators and service providers also may be subject to additional responsibilities under the fiduciary responsibility requirements of the Employee Retirement Income Security Act of 1974 (ERISA), the Internal Revenue Code and a host of other laws. Whether they are subject to the additional responsibilities depends on the scope of data affected and their involvement with the affected plans,

Insurance industry or other vendors providing services to these plans also may face specific responsibilities under applicable insurance, health care, federal or state identity theft, privacy or data security or other federal or state laws. (See, e.g., Restated HIPAA Regulations Require Health Plans to Tighten Privacy Policies and Practices; Cybercrime and Identity Theft: Health Information Security Beyond; HIPAA Compliance & Breach Data Shares Helpful Lessons for Health Plans, Providers and Business Associates.)

The need for prompt assessment and action is not necessarily limited to health plans and organizations sponsoring, administering or doing business with the plans involved in the Premera or Anthem breaches. The report of these and other healthcare breaches, as well as recent reports of identity theft and other fraud affecting federal tax returns and other large data breach reports involving retailers and other prominent businesses are spurring recognition of the large risks and need for greater scrutiny and accountability to business collection, use and protection of sensitive personal and other data.

Of course, the risk is exploding largely in response to the continued evolution of electronic payment and other business operating systems coupled with the emergence of data harvesting and other capabilities at virtually every U.S. business. Cyber criminals seem to always be one step ahead of business and government in leveraging these emerging opportunities for their criminal purposes.

Everyone from the Internal Revenue Service, other federal and state government agencies and private business partners are pushing for electronic transactions and data. So, businesses are conducting more and more transactions electronically containing business and individual tax information, personal financial information, personal health information, confidential business and personal information. Meanwhile, “big data” and other business and marketing gurus also encourage businesses to use data from customers, prospects and other sources to benefit marketing and other parts of the business.

As these practices have taken hold over the past decade, data breaches, other cyber crimes and risks have also grown. Privacy, identity theft and other cyber crimes have led federal and state lawmakers to enact an ever-growing list of notice, consent, disclosure, security and other laws and regulations, including the Fair and Accurate Credit Transaction Act (FACTA),the Gramm-Leach-Bliley Act, the Privacy and Security Rules of the Health Insurance Portability and Accountability Act and state identity theft, data security and data breach and other electronic privacy and security laws.

As notorious breaches occur and judgments, penalties and other costs soar, federal and state regulators are looking at the need for expanded rules and penalties. (See Cybercrime Enforcement Statistics; DOJ Enforcement Priorities and Statistics.) Widening data privacy and security concerns from incidents like the recent reports of breaches at Anthem and elsewhere have prompted Congress and state regulators to hold hearings to consider the need for added reforms, and the Federal Trade Commission has just announced plans to host a workshop on Nov. 16, 2015, to look at the privacy issues around the tracking of consumers’ activities across their different devices for advertising and marketing purposes.

While these and other legal and enforcement developments promise new liabilities and expenses, the business losses and customer and business partner implications experienced by Target, Anthem and other businesses illustrate the severe business consequences that inevitably result if a business appears to have failed to take customer privacy or other data security concerns seriously.

The notorious Target hacking data breach event is illustrative. Target reported in late 2013 that credit and debit card thieves stole the name, address, email address and phone number from the credit and debit card records of around 70 million Target shoppers between Nov. 27 and Dec. 15, 2013. After announcing the breach, Target reported a 46% drop in profits in the fourth quarter of 2013, compared with the year before. The company announced plans to invest $100 million upgrading its payment terminals to support Chip-and-PIN-enabled cards and millions of dollars more in rectification efforts. Subsequently, Target’s losses have continued to mount, and it now faces lawsuits and other enforcement actions as a result of the breach.

Beyond a general need to tighten their defenses, health plans, their sponsors, fiduciaries, administrators and vendors have specific obligations that require immediate, well-documented action when an actual or potential breach happens. The Privacy, Security and Breach Notification requirements of HIPAA require that health plans adopt specific policies and maintain and administer specific safeguards. In the event of a breach, these rules require that the health plan, usually acting through its fiduciaries, and affected service providers that qualify as business associates both investigate and redress the breach, as well as provide specific notification as soon as possible, usually no later than 30 days after the health plan knows or has reason to know of the breach. Significant civil and even criminal penalties can apply.

Beyond the specific requirements of HIPAA, employers and other plan sponsors and others involved in the maintenance and administration of the health plan or the selection and oversight of its vendors often may have less-realized responsibilities. As health plan data often includes payroll and other tax data, employers, there may be specific responsibilities under the Internal Revenue Code or other laws. To the extent that the plan sponsor or another party is named as the plan administrator or otherwise exercises control over the selection of the insurer or other plan vendor or other plan operations, the fiduciary obligations of ERISA also may require a prudent investigation and other action. Brokers, insurers, third party administrators, preferred provider organizations or other managed care providers and others doing business with the health plan also may have specific responsibilities under state insurance, health care, data breach and identity theft or other laws. Under the provisions of most of these laws, leaving it to the insurer or other vendor involved in the breach generally will not suffice to fulfill applicable legal responsibilities, much less allay the fears of plan members, employees, healthcare providers and others involved with the health plan.

In the face of these developments, health plans and their sponsors, fiduciaries and others working with them must take immediate action in response to breaches. Businesses also should check the adequacy and defensibility of their current overall data collection, use and security practices while remaining ever-vigilant for new requirements, as well as weaknesses in their own practices.

Businesses need to build their defenses in anticipation of breaches both to withstand government and private litigation and enforcement, and the judgment of public opinion.

2015 Is Watershed for Healthcare Hacking

Predictions that 2015 would be a watershed year for stolen healthcare records are bearing out.

Health insurer Premera Blue Cross has disclosed that a cyber attack that commenced in May 2014 resulted in exposure of medical data and financial information of 11 million customers. Stolen records included claims data and clinical information, as well as financial account numbers, Social Security numbers, birth dates and other personal data. The Premera breach appears to involve a record number of victims.

Records for some 80 million people were stolen from the nation’s No. 2 insurer Anthem, and records for 4.5 million people were hacked from Community Health Systems, parent of 206 hospitals in 29 states, disclosed last summer. But the Anthem and CHS breaches involved the theft of personal data only, not medical records.

More: 7 steps to take if your healthcare records are in the wild

Personal and medical records are the building blocks for the worst forms of identity theft. With Premera, “hackers not only got the skeleton keys to lives, they got the key ring and the key chain,” says Adam Levin, chairman and co-founder of identity and data risk management consultancy, IDT911, which sponsors ThirdCertainty. “Members and employees whose data was exposed – especially their SSNs – will be forced to look over their shoulders for the rest of their lives.”

Seattleites hit hard

More than half of the victims — about 6 million Premera patrons – reside in Washington state, including employees of Amazon, Microsoft and Starbucks. These companies now are prime targets for spear phishing attacks. It doesn’t take much imagination for a criminal to use stolen data to create spoofed accounts to come across as a trusted colleague to send viral email and social media posts to fellow employees as a way to breach any of these corporate networks.

On a lower rung of criminal activity, a whole generation of scammers who’ve mastered fraudulent online transaction using stolen credit card account numbers are ready to move to the next level, observes Lisa Berry-Tayman, senior privacy and governance advisor at IDT911 Consulting.

“Criminals learn,” Berry-Tayman says. “The credit card thief steals the data, charges until the account is closed and the money is gone. To steal more money over a longer period of time, he or she must think bigger, and bigger is identity theft. Why just spend their money for a finite period of time when you can become them and spend their money for years and years?”

The healthcare industry has arisen as a target because it has moved aggressively to get rid of paper records and to collect, store and make use healthcare data in digital form. The goal: to boost productivity. Trouble is the healthcare industry, like many other industries, continues to make the digital push, including intensive use of the Internet cloud, without adequately accounting for security basics, security experts argue.

Healthcare data at riska three-part series: Why medical records are easy to hack, lucrative to sell

“Today’s Premera breach news once again demonstrates the failure of flawed, outdated assumptions, an over-reliance on guard-the-entry-point security and simplistic single-key encryption schemes,” says Richard Blech, CEO of encryption technology company Secure Channels. “This is a quaint and dangerous approach to a 21st century problem.”

Trent Telford, CEO of data security company Covata, agrees. “For many of these companies, data security has been an afterthought or something they did not deem necessary,” Telford says. “However, this breach again highlights how vulnerable the health care and insurance industries are to attacks. People are entrusting these organizations with their personal information, and it is the responsibility of corporations to take appropriate steps to ensure it is protected – this must include data encryption.”

Common culprits?

Premera is keeping details of how the breach was carried out close to the vest. The FBI and IT forensics specialist Mandiant, a division of FireEye, are investigating. A good guess is that Premera was the focus of a targeted attack, says Josh Cannell, malware intelligence analyst at Malwarebytes Labs.

“A vast majority of cyberattacks targeting enterprise networks originate by attackers gaining access to internal networks through social engineering techniques like phishing/spear phishing e-mails that closely resemble something employees are familiar with,” Cannell says. “Once attackers have an access point inside an enterprise network, they can then use privilege escalation techniques and install malware to maintain a presence on the network.”

Cannell says it’s plausible the same hacking collective hit Anthem and Premera. “Since the attack happened around the same time as the Anthem breach, and was targeting a similar organization, it seems reasonable to say the threat likely originated from the same actors,” Cannell says.