Health data breach notification rule starts Sept. 23

A new federal data breach notification rule for patients' medical data that goes into effect Sept. 23 is said to be broader in its reach than previous health data rules, but it also may have a loophole that could limit its effect.

In late August, the Health and Human Services Department published an interim final notification rule for entities covered under the Health Insurance Portability and Accountability Act (HIPAA), such as hospitals, doctors and health plans.

The rule was required by Congress under the economic stimulus law. It sets procedures to notify victims of an unauthorized release of their private health data and provides for criminal and civil penalties for such disclosures. However, if the sensitive data is maintained in encrypted formats — rendering it unreadable, unusable or indecipherable upon release — there is no need for breach notification.

The new rule has a broader scope because it applies the breach notification rules to “business associates” of covered entities, which include health information exchanges, Jodi Daniels, director of policy and research in HHS’ Office of the National Coordinator for Health IT, said at a federal advisory meeting Sept. 18.

Business associates also include any provider of services to a HIPAA-covered entity, which include third-party administrators, claims processors, attorneys, accountants and software providers.

The new rule is a significant change for the business associates because it is the first time they are being subjected to federal law in this area, said John Barlament, partner with the Michael Best & Friedrich law firm in Milwaukee.

“From a business associate perspective, this is a very important change,” Barlament said. “Previously, all they had to do was follow the rules of their clients. Now they have to [follow] federal law. Previously, if there was a data breach it was a breach of contract. Now, if they don’t follow HIPAA, they are subject to federal penalties.”

Another notable change is that HHS included a provision stating that a breach is not considered a breach unless the access, use or disclosure of the data poses a significant risk of financial or other harm to an individual. The covered entities determine whether the potential harm is sufficient to warrant disclosure.

However, that harm threshold is being criticized by the Center for Democracy and Technology (CDT), a privacy advocacy group, as being far too general and severely undermining privacy protections.

Providers and health care companies do not have an incentive to carry out breach notifications and are likely to minimize the harm to patients, resulting in inadequate reporting, Harley Geiger, staff counsel for the CDT, wrote in a blog entry dated Sept. 11.

“If a health care company consistently makes an error that it determines carries insignificant risk of harm to the patient, what incentive is there for the company to fix it? They never have to tell anyone unless, of course, harm actually occurs. But then it is too late,” Geiger wrote.

The rule also reduces the incentive for companies to apply encryption and other protections because the companies have the option of determining that a breach would cause no harm, he added.

Barlament called the harm threshold provision a significant change from what was written in the economic stimulus law, but he also said it is a “reasonable interpretation” of the law. "If you don’t have a harm threshold, then any indication of technical breach, even without risk of harm, would have to be reported,” he said. “That would be challenging to keep track of.”

A companion breach notification rule was published by the Federal Trade Commission for non-HIPAA entities that handle personal health data, including vendors of personal health record systems, such as Google and Microsoft. The FTC published a final rule that goes into effect Sept. 24.