Other MMA Content
This article is the first in a two-part series addressing whether and how the Privacy and Security Rules (the “Rules”) under the Health Insurance Portability and Accountability Act (HIPAA with one P and two As, always) apply to various legal entities. This article addresses Covered Entities. Part two will address Business Associates.
What’s a Covered Entity?
There are three types of Covered Entities under the Rules. We’ll describe all three below, although the remainder of this article focuses on the Rules as they relate to employer-provided group health plans.
- Health care providers that engage in certain types of electronic transactions – Health care providers generally include what you’d expect, such as hospitals, clinics, pharmacies, nursing homes, health care practices, individual health care professionals, etc.
To be a Covered Entity, the health care provider has to engage in certain types of electronic transactions including determinations of eligibility, billing, payment, and the coordination of benefits. Even in the rare instance that a health care provider is not subject to the Rules, other federal and state law likely affects how the provider may access or use personal health information.
- Health care clearinghouses – These have nothing to do with sweepstakes prizes and usually operate invisibly in the background as a go-between health care providers and health plans. A health care clearinghouse receives health information from an entity and processes the health information into a format usable by another entity.
The best example we can give you occurs when a health care provider transmits billing information to a third party, the third party reprices the claims and formats the information into a new data set, and transmits the data set to a third party administrator or insurance carrier enabling it to process and pay the claims. The third party repricing and formatting the billing information in this example is a health care clearinghouse.
- Health plans – A health plan is a plan that provides or pays for the cost of medical care. Simple, right?
Group Health Plans
There are many types of benefits that involve personal health information. A plan is only a Covered Entity under the Rules if it is a health plan that provides or pays for the cost of medical care. Covered Entity status transforms a lot of personal health information that may be held or used by or on behalf of the health plan into Protected Health Information. 
- Information about a past, present, or future health condition, treatment for a health condition, or payment for the treatment of a health condition;
- Identifiable to a specific individual;
- Created and/or received by a Covered Entity or Business Associate acting on behalf of a Covered Entity; and
- Maintained or transmitted in any form.
We’re focusing on employer-provided group health plans and will provide an overview of their obligations under “Group Health Plan Responsibilities Under the Rules” below.
Is it a Group Health Plan?
· Prescription drug
· Health FSAs
· EAPs (if not just a referral service)
· Business travel accident
· Leave administration (e.g. FMLA)
· Workers’ Compensation insurance
· Onsite clinics
· Long-term care
· Wellness programs
A group health plan is exempt from the Rules if it covers less than 50 current and/or former employees and is self-administered by the employer without the assistance of a third party administrator or insurance carrier. This is hard to meet, but some small health flexible spending account (health FSA) or health reimbursement arrangement (HRA) plans may qualify.
Unlike ERISA, the Rules contain no exception for church or governmental plans.
What Did You Mean by “Maybe So?”
- Onsite clinics – This feels like a trick. At first glance, you’d think an employer-provided onsite clinic might be a Covered Entity both as a health care provider and as a group health plan, but what seems obvious isn’t necessarily so.
First, an onsite clinic might be operated in such a way that it doesn’t engage in any of the electronic transactions that would cause it to be a Covered Entity as a health care provider. Second, an onsite clinic that merely provides first aid-type services is not a health plan at all under the Rules. Third, an odd exception under the Rules seems to exclude onsite clinics that are health plans, even when the onsite clinic is integrated into other group health plan coverage (but see “It’s a bird, it’s a plane” below).
As a precaution, we recommend an employer seek the assistance of legal counsel before taking the position the Rules do not apply to its onsite clinic. Again, even though the Rules may not apply, personal information may still be protected by other federal or state law.
- Long-term care – A long-term care policy is a group health plan unless it is limited to nursing home fixed indemnity coverage.
- Wellness programs – Wellness programs can include programs that include medical care (e.g. biometric screenings and targeted health coaching) and those that do not (e.g. general education and activity challenges). If a wellness program does not include any medical care services, it is not subject to the Rules. In many instances, a wellness program will include both medical care and non-medical care services and/or be integrated into an employer’s medical plan (please see “It’s a bird, it’s a plane” below).
Does Self-Insured vs. Fully-Insured Matter?
It must, or we wouldn’t have a section addressing it, right? If a group health plan is self-insured, it is generally subject to all of the compliance obligations under the Rules. If a group health plan is fully-insured, many of the compliance obligations under the Rules belong to the insurance carrier if the plan (through its plan sponsor acting on the plan’s behalf) is “hands off” PHI.
- “Hands Off” PHI – The plan sponsor does not create or receive PHI other than enrollment/disenrollment information or summary health information for the purposes of obtaining premium bids or modifying, amending, or terminating the plan. Many fully-insured group health plans qualify as “hands off” PHI.
We can hear the howls of protest, but self-insured group health plans cannot qualify for “hands off” PHI relief under the Rules no matter how little the plan sponsor may be involved with their administration.
- “Hands On” PHI – This applies if the plan sponsor is not “hands off” PHI and can access or receive specific information about claims information or payment.
We will provide an overview of the responsibilities for self-insured group health plans and fully-insured plans that are “hands off” or “hands on” PHI under “Group Health Plan Responsibilities Under the Rules” below.
It’s a Bird, it’s a Plane…
Sometimes, a legal entity may include parts that are subject to the Rules and others that are not. The Rules refer to this as a “hybrid entity” and examples include:
- A welfare benefit “wrap plan” that incorporates both medical and non-medical care benefits such as medical, dental, vision, group term life, accidental death & dismemberment, business travel accident, and long-term disability benefits;
- A standalone wellness program that includes both medical and non-medical care benefits such as biometric screenings, targeted health and nutritional counseling, general education, and step and/or healthy eating challenges; and
- A Walgreen’s or CVS store that includes a pharmacy.
Left as is, the entire “hybrid entity” must comply with the Rules. However, the Rules allow a “hybrid entity” to separate itself for compliance purposes by designating which parts make up the Covered Entity and which do not. The Rules appear to only require this designation in the Covered Entity’s HIPAA Privacy and Security policies and procedures, but it wouldn’t be the worst idea ever to also include this in the corresponding plan document. 
Group Health Plan Responsibilities Under the Rules
A plan/plan sponsor can generally reduce its liability by limiting its contact with PHI. Many of the responsibilities in this section can be delegated to third parties, but the plan remains responsible for compliance with the Rules.
Self-Insured Group Health Plan
Fully-Insured Group Health Plan that is “Hands Off” PHI
The plan may not:
The information contained herein is for general informational purposes only and does not constitute legal or tax advice regarding any specific situation. Any statements made are based solely on our experience as consultants. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. The information provided in this alert is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency is not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions. © 2018 Marsh & McLennan Agency LLC. All Rights Reserved.