In the last two weeks, the Office for Civil Rights (OCR) announced two substantial settlements under HIPAA that together totaled $4.35 million. These large amounts seem to be driven not by actual harm to individuals, but in significant part by alleged HIPAA compliance failures identified by OCR following investigations commenced in response to receipt of data breach reports. It is a mistake to believe that timely and otherwise compliant reporting of supposed “no harm, no foul” data breaches will result in minor, if any, enforcement activity; that is, if the agency believes you have not satisfactorily complied with the privacy and security standards.

Depending on the circumstances of the breach, an OCR investigation will look at why the breach occurred, but it likely will go beyond that to examine compliance with basic HIPAA privacy and security standards, even if indirectly related to the breach at hand.

Let’s see how this could play out. In the case of the $3.5 million settlement with Triple-S Management Corporation, there were a number of breaches reported to OCR:

  • Former Triple-S employees while employed by a Triple-S competitor improperly accessed restricted areas of a Triple-S subsidiary’s database. According to OCR’s announcement, the individual’s access rights were not terminated upon leaving Triple-S employment. This allowed the former employees to access names, contract numbers, home addresses, diagnostic codes and treatment codes of covered individuals.
  • As we reported, a Triple-S subsidiary reported to OCR that in September 2013 a vendor disclosed Medicare Advantage beneficiaries’ protected health information (PHI) on the outside of a pamphlet mailed to the beneficiaries, about 13,000 of them.
  • In another breach, a Triple-S subsidiary reported that a former employee of a business associate copied beneficiary ePHI onto a CD, took it home for an unknown period of time, and then downloaded it onto a computer at his new employer. The ePHI included beneficiaries enrollment information, including names, dates of births, contract numbers, HICN, home addresses’ and Social Security numbers.
  • Another breach involved enrollment staff who placed the incorrect member ID cards in mailing envelopes, resulting in beneficiaries receiving the member ID card of another individual. The PHI included members’ names, identification numbers, benefit packages, effective dates, contract numbers, co-payments and deductibles.

Note – these are not sophisticated systems attacks carried out by unnamed international identity theft rings or by nation states. They are essentially mistakes in the handling of PHI that can happen at any covered entity or business associate.

Each of the incidents above affected more than 500 individuals, and there were a handful of other breaches summarized in the resolution agreement affecting fewer than 500 individuals. But there was no discussion of harm to any affected individuals in support of the settlement amount. Instead, OCR itemized a number of alleged compliance failures, not all of which directly led to the breaches, such as:

  • Not implementing appropriate administrative, physical, and technical safeguards to protect PHI
  • Disclosing PHI to an outside vendor without a business associate agreement
  • Using and disclosing more than the minimum necessary PHI
  • Not conducting an accurate and thorough risk analysis that incorporates all IT equipment, applications, and data systems
  • Not implementing sufficient security measures to reduce risk to ePHI to a reasonable and appropriate level.

In addition to paying $3.5 million, Triple-S will need to establish a comprehensive compliance program satisfactory to OCR that includes a risk analysis and a risk management plan, policies and procedures for compliance with HIPAA requirements, training and other measures.

Of course, OCR’s approach makes sense in that its purpose generally is not to remedy harm to individuals affected by data breaches, but to enforce compliance with the HIPAA privacy and security standards. Covered entities and business associates should avoid, therefore, underestimating potential regulatory exposure because of a “no harm, no foul” view of reported data breaches. Compliance and steps to prevent breaches are the agency’s focus, not whether the breach actually harms affected persons, although significant harm to affected individuals would strengthen the agency’s enforcement position.

Preparedness is key!

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP)…

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Joe also is a member of the firm’s Employee Benefits practice group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Joe counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Joe’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Joe speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Joe served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.