Stakes Are High In Battle Over Health DataPrivacy

Washington

For both insurance producers and companies, efforts to developworkable privacy standards for personal health information carryvery high stakes.

Insurance agents and brokers fear they could be effectivelybarred from shopping group health insurance policies and providingthe traditional services offered to corporate clients.

Insurers believe that restrictions on sharing certain healthinformation could lead to a flood of litigation in the workerscompensation market, resulting in a dramatic increase in costs andpremiums.

The controversy centers on a proposed rule developed by the U.S.Department of Health and Human Services aimed at protecting theprivacy of individually identifiable health information. The rulewas first released on Dec. 28, 2000, and then reissued in revisedform on March 27, 2002, pursuant to the Health InsurancePortability and Accountability Act of 1996.

Pursuant to a HIPAA mandate, the Clinton-era HHS developed arule governing individually identifiable health information afterCongress failed to enact legislation. Many industry groups decriedthe rule as unworkable.

The new Bush administration modified the proposed rule somewhat,but it did not resolve the industrys concerns.

The proposed rule is the primary health privacy concern facingthe insurance industry right now, according to Maria Berthoud,senior vice president of federal government affairs for theIndependent Insurance Agents and Brokers of America in Alexandria,Va.

The insurance industry, Ms. Berthoud said, will have to try toresolve its concerns within the regulatory process. It would beimpractical, she said, to seek legislation until a final rule isissued.

Regarding agent concerns, Ms. Berthoud stated that “if [therule] is not fixed, agents will find it hard to sell healthpolicies to employers.”

The rule as written would make it impossible for a broker toshop a policy for a client to get a better rate or better coverage,according to Nicole Allen, director of government affairs for theWashington-based Council of Insurance Agents and Brokers.

With increased expenses and an inability to move their healthpolicies, employers might decide to scale back or drop healthcoverage, she cautioned.

Specifically, agents are concerned with a provision in theproposal allowing one entity covered by the rule to discloseprotected health information to another entity covered by the ruleonly if two conditions are met:

First, both entities must have a relationship with the affectedindividual.

Second, the disclosure must be necessary to detect healthcarefraud, or must be specifically mentioned in a particular section ofthe rule.

But in comments filed with HHS, agents said these conditionswould disrupt key functions performed by agents and brokers. Infact, they said, agents and brokers will not be able to obtain theinformation needed to, for example, amend, supplement and replacegroup policies.

Moreover, agents said that neither they nor insurers will have a“relationship” with the affected individual. “That is simply nothow the group health market works,” they declared.

Instead, agents and brokers, as well as potential new insurers,have a relationship with the employer, while the affectedindividual has a relationship with the current insurer, thecomments said.

In effect, agents say, the “relationship” condition means that aplan sponsor, through its agents or broker, will not be able toobtain from the existing insurer the claims information needed forquotes on supplemental or replacement coverage.

Regarding the second condition, agents are asking HHS to revisethe rule to specifically allow disclosure of personallyidentifiable health information for underwriting and premium ratingactivities.

For p-c insurers, the concern is the so- called “minimumnecessary” standard. Under this standard, under pain of fines andother penalties, a doctor who examines or treats a worker who hasbeen injured on the job may disclose only the “minimum amount ofinformation necessary” to the workers comp insurer.

According to a joint statement filed with HHS by more than 50insurance and business groups, the standard “effectively preventsworkers compensation insurers from obtaining information needed topay injured workers the benefits guaranteed under the state workerscompensation system. This regulatory roadblock will override theexisting system of state workers compensation protections andprocedures.”

Along with numerous individual companies, the statement wasfiled by the four major insurance trade associations: the AmericanInsurance Association, the Alliance of American Insurers, theNational Association of Independent Insurers, and the NationalAssociation of Mutual Insurance Companies.

Risk management and general business groups signing thestatement included the Risk and Insurance Management Society, theSelf-Insurance Institute of America, the National Association ofManufacturers, and the U.S. Chamber of Commerce.

The groups say the “minimum necessary” standard is unworkablebecause physicians are not in a position to know the legalrequirements of a states workers comp system. “How will a physicianknow that a workers compensation payer is entitled to partialreimbursement from a second injury fund?” the statement asks.“Would a physician even know what a second injury fund is?”

In addition, the statement pointed out that states vary as tothe kinds of medical conditions considered compensable.

Because of these variations, a federal test is not flexibleenough to address what is actually necessary in different statesystems, the statement said.

Faced with uncertainties about the extent of information theyare receiving, workers comp payers will be forced to seek courtorders to obtain all medical information relevant to workers compclaims, the statement warned.

“The minimum necessary test will thus foster attorneyinvolvement, contrary to the intent of this no-fault system, whichis specifically designed to reduce disputes between workers andemployers over compensation for work injuries and to takecompensation determinations out of court,” the statementdeclared.

Therefore, the statement asked HHS to eliminate application ofthe “minimum necessary” standard to disclosures made to workerscomp insurers or to self-insured employers.

“Failure to make this change will impose on the states a federalstandard that will create a dual system of workers compensationclaims adjudication, ignoring over a quarter century ofCongressional intent to preserve the state workers compensationsystem,” the statement declared.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, May 27 2002.Copyright 2002 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.