Will HIPAA Law Echo Hawaii Snafu?

By Daniel Hays

The newly effective federal law designed to protect the privacyof medical records has some employers and insurance representativeswarning of a potential disaster for the nations workerscompensation systemssimilar to one that occurred in Hawaii fouryears ago.

In 1999, Hawaii legislators approved a law protecting medicalrecords privacy which, before its suspension and eventual repeal,had the unintended effect of shutting down the states workers compsystem, these representatives said.

And while government officials and privacy advocates said theApril 14 implementation of the Health Insurance Portability andAccountability Act privacy rules should create no problems forworkers comp systems, business interests reported that they havealready seen activity that causes them to worry.

One of those concerned is Paul Ables, who lobbies the Hawaiilegislature for the Washington, D.C.-based American InsuranceAssociation. A week before the HIPAA rules went into effect, hesaid, an association of hospitals in that state told businessinterests they believed that HIPAA rules required a subpoena formedical records.

Mr. Ables, referring to the workers comp problems Hawaii had in1999 when it passed its Act 87 Relating to Privacy of Health CareInformation, said with HIPAA: “It sounds like we may be headedthere again. Were hoping not. Were trying to work it out.”

In Washington, Emil Oxfeld, president of Strategic Services onUnemployment and Workers Compensation, represents employers' viewson those issues to government. He also worries about a Hawaiiredux situation.

According to Mr. Oxfelds research, Act 87 did not apply toworkers comp, but nevertheless it brought the system to a halt. Thereason: doctors and other medical providers were so fearful ofpenalties they could incur for improper records release that theyrefused to provide those records.

Insurers did not view subpoenas as an option because, in manycases, the evidence needed for a court order was not available.

In Honolulu, Valerie Pacheco, program administrator for theworkers compensation division of the states department of humanresources and development, said that Act 87 “literally shut us downuntil we could secure [medical record release] consents from ourinjured workers. We had approximately 1,700 open claims.”

She added that because cases often involved more than onetreating physician, her division had to send out 9,000 consentforms. Most came back signed, but there were cases where attorneysrepresenting workers advised them not to sign. Ms. Pacheco saidthere were legal disagreements over what the statute provided. “Itwas a mess,” she admitted.

Could HIPAA privacy regulations have the same effect?

In Ms. Pachecos view, although HIPAA attempts to carve out comp,“the likelihood is it will.” She said she could not say whether thelaw will have a totally chilling effect, guessing that perhaps onlya small percentage of health care providers would withholdinformation.

Where employees decline to sign consents, “we wont be able todetermine what benefits are appropriate,” she noted.

Craig Polosky, a spokesperson for the U.S. Department of Healthand Human Services, which drew up the HIPAA regulation, said itshould not interfere with workers comp because “lawyers have vettedthis.”

He pointed to materials on the HHS Web site. Among its postingsconcerning workers comp, HHS states that individuals do not have aright under the rules to request that a health provider “restrict adisclosure of protected health information about them for workerscompensation purposes when that disclosure is required by law orauthorized” by law.

Jan Lori Goldman, director of the Georgetown Health PrivacyProject, a non-profit Washington-based privacy protection group,also believes the regulation poses no problem for comp. “I dont seeany glitch. I see a lot of misinformation being shared. If peoplemisinterpret or overinterpret [the rule], thats not a legalissue.”

But interpretation is a key factor in the mind of Bruce C. Wood,assistant general counsel for the AIA in Washington. The materialprovided by the Office of Civil Rights in HHS, he said, is toogeneric and none of it has “the nuance to provide the guidanceneeded.”

He noted that in March of this year, the Massachusetts agencyoverseeing workers' comp there, the Department of IndustrialAccidents health policy office, sent out an advisory. Citing theHIPAA rule, it stated that “an insurer cannot access theprivate/personal health information of an injured worker for thepurpose of unregulated and unmandated case management/managed carewithout a signed consent. To do so violates the injured employee'sright to privacy under this Act.”

He termed the Massachusetts interpretation “absolutelyoutrageous,” and said he had written to HHS asking the departmentto publish additional guidance, but without success.

At UWC, Mr. Oxfeld said that, in view of the past Hawaiisituation, “there is a real danger” of problems developing. Henoted that medical providers are penalized under the rule if theymake improper disclosures, “but there are no penalties if theywithhold information that they could disclose.”

Even though HIPAA rule violations carry only civil penalties,Mr. Oxfeld said that normally cooperative doctors, concerned fortheir reputations, might err on the side of excess caution.

“For those in the hip pocket of trial lawyers,” he said the rule“may be a shield to hide behind.”

“Its not hard to imagine counsel for a claimant not wanting apayer to know that the workers condition wasnt work-related or theseverity isnt as great as they claim, or their client might be ableto return to work,” he explained.

“Theres a lot of medical judgment involved, which is why thosematters are in dispute.”

Mr. Oxfeld also suggested that just the threat of a privacyviolation complaint by an attorney “may be enough to deterphysicians complete disclosures.”

Attorney Lisa T. Murphy of Miller and Chevalier in Washington,D.C., voiced a middle-ground perception of how HIPAA will affectworkers comp matters, saying that she “cant imagine providers canstonewall with the federal law.”

But “theres going to be a time period while the kinks get workedout of the rule,” said Ms. Murphy, whose law firm works on employeebenefits and health litigation. It may take a year or more, shesaid.

In Mr. Oxfelds view, the timing is worrisome. He noted that HHSofficials have said they would consider modifying the rule if itinterferes with the exchange of records for legitimate medicalpurposes. But a rule change, he added, could take 12 months toaccomplish.

Reproduced from National Underwriter Edition, April 21, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved. Copyright in this article as anindependent work may be held by the author.