Will HIPAA Law Echo Hawaii Snafu?

By Daniel Hays

The newly effective federal law designed to protect the privacy of medical records has some employers and insurance representatives warning of a potential disaster for the nations workers compensation systemssimilar to one that occurred in Hawaii four years ago.

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

And while government officials and privacy advocates said the April 14 implementation of the Health Insurance Portability and Accountability Act privacy rules should create no problems for workers comp systems, business interests reported that they have already seen activity that causes them to worry.

One of those concerned is Paul Ables, who lobbies the Hawaii legislature for the Washington, D.C.-based American Insurance Association. A week before the HIPAA rules went into effect, he said, an association of hospitals in that state told business interests they believed that HIPAA rules required a subpoena for medical records.

Mr. Ables, referring to the workers comp problems Hawaii had in 1999 when it passed its Act 87 Relating to Privacy of Health Care Information, said with HIPAA: “It sounds like we may be headed there again. Were hoping not. Were trying to work it out.”

In Washington, Emil Oxfeld, president of Strategic Services on Unemployment and Workers Compensation, represents employers' views on those issues to government. He also worries about a Hawaii redux situation.

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

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

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

She added that because cases often involved more than one treating physician, her division had to send out 9,000 consent forms. Most came back signed, but there were cases where attorneys representing workers advised them not to sign. Ms. Pacheco said there were legal disagreements over what the statute provided. “It was 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 the law will have a totally chilling effect, guessing that perhaps only a small percentage of health care providers would withhold information.

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

Craig Polosky, a spokesperson for the U.S. Department of Health and Human Services, which drew up the HIPAA regulation, said it should not interfere with workers comp because “lawyers have vetted this.”

He pointed to materials on the HHS Web site. Among its postings concerning workers comp, HHS states that individuals do not have a right under the rules to request that a health provider “restrict a disclosure of protected health information about them for workers compensation purposes when that disclosure is required by law or authorized” by law.

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

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

He noted that in March of this year, the Massachusetts agency overseeing workers' comp there, the Department of Industrial Accidents health policy office, sent out an advisory. Citing the HIPAA rule, it stated that “an insurer cannot access the private/personal health information of an injured worker for the purpose of unregulated and unmandated case management/managed care without a signed consent. To do so violates the injured employee's right to privacy under this Act.”

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

At UWC, Mr. Oxfeld said that, in view of the past Hawaii situation, “there is a real danger” of problems developing. He noted that medical providers are penalized under the rule if they make improper disclosures, “but there are no penalties if they withhold information that they could disclose.”

Even though HIPAA rule violations carry only civil penalties, Mr. Oxfeld said that normally cooperative doctors, concerned for their 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 a payer to know that the workers condition wasnt work-related or the severity isnt as great as they claim, or their client might be able to return to work,” he explained.

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

Mr. Oxfeld also suggested that just the threat of a privacy violation complaint by an attorney “may be enough to deter physicians complete disclosures.”

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

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

In Mr. Oxfelds view, the timing is worrisome. He noted that HHS officials have said they would consider modifying the rule if it interferes with the exchange of records for legitimate medical purposes. But a rule change, he added, could take 12 months to accomplish.


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


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