Jury out on HIPAA and claims: when Congress passed the Health Insurance Portability and Accountability Act in 1996, the risk management community perceived it as regulating health insurance coverage provided as part of an employee benefits package

Risk & Insurance, May, 2004 by Joe Mangan

Few, if any, saw in the new legislation a threat to the ability of loss adjusters to obtain the information needed to settle workers' compensation and third-party liability claims. Those provisions were there nonetheless and lay dormant until 1999 when three years of congressional inaction triggered a rulemaking process built into HIPAA.

The Department of Health and Human Services started to develop regulations to protect the confidentiality of health information gathered by health care providers and published a rule that took effect on April 14, 2003.

Although the rules do not apply directly to property and casualty insurers or third-party administrators and contain a specific exemption for workers' compensation, claims professionals have expressed concern that health care providers and clearinghouses would interpret the rules too conservatively and withhold information that loss adjusters need.

There is some evidence that health care providers are indeed holding to higher standards than Congress and HHS intended, but the problems appear to be isolated and not especially severe. Not all claims professionals agree about whether the situation will improve or deteriorate.

Overall, claims professionals have given mixed reviews to HIPAA's opening act. It has not been the crippling obstacle to claims settlement that some foresaw, but it has created some new problems. Workers' compensation insurers and TPAs are going to have to supply each health care provider with a release from each claimant. That means not only sending out release forms on each first notice of loss, but also following through to make sure claimants complete and return them. Similar obstacles to the free flow of information are also driving more third-party liability claims to litigation. That means higher claims costs whether a business buys insurance or retains its own losses.