To improve the efficiency and effectiveness of the healthcare system, the Health Insurance Portability and Accountability Act (HIPAA) of 1996 included a series of "administrative simplification" provisions that required the Department of Health and Human Services (HHS) to adopt national standards for electronic healthcare transactions. By ensuring consistency throughout the industry, these national standards make it easier for health plans, doctors, hospitals and other healthcare providers to process claims and other transactions electronically.  The law also requires the adoption of security and privacy standards in order to protect personal health information.  

HHS has issued the following major regulations:

• Electronic healthcare transactions (final rule issued);
• Health information privacy (final rule issued);
• Unique identifier for employers (final rule issued);
• Security requirements (final rule issued);
• Unique identifier for providers (final rule issued);
• Unique identifier for health plans (proposed rule in development);
• Enforcement procedures (final rule issued).

Although the HIPAA law also called for a unique health identifier for individuals, HHS and Congress have indefinitely postponed any effort to develop such a standard.

Under HIPAA, most health plans, healthcare clearinghouses and healthcare providers who engage in certain electronic transactions have two years from the time the final regulation takes effect to implement each set of final standards.

Five Steps to Understanding HIPAA

Understand the different types of health insurance and group health plan coverage that are affected by the Health Insurance Portability & Accountability Act of 1996 (HIPAA). Generally, HIPAA applies to three types of coverage:  group health plans, individual health insurance and comparable coverage through a high-risk pool.

Evaluate the impact of a pre-existing condition that you have which may trigger the need for HIPAA’s limited protections.  Traditionally, many employer-sponsored group health plans and health insurance issuers in both group and individual markets have limited or denied coverage of health conditions in exclusions known as pre-existing condition exclusions.

Determine how much, if any, creditable coverage you have.  Under HIPAA’s group market rules, creditable coverage can be used to reduce or eliminate pre-existing condition exclusions that might be applied to you under a future plan or policy.

Understand the other HIPAA coverage protections you have.  You should obtain general information about special enrollment rights to other coverage, how your health status can affect your access to care, other coverage choices that may help you take advantage of HIPAA protections, and your rights to renew group and individual coverage.

Know where to go for more information if you have questions.

What HIPAA Does and Does Not Do

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) includes important, but limited, protections for millions of working Americans and their families. HIPAA may:

Increase your ability to get health coverage for yourself and your dependents if you start a new job;
Lower your chance of losing existing health care coverage, whether you have that coverage through a job, or through individual health insurance;
Help you maintain continuous health coverage for yourself and your dependents when you change jobs; and
Help you buy health insurance coverage on your own if you lose coverage under an employer's group health plan and have no other health coverage available.

Among its specific protections, HIPAA

Limits the use of pre-existing condition exclusions;
Prohibits group health plans from discriminating by denying you coverage or charging you extra for coverage based on your or your family members’ past or present poor health;
Guarantees certain small employers and certain individuals who lose job-related coverage the right to purchase health insurance; and
Guarantees, in most cases, that employers or individuals who purchase health insurance can renew the coverage regardless of any health conditions of individuals covered under the insurance policy.
In short, HIPAA may lower your chance of losing existing coverage, ease your ability to switch health plans and/or help you buy coverage on your own if you lose your employer's plan and have no other coverage available.

Misunderstandings About HIPAA

Although HIPAA helps protect you and your family in many ways, you should understand what it does NOT do.

HIPAA does NOT require employers to offer or pay for health coverage for employees or family coverage for their spouses and dependents;
HIPAA does NOT guarantee health coverage for all workers;
HIPAA does NOT control the amount an insurer may charge for coverage;
HIPAA does NOT require group health plans to offer specific benefits;
HIPAA does NOT permit people to keep the same health coverage they had in their old job when they move to a new job;
HIPAA does NOT eliminate all use of pre-existing condition exclusions; and
HIPAA does NOT replace the State as the primary regulator of health insurance.