Privacy Legislation Could Have a Negative Impact on W/C Insurers

broad coalition of insurance and employer trade associations and companies recently filed comments with the U.S. Department of Health and Human Services on proposed medical records privacy regulations. Insurers argue the proposed regulation needs clarification to ensure the ability of workers’ comp insurers to process claims in a timely manner.

Congress missed a self-imposed August 1999 deadline to enact medical records confidentiality legislation. As a result, the Secretary of Health and Human Services (HHS) was directed, under provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), to promulgate these regulations.

“In our view, what Congress was intending in passing the HIPAA legislation was that the federal government would defer to the states on the issue of how to deal with the medical privacy issues in the context of workers’ compensation and other p/c lines, like automobile,” said Keith Bateman, vice president and director of workers’ compensation and health for the Alliance.

The Alliance, a national trade association representing 318 p/c companies, was one of the many groups involved in submitting comments. According to Bateman, the Alliance’s main concern is that the standards may have a negative impact upon workers’ compensation.

In his testimony, Bateman stressed the need to clarify several broad definitions contained in the proposed regulation. “It’s not clear what they mean,” he said. “For example, they take a very broad view of electronic transmission and electronic records.”

Bateman also noted that a number of other aspects of the proposed standards failed to reflect the claims management needs of insurers, and could actually encourage insurance fraud.

Last year, the American Insurance Association (AIA), a national trade association of more than 380 p/c companies that write a major share of all property and casualty insurance throughout the U.S., including auto, homeowners, workers’ comp and other liability insurance, formed a broad-based industry group to address federal medical records confidentiality regulations.

The preamble to the HHS proposed regulations clearly states that p/c lines, including workers’ comp and auto insurance, are not “covered entities” under the proposed regulations. In addition, HHS acknowledges the vast differences between medical services authorized by certain p/c lines and those actually provided by health insurers, which are covered entities under the regulations.

The key issue, according to Bruce Wood, AIA assistant general counsel, is whetherÐand to the extentÐthe regulations permit non-covered entities (i.e., property and casualty insurers) to obtain information from covered entities.

“P/C is not a covered entityÐa policy we strongly supportÐbut if our companies are unable to obtain information from covered entities [providers] to carry out their insurance functions, including managing disability under workers’ comp laws, they are effectively covered by the rule,” Wood said. “And that would be highly objectionable for the reasons set out in the comments.”

In his comments, Wood stresses the fact that AIA members have a “vital stake in meeting their obligations under state insurance laws and their contractual obligations to their policyholders. Medical privacy regulations, if not well tailored to protect exchanges of information necessary to carrying out legitimate insurance functions, will disrupt the operations of property and casualty insurers and, in particular, state workers’ compensation systems, at great cost to the employers.”

The National Council on Compensation Insurance Inc. (NCCI) joined with the coalition of industry representatives in submitting comments to the HHS. The comments seek clarifications in the rule to ensure that p/c benefit providers can collect the information necessary to process claims and manage disability under state workers’ comp laws.

“Although the provisions as they apply now do not directly apply to workers’ comp, we are concerned through indirect means that they could put some burdensome restrictions on workers’ comp insurers,” said Peter Burton, senior division executive of state relations and national public policy development for NCCI. “We’re concerned that if interpreted in such a way, it could impair the ability to do experience rating, which is so ingrained in workers’ compensation safety. It could also impair in collection of benefit information to allow for the prompt processing of claims and managing of the injured worker’s disability.”

According to the California Workers’ Compensation Institute (CWCI), the trend toward open access could destroy privacy protections and allow individually identifiable claims data to be sold to anyone upon request, leading to possible lawsuits against insurance entities by claimants for violating their privacy.

The National Association of Mutual Insurance Companies (NAMIC) believes that a balance must be struck between protecting personal information and recognizing legitimate business needs and contractual obligations of insurers.

NAMIC’s Federal Key Issues Brochure states that: “In the area of health care privacy, property/casualty insurers need to be able to access and disclose certain information in order to promptly resolve claims and protect against fraud. It is essential for insurers to have information regarding the validity of claims to facilitate benefit payments.” In his closing comments, AIA’s Wood stated: “We are encouraged by the efforts made by HHS to recognize the unique needs of property and casualty benefit providers. The clarifications we have submitted will ensure HHS’ intent to permit the disclosure of information necessary for carrying out insurance functions and meeting obligations under state law to serve our policyholders.”

All in all, more than 40 organizations and companies joined to submit comment to HHS. The comment period, originally set to end on Jan. 3, 2000, was extended to Feb. 17. Meanwhile, the deadline of Feb. 21 for HHS to issue its final standard came and went without a decision.

“In this case, I think you’re talking about 40,000 letters and 10,000 electronic communications, so it’s going to take them a considerable period of time,” the Alliance’s Bateman said. “Simply because of the sheer volume that they have to deal with…it will take them months to wade through everything.”

Topics Carriers Legislation Claims Workers' Compensation Property Property Casualty Casualty