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Date: February 13, 1997
FACT SHEET
Contact: HCFA Press Office, (202) 690-6145

OVERVIEW: In August 1996, President Clinton signed into law the Health Insurance Portability and Accountability Act (HIPAA). One part of this Act, referred to as Administrative Simplification, is aimed at reducing administrative costs and burdens in the health care industry. It requires the Department of Health and Human Services to adopt national uniform standards for the electronic transmission of certain health information.

HHS is working with both public and private organizations to develop the best standards possible. Although HIPAA does not mandate the collection or electronic transmission of any health information, it does require that adopted standards be used for any electronic transmission of specified transactions.

Background

About 26 cents of every health care dollar is spent on administrative overhead. Administrative overhead includes activities such as enrolling beneficiaries in a health plan, paying health insurance premiums, checking eligibility, obtaining authorization for specialist referrals and filing reimbursement claims. The adoption of uniform national standards for electronic processing of insurance claims and related transactions will improve information flow and help generate significant savings. The health care industry estimates that full implementation of these provisions could save as much as $9 billion per year on administrative overhead, while improving efficiency and enhancing the quality of health care services.

Scope of Administrative Simplification

HHS will adopt uniform national standards for the electronic transmission of the following types of health information:

• Health insurance enrollment and eligibility
• Health insurance claims and equivalent information for encounters in managed care settings
• Identification numbers for providers, health plans, employers, and individuals
• Health data codes and classification systems
• Security standards and safeguards

To ensure protection of privacy, the law provides for confidentiality protections for information processed in accordance with the new standards. HHS is also required to make detailed recommendations for health record privacy to Congress. If Congress does not enact such legislation, health care providers, health plans, and health care clearinghouses using the new standards will be required to follow confidentiality regulations established by HHS.

Standards Adoption Process

The HHS Data Council, the Department's internal advisory group on data policy, will guide the standards development and implementation process. Workgroups, comprised of representatives from throughout HHS and several other federal agencies, will be responsible for the research, development, and analysis of the standards. The National Committee on Vital and Health Statistics (NCVHS), the Department's external data policy advisory committee, will serve as the primary liaison with the public. To provide the opportunity for public input, the NCVHS has scheduled a series of public meetings and hearings. In addition, HHS staff will meet and consult with representatives of interested groups.

The general approach for adoption of standards includes the following steps:

• Identify existing standards that could be adopted
• Analyze existing standards, identify gaps and conflicts
• Develop recommendations for standards to be adopted
• Publish proposed rules outlining the standards in the Federal Register for 60 day public comment period
• Analyze comments and prepare and publish Final Rules
• Distribute standards and prepare and distribute implementation guides

Implementation Schedule

The statute requires HHS to adopt standards for health insurance transactions by February 1998. The health care industry then has 24 months to implement the standards. Small insurance plans (as defined by HHS) will have 36 months to implement the standards. Privacy protection standards will either be enacted by Congress or issued by HHS to accompany the implementation of the new standards.

Web Site Address

Additional information about the HHS standards adoption process, the workgroups and the progress of the Administrative Simplification effort will be made available on the HHS Data Council and NCVHS web pages at the following addresses: aspe.os.dhhs.gov/datacncl/ or aspe.os.dhhs.gov/ncvhs/