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Health Insurance Portability and Accountability Act

What is HIPAA?

President Clinton signed the Kassebaum-Kennedy Health Insurance Portability and Accountability Act (HIPAA)on August 21, 1996.

HIPAA is designed to expand health coverage by improving the portability and continuity of health insurance coverage in group and individual markets to:

  • combat waste in health care delivery,
  • promote the use of medical savings accounts,
  • improve access to long-term care services and coverage, and
  • simplify the administration of health insurance.

Within this context HIPAA includes a provision called Administrative Simplification, which is intended to improve the efficiency and effectiveness of the health care system by encouraging the development of standards for the electronic transmission, privacy and security of certain health information. Administrative Simplification is one of the Act's five titles and is a focus for governments across the nation.

The Administrative Simplification provision of Health Insurance Portability and Accountability Act of 1996 (HIPAA, Title II) requires the Federal Department of Health and Human Services to establish national standards for electronic health care transactions and national identifiers for providers, health plans and employers. The Act also addresses the security and privacy of health data. The long-term purpose of these standards is to improve the efficiency and effectiveness of the nation’s health care system by encouraging widespread use of standard electronic data interchanges in health care.

The intent of the law is that all electronic transactions with specified standards must be conducted according to the standards. These standards were reviewed through a process that included significant public and private sector input prior to publication in the Federal Register as Final Rules with legally binding implementation time frames.

Covered entities are required to accept transmissions in the standard format and must not delay a transaction or adversely affect an entity that wants to conduct standards transactions electronically. For HIPAA, Arizona Health Care Cost Containment System (AHCCCS) and DES Health Plans are covered entities.

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