The Health Insurance Portability and Accountability Act (HIPAA) is the most important data protection regulation for healthcare providers in the USA. It covers health insurers, clinics, hospitals, private practices, and developers of health apps, care settings, and pharmacies.
If you handle patient records, you need to be HIPAA-compliant. For your convenience, we have created a handy HIPAA compliance checklist for covered organizations. However, this blog looks at another critical HIPAA-related issue: the different types of violations and the penalties for breaching HIPAA rules.
Violations matter. Poor compliance causes customers to lose trust in your data protection policies. It's only a matter of time before patients move their business elsewhere. Regulators can also issue significant financial penalties or even jail offenders in the most extreme cases.
This makes protecting sensitive data a critical task for health companies and their partners. So let's explore the issue in-depth and explain everything you need to know about HIPAA violations.
What qualifies as a HIPAA Violation?
Before talking about HIPAA penalties, we need a clear understanding of what exactly constitutes a HIPAA violation. Fortunately, the legal definition of a violation is extremely clear.
HIPAA violations take place when either a covered entity (CE) or a business associate (BA) of a covered entity breach HIPAA Security, Private, or Breach Notification Rules.
HIPAA has three main rules. Here is a quick summary of what you need to know about them:
The HIPAA Privacy Rule sets out protections for private health data. CEs must keep data confidential and prevent unauthorized disclosure. They must also make health records available if patients desire.
The HIPAA Security Rule states that healthcare organizations must keep patient records secure. This includes physical, administrative, and electronic safeguards. You could see this rule as putting the privacy rule into practice.
The HIPAA Breach Notification Rule requires CEs to inform patients about any actual or potential data breaches. Notification must occur within 60 days of the breach.
Covered entities must become familiar with these rules when creating a compliance strategy. If you suffer a penalty, ignorance of HIPAA guidelines is not a valid defense. Covered entities must be aware of their responsibilities under the law.
Business associates, third parties your company uses also need to be part of compliance strategies. If partners can access your network assets, they could potentially cause a data breach.
Deliberate versus accidental violations
The first thing to note is that violating HIPAA can be deliberate or accidental. Covered entities need policies to cover both types of violations.
Deliberate breaches could include nurses passing the health records of a celebrity to media contacts or selling records on the Dark Web. But they also extend to simply sharing patient data without the consent of the individual concerned. In these cases, penalties tend to be severe.
Deliberate breaches also include offenses where organizations fail to act when they should do so. For instance, companies may refuse to issue breach notifications to customers within the required 60-day limit.
Company policies that clash with HIPAA rules are often deemed deliberate breaches if regulators decide that the covered entity knew about the issue and was able to remove the conflict.
Accidental breaches of HIPAA rules carry less severe penalties. They could include the absence of encryption on mobile devices or failure to train staff in cybersecurity practices.
For example, physicians could click on phishing links disguised as communications from pharmaceutical partners. There is probably no deliberate or malicious breach here. But the covered entity would be liable due to poor security training and policies.
Broadly speaking, if companies fail to take action to conform to HIPAA rules, this will qualify as a breach. That's why having a comprehensive HIPAA compliance strategy is essential.
Criminal versus civil violations
It's also important to understand the difference between criminal and civil HIPAA breaches.
Criminal cases are mounted by the Department of Justice and are much less common than civil penalties. They deal with deliberate violations and can lead to prison sentences for individuals at the organizations involved. Offenses leading to criminal charges include:
Wrongful disclosure of Protected Health Information (PHI)
Wrongful disclosure of PHI under false pretenses (e.g. seeking access to medical records of patients not under the care of a physician)
Wrongful disclosure of PHI under false pretenses with malicious intent (to sell or otherwise benefit from stealing PHI)
Most of the time, you or your staff won't risk criminal charges. Instead, the challenge is to minimize the risk of civil cases.
Civil cases may involve behavior that is deliberate, but not malicious. Instead, civil offenses tend to involve poor risk assessment processes or simply ignorance of what HIPAA requires.
In these cases, the OCR or Attorneys General will seek a financial penalty under the HIPAA enforcement rule. Civil violations are covered by four tiers, which we will look at in more detail below.
4 types of HIPAA violations
In most instances, the Office for Civil Rights (OCR) receives complaints and decides whether organizations have violated HIPAA regulations. When the OCR deliberates, its regulators use a four-tier system to categorize potential violations.
The four tiers differ in terms of severity, with rising financial penalties. They also differ in terms of culpability. In some cases, organizations are not aware of HIPAA violations. In others, breaches are wilful and systematic.
The size of the financial penalty is related to various factors. Regulators consider:
How long the violation has existed
How many individuals are affected
The value and amount of the data at risk
Whether the organization willingly collaborates with OCR
Whether the organization has a clean regulatory history
Tier 1 – Accidental violation
At this tier, organizations are not aware of HIPAA breaches. The organization also had no way to avoid the violation, even with complete adherence to HIPAA regulations. At this level, covered entities must show evidence of compliance. This proves that the breach could not be avoided.
Highest penalty: $100 per incident, with a limit of $50,000
Tier 2 – Aware of violation, but no remediation possible
At tier 2, organizations know about HIPAA violations before OCR is informed. In this category, staff should have been aware of the fault. But the organization could not avoid violating HIPAA rules, even while administering adequate levels of care. This level falls short of the definition of “wilful neglect.”
Highest penalty: $1,000 per incident, with a limit of $100,000
Tier 3 – Wilful neglect with remediation
At tier 3, organizations commit “wilful neglect”. This means they were aware of the violation. the covered entity could have taken action to remedy the breach but failed to do so. However, there is a caveat here. Tier 3 penalties are lower because the organization involved has taken action to remediate the issue.
Highest penalty: $10,000 per incident, with a limit of $250,000
Tier 4 – Wilful neglect without remediation
At tier 4, organizations are also guilty of “wilful neglect”. The violation was known and the organization failed to take remedial action. Breaches in this category could continue for months or years, with serious consequences for patient welfare and data protection. For these reasons, Tier 4 penalties are far higher than other categories.
Highest penalty: $50,000 per incident, with a limit of $1.5 million
The consequences of a HIPAA violation
According to US law, if a covered entity breaks the HIPAA regulations, it may face a penalty of up to $50,000 and up to one-year imprisonment. The actual consequences depend on the type and severity of the HIPAA violation, and whether they were committed by a healthcare employee or an employer, i.e., covered entities.
There are two types of violations: civil and criminal. Each category has tiers to determine penalties for a specific breach.
Civil HIPAA penalties
HIPAA violations committed without malicious intent fall into the category of civil penalties. What’s the most common reason for these violations? Most of the time, it’s because healthcare employees or covered entities don’t know the HIPAA Privacy Rule. Yet, unawareness or negligence of HIPAA standards is not an excuse for escaping a penalty.
Criminal HIPAA penalties
Intentional HIPAA violations, such as disclosing or selling personal health information, are a crime. The criminal penalties for these violations can be severe and restitution may be also paid to the victims. A covered entity that committed a HIPAA violation must settle it with OCR and state attorneys general.
The height of the criminal penalties depends on the following factors:
the seriousness of HIPAA violations
the length of time that the violation has been taking place
the number of violations identified.
Who issues penalties?
HIPAA is a Federal regulation. So you might assume that penalties are issued exclusively by the Federal Government. However, the actual situation is more complex. Covered entities should be familiar with all regulatory bodies in their specific business sector.
The Office for Civil Rights (OCR)
To start with, the Office for Civil Rights processes most HIPAA violations and issues penalties. OCR is part of the Department of Health and Human Services (HHS), and it has a general bias towards negotiation instead of penalizing organizations.
As a rule, before mandating penalties, OCR will issue technical assistance and monitor voluntary compliance agreements with covered entities. However, if breaches persist, OCR will launch civil cases to demand HIPAA violation penalties. This is particularly likely if covered entities have a previous history of repeat violations.
OCR has the power to launch civil proceedings. But it can also pass HIPAA cases to the Department of Justice (DOJ) to handle criminal violations. So a violation at the federal level can lead to jail time alongside large financial penalties.
State-level Attorneys General
HIPAA penalties may also be issued at a state level by Attorneys General. Attorneys General can use powers granted by the 2009 HITECH Act to launch lawsuits against organizations breaching HIPAA rules. These suits are civil cases, so they do not lead to prison sentences. But they can result in large financial penalties.
Additionally, HIPAA violations can stretch across state boundaries. In these situations, covered entities may face lawsuits from numerous Attorneys General. This multiplies the financial cost of non-compliance.
Proactive organizations may also create policies to penalize staff members when they violate HIPAA regulations. This could be developed autonomously, or in collaboration with the Office for Civil Rights as part of compliance strategies.
Internal penalties tend to range in severity and seek to deter unsafe behavior when handling patient data. They are an important data security measure, especially when deployed with mandatory security training.
How can NordLayer solutions mitigate HIPAA risks?
Violating HIPAA suggests that your data protection measures are below the standard needed in today's digital marketplace. That’s why organizations need modern security solutions that easily adapt to the complexities of today’s hybrid working environments and HIPAA rules. All locations, users, devices, apps, and data must have the same advanced level of protection.
With NordLayer's solutions, you can secure access to sensitive information, prevents reputational, legal, and financial damage, and helps achieve HIPAA compliance. Whatever area of healthcare you work in, NordLayer is ready to help you succeed.