The Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Pharmacy Benefit: Implications for Health Plans, PBMs, and Providers

OBJECTIVES: To summarize and analyze the key provisions of the Health Insurance Portability and Accountability Act (HIPAA) and the impact on pharmacies, health plans, pharmacy benefit managers, and others involved in the delivery of pharmacy services and managed pharmacy benefits. BACKGROUND: HIPAA was enacted by Congress in 1996 with the goals of administrative simplification in the health care system as well as protecting the privacy of individuals. HIPAA imposes new standards for health care transactions and patient privacy and defines new patient rights regarding their health care information. Transaction standards took effect October 16, 2002, while the privacy standards have a compliance date of April 14, 2003. Regulations, or standards, will apply to health plans, pharmacies, and other health care providers and other businesses involved in the delivery of health care services. Failure to comply will be punishable under the law. The U.S. Department of Health and Human Services estimated the 10-year cost of compliance to be $17.6 billion. CONCLUSIONS: HIPAAs new requirements will demand significant effort and expense for systems and business process development. Businesses from the smallest independent pharmacy to the largest health plans must be compliant by the deadlines imposed by HIPAA.