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      <H6><A =
href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#Subtitle">[TABLE OF=20
      CONTENTS]</A></H6></TD>
    <TD>
      <H6><A=20
    =
href=3D"http://aspe.hhs.gov/admnsimp/H3103SUM.HTM">[SUMMARY]</A></H6></TD=
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<DIV id=3Dskip><A =
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Main Content</A></DIV>
<H1 align=3Dcenter>PUBLIC LAW 104-191</H1>
<H2 align=3Dcenter>AUG. 21, 1996</H2>
<H2 align=3Dcenter>HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT =
OF=20
1996</H2>
<P><B>Public Law 104-191<BR>104th Congress</B></P>
<H2 align=3Dcenter>An Act</H2>
<P>To amend the Internal Revenue Code of 1986 to improve portability and =

continuity of health insurance coverage in the group and individual =
markets, to=20
combat waste, fraud, and abuse in health insurance and health care =
delivery, to=20
promote the use of medical savings accounts, to improve access to =
long-term care=20
services and coverage, to simplify the administration of health =
insurance, and=20
for other purposes.</P>
<P>Be it enacted by the Senate and House of Representatives of the =
United States=20
of America in Congress assembled,</P>
<H4>SECTION 1. SHORT TITLE; TABLE OF CONTENTS.</H4>
<P>(a) <STRONG>SHORT TITLE.</STRONG>--This Act may be cited as the =
"Health=20
Insurance Portability and Accountability Act of 1996".</P>
<P>(b) <STRONG>TABLE OF CONTENTS.</STRONG>--The table of contents of =
this Act is=20
as follows:</P>
<P>Sec. 1. Short title; table of contents.</P>
<P><STRONG>TITLE I--HEALTH CARE ACCESS, PORTABILITY, AND=20
RENEWABIL</STRONG>ITY</P>
<P><STRONG>...</STRONG></P>
<P><STRONG>TITLE II--PREVENTING HEALTH CARE FRAUD AND ABUSE; =
ADMINISTRATIVE=20
SIMPLIFICATION; MEDICAL LIABILITY REFORM</STRONG></P>
<P><STRONG>...</STRONG></P>
<P align=3Dcenter><B><A name=3DSubtitle>Subtitle F</A>--Administrative=20
Simplification</B></P>
<DIV id=3Dskip><A =
href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#_main">Skip to=20
Main Content</A></DIV>
<MENU compact>
  <LI><A href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#261">Sec. =
261. Purpose.=20
  </A>
  <LI><A href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#262">Sec. =
262.=20
  Administrative simplification.</A> </LI></MENU>
<P align=3Dcenter><B>"Part C--Administrative Simplification</B></P>
<DIV id=3Dskip><A =
href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#_main">Skip to=20
Main Content</A></DIV>
<MENU compact>
  <LI><A href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#1171">"Sec. =
1171.=20
  Definitions.</A>=20
  <LI><A href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#1172">"Sec. =
1172.=20
  General requirements for adoption of standards.</A>=20
  <LI><A href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#1173">"Sec. =
1173.=20
  Standards for information transactions and data elements.</A>=20
  <LI><A href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#1174">"Sec. =
1174.=20
  Timetables for adoption of standards.</A>=20
  <LI><A href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#1175">"Sec. =
1175.=20
  Requirements.</A>=20
  <LI><A href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#1176">"Sec. =
1176.=20
  General penalty for failure to comply with requirements and =
standards.</A>=20
  <LI><A href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#1177">"Sec. =
1177.=20
  Wrongful disclosure of individually identifiable health =
information.</A>=20
  <LI><A href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#1178">"Sec. =
1178.=20
  Effect on State law.</A>=20
  <LI><A href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#1179">"Sec. =
1179.=20
  Processing payment transactions.".</A> </LI></MENU>
<P><A href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#263">Sec. 263. =
Changes in=20
membership and duties of National Committee on Vital and Health =
Statistics.=20
</A></P>
<P><A href=3D"http://aspe.hhs.gov/admnsimp/pl104191.htm#264">Sec. 264.=20
Recommendations with respect to privacy of certain health information. =
</A></P>
<P><STRONG>...</STRONG></P>
<P>
<HR>
<A name=3D_main></A>
<P></P>
<H3 align=3Dcenter>Subtitle F--Administrative Simplification</H3>
<H4>SEC. <A name=3D261>261</A>. PURPOSE.</H4>
<P>It is the purpose of this subtitle to improve the Medicare program =
under=20
title XVIII of the Social Security Act, the medicaid program under title =
XIX of=20
such Act, and the efficiency and effectiveness of the health care =
system, by=20
encouraging the development of a health information system through the=20
establishment of standards and requirements for the electronic =
transmission of=20
certain health information.</P>
<H4>SEC. <A name=3D262>262</A>. ADMINISTRATIVE SIMPLIFICATION.</H4>
<P>(a) IN GENERAL.--Title XI (42 U.S.C. 1301 et seq.) is amended by =
adding at=20
the end the following:</P>
<P align=3Dcenter><A name=3D1171>"PART C</A>--ADMINISTRATIVE =
SIMPLIFICATION</P>
<P align=3Dcenter>"DEFINITIONS</P>
<P>"<B>SEC. 1171</B>. For purposes of this part:</P>
<P>"(1) CODE SET.--The term 'code set' means any set of codes used for =
encoding=20
data elements, such as tables of terms, medical concepts, medical =
diagnostic=20
codes, or medical procedure codes.</P>
<P>"(2) HEALTH CARE CLEARINGHOUSE.--The term 'health care clearinghouse' =
means a=20
public or private entity that processes or facilitates the processing of =

nonstandard data elements of health information into standard data =
elements.</P>
<P>"(3) HEALTH CARE PROVIDER.--The term 'health care provider' includes =
a=20
provider of services (as defined in section 1861(u)), a provider of =
medical or=20
other health services (as defined in section 1861(s)), and any other =
person=20
furnishing health care services or supplies.</P>
<P>"(4) HEALTH INFORMATION.--The term 'health information' means any=20
information, whether oral or recorded in any form or medium, that--</P>
<P>"(A) is created or received by a health care provider, health plan, =
public=20
health authority, employer, life insurer, school or university, or =
health care=20
clearinghouse; and</P>
<P>"(B) relates to the past, present, or future physical or mental =
health or=20
condition of an individual, the provision of health care to an =
individual, or=20
the past, present, or future payment for the provision of health care to =
an=20
individual.</P>
<P>"(5) HEALTH PLAN.--The term 'health plan' means an individual or =
group plan=20
that provides, or pays the cost of, medical care (as such term is =
defined in=20
section 2791 of the Public Health Service Act). Such term includes the=20
following, and any combination thereof:</P>
<P>"(A) A group health plan (as defined in section 2791(a) of the Public =
Health=20
Service Act), but only if the plan--</P>
<P>"(i) has 50 or more participants (as defined in section 3(7) of the =
Employee=20
Retirement Income Security Act of 1974); or</P>
<P>"(ii) is administered by an entity other than the employer who =
established=20
and maintains the plan.</P>
<P>"(B) A health insurance issuer (as defined in section 2791(b) of the =
Public=20
Health Service Act).</P>
<P>"(C) A health maintenance organization (as defined in section 2791(b) =
of the=20
Public Health Service Act).</P>
<P>"(D) Part A or part B of the Medicare program under title XVIII.</P>
<P>"(E) The medicaid program under title XIX.</P>
<P>"(F) A Medicare supplemental policy (as defined in section =
1882(g)(1)).</P>
<P>"(G) A long-term care policy, including a nursing home fixed =
indemnity policy=20
(unless the Secretary determines that such a policy does not provide=20
sufficiently comprehensive coverage of a benefit so that the policy =
should be=20
treated as a health plan).</P>
<P>"(H) An employee welfare benefit plan or any other arrangement which =
is=20
established or maintained for the purpose of offering or providing =
health=20
benefits to the employees of 2 or more employers.</P>
<P>"(I) The health care program for active military personnel under =
title 10,=20
United States Code.</P>
<P>"(J) The veterans health care program under chapter 17 of title 38, =
United=20
States Code.</P>
<P>"(K) The Civilian Health and Medical Program of the Uniformed =
Services=20
(CHAMPUS), as defined in section 1072(4) of title 10, United States =
Code.</P>
<P>"(L) The Indian health service program under the Indian Health Care=20
Improvement Act (25 U.S.C. 1601 et seq.).</P>
<P>"(M) The Federal Employees Health Benefit Plan under chapter 89 of =
title 5,=20
United States Code.</P>
<P>"(6) INDIVIDUALLY IDENTIFIABLE HEALTH INFORMATION.--The term =
'individually=20
identifiable health information' means any information, including =
demographic=20
information collected from an individual, that--</P>
<P>"(A) is created or received by a health care provider, health plan, =
employer,=20
or health care clearinghouse; and</P>
<P>"(B) relates to the past, present, or future physical or mental =
health or=20
condition of an individual, the provision of health care to an =
individual, or=20
the past, present, or future payment for the provision of health care to =
an=20
individual, and--</P>
<P>"(i) identifies the individual; or</P>
<P>"(ii) with respect to which there is a reasonable basis to believe =
that the=20
information can be used to identify the individual.</P>
<P>"(7) STANDARD.--The term 'standard', when used with reference to a =
data=20
element of health information or a transaction referred to in section=20
1173(a)(1), means any such data element or transaction that meets each =
of the=20
standards and implementation specifications adopted or established by =
the=20
Secretary with respect to the data element or transaction under sections =
1172=20
through 1174.</P>
<P>"(8) STANDARD SETTING ORGANIZATION.--The term 'standard setting =
organization'=20
means a standard setting organization accredited by the American =
National=20
Standards Institute, including the National Council for Prescription =
Drug=20
Programs, that develops standards for information transactions, data =
elements,=20
or any other standard that is necessary to, or will facilitate, the=20
implementation of this part.</P>
<P align=3Dcenter><A name=3D1172>"GENERAL REQUIREMENTS FOR ADOPTION OF=20
STANDARDS</A></P>
<P>"<B>SEC. 1172.</B> (a) APPLICABILITY.--Any standard adopted under =
this part=20
shall apply, in whole or in part, to the following persons:</P>
<P>"(1) A health plan.</P>
<P>"(2) A health care clearinghouse.</P>
<P>"(3) A health care provider who transmits any health information in=20
electronic form in connection with a transaction referred to in section=20
1173(a)(1).</P>
<P>"(b) REDUCTION OF COSTS.--Any standard adopted under this part shall =
be=20
consistent with the objective of reducing the administrative costs of =
providing=20
and paying for health care.</P>
<P>"(c) ROLE OF STANDARD SETTING ORGANIZATIONS.--</P>
<P>"(1) IN GENERAL.--Except as provided in paragraph (2), any standard =
adopted=20
under this part shall be a standard that has been developed, adopted, or =

modified by a standard setting organization.</P>
<P>"(2) SPECIAL RULES.--</P>
<P>"(A) DIFFERENT STANDARDS.--The Secretary may adopt a standard that is =

different from any standard developed, adopted, or modified by a =
standard=20
setting organization, if--</P>
<P>"(i) the different standard will substantially reduce administrative =
costs to=20
health care providers and health plans compared to the alternatives; =
and</P>
<P>"(ii) the standard is promulgated in accordance with the rulemaking=20
procedures of subchapter III of chapter 5 of title 5, United States =
Code.</P>
<P>"(B) NO STANDARD BY STANDARD SETTING ORGANIZATION.--If no standard =
setting=20
organization has developed, adopted, or modified any standard relating =
to a=20
standard that the Secretary is authorized or required to adopt under =
this=20
part--</P>
<P>"(i) paragraph (1) shall not apply; and</P>
<P>"(ii) subsection (f) shall apply.</P>
<P>(3) CONSULTATION REQUIREMENT.--</P>
<P>"(A) IN GENERAL.--A standard may not be adopted under this part =
unless--</P>
<P>"(i) in the case of a standard that has been developed, adopted, or =
modified=20
by a standard setting organization, the organization consulted with each =
of the=20
organizations described in subparagraph (B) in the course of such =
development,=20
adoption, or modification; and</P>
<P>"(ii) in the case of any other standard, the Secretary, in complying =
with the=20
requirements of subsection (f), consulted with each of the organizations =

described in subparagraph (B) before adopting the standard.</P>
<P>"(B) ORGANIZATIONS DESCRIBED.--The organizations referred to in =
subparagraph=20
(A) are the following:</P>
<P>"(i) The National Uniform Billing Committee.</P>
<P>"(ii) The National Uniform Claim Committee.</P>
<P>"(iii) The Workgroup for Electronic Data Interchange.</P>
<P>"(iv) The American Dental Association.</P>
<P>"(d) IMPLEMENTATION SPECIFICATIONS.--The Secretary shall =
establish</P>
<P>specifications for implementing each of the standards adopted under =
this</P>
<P>part.</P>
<P>"(e) PROTECTION OF TRADE SECRETS.--Except as otherwise required by =
law, a=20
standard adopted under this part shall not require disclosure of trade =
secrets=20
or confidential commercial information by a person required to comply =
with this=20
part.</P>
<P>"(f) ASSISTANCE TO THE SECRETARY.--In complying with the requirements =
of this=20
part, the Secretary shall rely on the recommendations of the National =
Committee=20
on Vital and Health Statistics established under section 306(k) of the =
Public=20
Health Service Act (42 U.S.C. 242k(k)), and shall consult with =
appropriate=20
Federal and State agencies and private organizations. The Secretary =
shall=20
publish in the Federal Register any recommendation of the National =
Committee on=20
Vital and Health Statistics regarding the adoption of a standard under =
this=20
part.</P>
<P>(g) APPLICATION TO MODIFICATIONS OF STANDARDS.--This section shall =
apply to a=20
modification to a standard (including an addition to a standard) adopted =
under=20
section 1174(b) in the same manner as it applies to an initial standard =
adopted=20
under section 1174(a).</P>
<P align=3Dcenter><A name=3D1173>"STANDARDS FOR INFORMATION TRANSACTIONS =
AND DATA=20
ELEMENTS</A></P>
<P>"<B>SEC. 1173.</B> (a) STANDARDS TO ENABLE ELECTRONIC EXCHANGE.--</P>
<P>"(1) IN GENERAL.--The Secretary shall adopt standards for =
transactions, and=20
data elements for such transactions, to enable health information to be=20
exchanged electronically, that are appropriate for--</P>
<P>"(A) the financial and administrative transactions described in =
paragraph=20
(2); and</P>
<P>"(B) other financial and administrative transactions determined =
appropriate=20
by the Secretary, consistent with the goals of improving the operation =
of the=20
health care system and reducing administrative costs.</P>
<P>"(2) TRANSACTIONS.--The transactions referred to in paragraph (1)(A) =
are=20
transactions with respect to the following:</P>
<P>"(A) Health claims or equivalent encounter information.</P>
<P>"(B) Health claims attachments.</P>
<P>"(C) Enrollment and disenrollment in a health plan.</P>
<P>"(D) Eligibility for a health plan.</P>
<P>"(E) Health care payment and remittance advice.</P>
<P>"(F) Health plan premium payments.</P>
<P>"(G) First report of injury.</P>
<P>"(H) Health claim status.</P>
<P>"(I) Referral certification and authorization.</P>
<P>"(3) ACCOMMODATION OF SPECIFIC PROVIDERS.--The standards adopted by =
the=20
Secretary under paragraph (1) shall accommodate the needs of different =
types of=20
health care providers.</P>
<P>(b) UNIQUE HEALTH IDENTIFIERS.--</P>
<P>"(1) IN GENERAL.--The Secretary shall adopt standards providing for a =

standard unique health identifier for each individual, employer, health =
plan,=20
and health care provider for use in the health care system. In carrying =
out the=20
preceding sentence for each health plan and health care provider, the =
Secretary=20
shall take into account multiple uses for identifiers and multiple =
locations and=20
specialty classifications for health care providers.</P>
<P>"(2) USE OF IDENTIFIERS.--The standards adopted under paragraph (1) =
shall=20
specify the purposes for which a unique health identifier may be =
used.</P>
<P>(c) CODE SETS.--</P>
<P>"(1) IN GENERAL.--The Secretary shall adopt standards that--</P>
<P>"(A) select code sets for appropriate data elements for the =
transactions=20
referred to in subsection (a)(1) from among the code sets that have been =

developed by private and public entities; or</P>
<P>"(B) establish code sets for such data elements if no code sets for =
the data=20
elements have been developed.</P>
<P>"(2) DISTRIBUTION.--The Secretary shall establish efficient and =
low-cost=20
procedures for distribution (including electronic distribution) of code =
sets and=20
modifications made to such code sets under section 1174(b).</P>
<P>(d) SECURITY STANDARDS FOR HEALTH INFORMATION.--</P>
<P>"(1) SECURITY STANDARDS.--The Secretary shall adopt security =
standards=20
that--</P>
<P>"(A) take into account--</P>
<P>"(i) the technical capabilities of record systems used to maintain =
health=20
information;</P>
<P>"(ii) the costs of security measures;</P>
<P>"(iii) the need for training persons who have access to health=20
information;</P>
<P>"(iv) the value of audit trails in computerized record systems; =
and</P>
<P>"(v) the needs and capabilities of small health care providers and =
rural=20
health care providers (as such providers are defined by the Secretary); =
and</P>
<P>"(B) ensure that a health care clearinghouse, if it is part of a =
larger=20
organization, has policies and security procedures which isolate the =
activities=20
of the health care clearinghouse with respect to processing information =
in a=20
manner that prevents unauthorized access to such information by such =
larger=20
organization.</P>
<P>"(2) SAFEGUARDS.--Each person described in section 1172(a) who =
maintains or=20
transmits health information shall maintain reasonable and appropriate=20
administrative, technical, and physical safeguards--</P>
<P>"(A) to ensure the integrity and confidentiality of the =
information;</P>
<P>"(B) to protect against any reasonably anticipated--</P>
<P>"(i) threats or hazards to the security or integrity of the =
information;=20
and</P>
<P>"(ii) unauthorized uses or disclosures of the information; and</P>
<P>"(C) otherwise to ensure compliance with this part by the officers =
and=20
employees of such person.</P>
<P>(e) ELECTRONIC SIGNATURE.--</P>
<P>"(1) STANDARDS.--The Secretary, in coordination with the Secretary of =

Commerce, shall adopt standards specifying procedures for the electronic =

transmission and authentication of signatures with respect to the =
transactions=20
referred to in subsection (a)(1).</P>
<P>"(2) EFFECT OF COMPLIANCE.--Compliance with the standards adopted =
under=20
paragraph (1) shall be deemed to satisfy Federal and State statutory=20
requirements for written signatures with respect to the transactions =
referred to=20
in subsection (a)(1).</P>
<P>(f) TRANSFER OF INFORMATION AMONG HEALTH PLANS.--The Secretary shall =
adopt=20
standards for transferring among health plans appropriate standard data =
elements=20
needed for the coordination of benefits, the sequential processing of =
claims,=20
and other data elements for individuals who have more than one health =
plan.</P>
<P align=3Dcenter><A name=3D1174>"TIMETABLES FOR ADOPTION OF =
STANDARDS</A></P>
<P>"<B>SEC. 1174.</B> (a) INITIAL STANDARDS.--The Secretary shall carry =
out=20
section 1173 not later than 18 months after the date of the enactment of =
the=20
Health Insurance Portability and Accountability Act of 1996, except that =

standards relating to claims attachments shall be adopted not later than =
30=20
months after such date.</P>
<P>"(b) ADDITIONS AND MODIFICATIONS TO STANDARDS.--</P>
<P>"(1) IN GENERAL.--Except as provided in paragraph (2), the Secretary =
shall=20
review the standards adopted under section 1173, and shall adopt =
modifications=20
to the standards (including additions to the standards), as determined=20
appropriate, but not more frequently than once every 12 months. Any =
addition or=20
modification to a standard shall be completed in a manner which =
minimizes the=20
disruption and cost of compliance.</P>
<P>"(2) SPECIAL RULES.--</P>
<P>"(A) FIRST 12-MONTH PERIOD.--Except with respect to additions and=20
modifications to code sets under subparagraph (B), the Secretary may not =
adopt=20
any modification to a standard adopted under this part during the =
12-month=20
period beginning on the date the standard is initially adopted, unless =
the=20
Secretary determines that the modification is necessary in order to =
permit=20
compliance with the standard.</P>
<P>"(B) ADDITIONS AND MODIFICATIONS TO CODE SETS.--</P>
<P>"(i) IN GENERAL.--The Secretary shall ensure that procedures exist =
for the=20
routine maintenance, testing, enhancement, and expansion of code =
sets.</P>
<P>"(ii) Additional rules.--If a code set is modified under this =
subsection, the=20
modified code set shall include instructions on how data elements of =
health=20
information that were encoded prior to the modification may be converted =
or=20
translated so as to preserve the informational value of the data =
elements that=20
existed before the modification. Any modification to a code set under =
this=20
subsection shall be implemented in a manner that minimizes the =
disruption and=20
cost of complying with such modification.</P>
<P align=3Dcenter><A name=3D1175>"REQUIREMENTS</A></P>
<P>"<B>SEC. 1175.</B> (a) CONDUCT OF TRANSACTIONS BY PLANS.--</P>
<P>"(1) IN GENERAL.--If a person desires to conduct a transaction =
referred to in=20
section 1173(a)(1) with a health plan as a standard transaction--</P>
<P>"(A) the health plan may not refuse to conduct such transaction as a =
standard=20
transaction;</P>
<P>"(B) the insurance plan may not delay such transaction, or otherwise=20
adversely affect, or attempt to adversely affect, the person or the =
transaction=20
on the ground that the transaction is a standard transaction; and</P>
<P>"(C) the information transmitted and received in connection with the=20
transaction shall be in the form of standard data elements of health=20
information.</P>
<P>"(2) SATISFACTION OF REQUIREMENTS.--A health plan may satisfy the=20
requirements under paragraph (1) by--</P>
<P>"(A) directly transmitting and receiving standard data elements of =
health=20
information; or</P>
<P>"(B) submitting nonstandard data elements to a health care =
clearinghouse for=20
processing into standard data elements and transmission by the health =
care=20
clearinghouse, and receiving standard data elements through the health =
care=20
clearinghouse.</P>
<P>"(3) TIMETABLE FOR COMPLIANCE.--Paragraph (1) shall not be construed =
to=20
require a health plan to comply with any standard, implementation =
specification,=20
or modification to a standard or specification adopted or established by =
the=20
Secretary under sections 1172 through 1174 at any time prior to the date =
on=20
which the plan is required to comply with the standard or specification =
under=20
subsection (b).</P>
<P>"(b) COMPLIANCE WITH STANDARDS.--</P>
<P>"(1) INITIAL COMPLIANCE.--</P>
<P>"(A) IN GENERAL.--Not later than 24 months after the date on which an =
initial=20
standard or implementation specification is adopted or established under =

sections 1172 and 1173, each person to whom the standard or =
implementation=20
specification applies shall comply with the standard or =
specification.</P>
<P>"(B) SPECIAL RULE FOR SMALL HEALTH PLANS.--In the case of a small =
health=20
plan, paragraph (1) shall be applied by substituting '36 months' for '24 =

months'. For purposes of this subsection, the Secretary shall determine =
the=20
plans that qualify as small health plans.</P>
<P>"(2) COMPLIANCE WITH MODIFIED STANDARDS.--If the Secretary adopts a=20
modification to a standard or implementation specification under this =
part, each=20
person to whom the standard or implementation specification applies =
shall comply=20
with the modified standard or implementation specification at such time =
as the=20
Secretary determines appropriate, taking into account the time needed to =
comply=20
due to the nature and extent of the modification. The time determined=20
appropriate under the preceding sentence may not be earlier than the =
last day of=20
the 180-day period beginning on the date such modification is adopted. =
The=20
Secretary may extend the time for compliance for small health plans, if =
the=20
Secretary determines that such extension is appropriate.</P>
<P>"(3) CONSTRUCTION.--Nothing in this subsection shall be construed to =
prohibit=20
any person from complying with a standard or specification by--</P>
<P>"(A) submitting nonstandard data elements to a health care =
clearinghouse for=20
processing into standard data elements and transmission by the health =
care=20
clearinghouse; or</P>
<P>"(B) receiving standard data elements through a health care=20
clearinghouse.</P>
<P align=3Dcenter><A name=3D1176>"GENERAL PENALTY FOR FAILURE TO COMPLY =
WITH=20
REQUIREMENTS AND STANDARDS</A></P>
<P>"<B>SEC. 1176.</B> (a) GENERAL PENALTY.--</P>
<P>"(1) IN GENERAL.--Except as provided in subsection (b), the Secretary =
shall=20
impose on any person who violates a provision of this part a penalty of =
not more=20
than $100 for each such violation, except that the total amount imposed =
on the=20
person for all violations of an identical requirement or prohibition =
during a=20
calendar year may not exceed $25,000.</P>
<P>"(2) PROCEDURES.--The provisions of section 1128A (other than =
subsections (a)=20
and (b) and the second sentence of subsection (f)) shall apply to the =
imposition=20
of a civil money penalty under this subsection in the same manner as =
such=20
provisions apply to the imposition of a penalty under such section =
1128A.</P>
<P>"(b) LIMITATIONS.--</P>
<P>"(1) OFFENSES OTHERWISE PUNISHABLE.--A penalty may not be imposed =
under=20
subsection (a) with respect to an act if the act constitutes an offense=20
punishable under section 1177.</P>
<P>"(2) NONCOMPLIANCE NOT DISCOVERED.--A penalty may not be imposed =
under=20
subsection (a) with respect to a provision of this part if it is =
established to=20
the satisfaction of the Secretary that the person liable for the penalty =
did not=20
know, and by exercising reasonable diligence would not have known, that =
such=20
person violated the provision.</P>
<P>"(3) FAILURES DUE TO REASONABLE CAUSE.--</P>
<P>"(A) IN GENERAL.--Except as provided in subparagraph (B), a penalty =
may not=20
be imposed under subsection (a) if--</P>
<P>"(i) the failure to comply was due to reasonable cause and not to =
willful=20
neglect; and</P>
<P>"(ii) the failure to comply is corrected during the 30-day period =
beginning=20
on the first date the person liable for the penalty knew, or by =
exercising=20
reasonable diligence would have known, that the failure to comply =
occurred.</P>
<P>"(B) EXTENSION OF PERIOD.--</P>
<P>"(i) NO PENALTY.--The period referred to in subparagraph (A)(ii) may =
be=20
extended as determined appropriate by the Secretary based on the nature =
and=20
extent of the failure to comply.</P>
<P>"(ii) ASSISTANCE.--If the Secretary determines that a person failed =
to comply=20
because the person was unable to comply, the Secretary may provide =
technical=20
assistance to the person during the period described in subparagraph =
(A)(ii).=20
Such assistance shall be provided in any manner determined appropriate =
by the=20
Secretary.</P>
<P>"(4) REDUCTION.--In the case of a failure to comply which is due to=20
reasonable cause and not to willful neglect, any penalty under =
subsection (a)=20
that is not entirely waived under paragraph (3) may be waived to the =
extent that=20
the payment of such penalty would be excessive relative to the =
compliance=20
failure involved.</P>
<P align=3Dcenter><A name=3D1177>"WRONGFUL DISCLOSURE OF INDIVIDUALLY =
IDENTIFIABLE=20
HEALTH INFORMATION</A></P>
<P>"<B>SEC. 1177.</B> (a) OFFENSE.--A person who knowingly and in =
violation of=20
this part--</P>
<P>"(1) uses or causes to be used a unique health identifier;</P>
<P>"(2) obtains individually identifiable health information relating to =
an=20
individual; or</P>
<P>"(3) discloses individually identifiable health information to =
another=20
person,</P>
<P>shall be punished as provided in subsection (b).</P>
<P>"(b) PENALTIES.--A person described in subsection (a) shall--</P>
<P>"(1) be fined not more than $50,000, imprisoned not more than 1 year, =
or=20
both;</P>
<P>"(2) if the offense is committed under false pretenses, be fined not =
more=20
than $100,000, imprisoned not more than 5 years, or both; and</P>
<P>"(3) if the offense is committed with intent to sell, transfer, or =
use=20
individually identifiable health information for commercial advantage, =
personal=20
gain, or malicious harm, be fined not more than $250,000, imprisoned not =
more=20
than 10 years, or both.</P>
<P align=3Dcenter><A name=3D1178>"EFFECT ON STATE LAW</A></P>
<P>"<B>SEC. 1178.</B> (a) GENERAL EFFECT.--</P>
<P>"(1) GENERAL RULE.--Except as provided in paragraph (2), a provision =
or=20
requirement under this part, or a standard or implementation =
specification=20
adopted or established under sections 1172 through 1174, shall supersede =
any=20
contrary provision of State law, including a provision of State law that =

requires medical or health plan records (including billing information) =
to be=20
maintained or transmitted in written rather than electronic form.</P>
<P>"(2) EXCEPTIONS.--A provision or requirement under this part, or a =
standard=20
or implementation specification adopted or established under sections =
1172=20
through 1174, shall not supersede a contrary provision of State law, if =
the=20
provision of State law--</P>
<P>"(A) is a provision the Secretary determines--</P>
<P>"(i) is necessary--</P>
<P>"(I) to prevent fraud and abuse;</P>
<P>"(II) to ensure appropriate State regulation of insurance and health=20
plans;</P>
<P>"(III) for State reporting on health care delivery or costs; or</P>
<P>"(IV) for other purposes; or</P>
<P>"(ii) addresses controlled substances; or</P>
<P>"(B) subject to section 264(c)(2) of the Health Insurance Portability =
and=20
Accountability Act of 1996, relates to the privacy of individually =
identifiable=20
health information.</P>
<P>"(b) PUBLIC HEALTH.--Nothing in this part shall be construed to =
invalidate or=20
limit the authority, power, or procedures established under any law =
providing=20
for the reporting of disease or injury, child abuse, birth, or death, =
public=20
health surveillance, or public health investigation or intervention.</P>
<P>"(c) STATE REGULATORY REPORTING.--Nothing in this part shall limit =
the=20
ability of a State to require a health plan to report, or to provide =
access to,=20
information for management audits, financial audits, program monitoring =
and=20
evaluation, facility licensure or certification, or individual licensure =
or=20
certification.</P>
<P align=3Dcenter><A name=3D1179>"PROCESSING PAYMENT TRANSACTIONS BY =
FINANCIAL=20
INSTITUTIONS</A></P>
<P>"<B>SEC. 1179.</B> To the extent that an entity is engaged in =
activities of a=20
financial institution (as defined in section 1101 of the Right to =
Financial=20
Privacy Act of 1978), or is engaged in authorizing, processing, =
clearing,=20
settling, billing,</P>
<P>transferring, reconciling, or collecting payments, for a financial=20
institution, this part, and any standard adopted under this part, shall =
not=20
apply to the entity with respect to such activities, including the=20
following:</P>
<P>"(1) The use or disclosure of information by the entity for =
authorizing,=20
processing, clearing, settling, billing, transferring, reconciling or=20
collecting, a payment for, or related to, health plan premiums or health =
care,=20
where such payment is made by any means, including a credit, debit, or =
other=20
payment card, an account, check, or electronic funds transfer.</P>
<P>"(2) The request for, or the use or disclosure of, information by the =
entity=20
with respect to a payment described in paragraph (1)--</P>
<P>"(A) for transferring receivables;</P>
<P>"(B) for auditing;</P>
<P>"(C) in connection with--</P>
<P>"(i) a customer dispute; or</P>
<P>"(ii) an inquiry from, or to, a customer;</P>
<P>"(D) in a communication to a customer of the entity regarding the =
customer's=20
transactions, payment card, account, check, or electronic funds =
transfer;</P>
<P>"(E) for reporting to consumer reporting agencies; or</P>
<P>"(F) for complying with--</P>
<P>"(i) a civil or criminal subpoena; or</P>
<P>"(ii) a Federal or State law regulating the entity.".</P>
<P>(b) CONFORMING AMENDMENTS.--</P>
<P>(1) REQUIREMENT FOR MEDICARE PROVIDERS.--Section 1866(a)(1) (42 =
U.S.C.=20
1395cc(a)(1)) is amended--</P>
<P>(A) by striking ``and" at the end of subparagraph (P);</P>
<P>(B) by striking the period at the end of subparagraph (Q) and =
inserting ";=20
and"; and</P>
<P>(C) by inserting immediately after subparagraph (Q) the following new =

subparagraph:</P>
<P>"(R) to contract only with a health care clearinghouse (as defined in =
section=20
1171) that meets each standard and implementation specification adopted =
or=20
established under part C of title XI on or after the date on which the =
health=20
care clearinghouse is required to comply with the standard or=20
specification.".</P>
<P>(2) TITLE HEADING.--Title XI (42 U.S.C. 1301 et seq.) is amended by =
striking=20
the title heading and inserting the following:</P>
<P align=3Dcenter>"TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND =
ADMINISTRATIVE=20
SIMPLIFICATION".</P>
<H4>SEC. <A name=3D263>263</A>. CHANGES IN MEMBERSHIP AND DUTIES OF <A=20
href=3D"http://ncvhs.hhs.gov/index.htm">NATIONAL COMMITTEE ON VITAL AND =
HEALTH=20
STATISTICS</A>.</H4>
<P>Section 306(k) of the Public Health Service Act (42 U.S.C. =
242k(k))</P>
<P>is amended--</P>
<P>(1) in paragraph (1), by striking "16" and inserting "18";</P>
<P>(2) by amending paragraph (2) to read as follows:</P>
<P>"(2) The members of the Committee shall be appointed from among =
persons who=20
have distinguished themselves in the fields of health statistics, =
electronic=20
interchange of health care information, privacy and security of =
electronic=20
information, population-based public health, purchasing or financing =
health care=20
services, integrated computerized health information systems, health =
services=20
research, consumer interests in health information, health data =
standards,=20
epidemiology, and the provision of health services. Members of the =
Committee=20
shall be appointed for terms of 4 years.";</P>
<P>(3) by redesignating paragraphs (3) through (5) as paragraphs (4) =
through=20
(6), respectively, and inserting after paragraph (2) the following:</P>
<P>"(3) Of the members of the Committee--</P>
<P>"(A) 1 shall be appointed, not later than 60 days after the date of =
the=20
enactment of the Health Insurance Portability and Accountability Act of =
1996, by=20
the Speaker of the House of Representatives after consultation with the =
Minority=20
Leader of the House of Representatives;</P>
<P>"(B) 1 shall be appointed, not later than 60 days after the date of =
the=20
enactment of the Health Insurance Portability and Accountability Act of =
1996, by=20
the President pro tempore of the Senate after consultation with the =
Minority=20
Leader of the Senate; and</P>
<P>"(C) 16 shall be appointed by the Secretary.";</P>
<P>(4) by amending paragraph (5) (as so redesignated) to read as =
follows:</P>
<P>"(5) The Committee--</P>
<P>"(A) shall assist and advise the Secretary--</P>
<P>"(i) to delineate statistical problems bearing on health and health =
services=20
which are of national or international interest;</P>
<P>"(ii) to stimulate studies of such problems by other organizations =
and=20
agencies whenever possible or to make investigations of such problems =
through=20
subcommittees;</P>
<P>"(iii) to determine, approve, and revise the terms, definitions,=20
classifications, and guidelines for assessing health status and health =
services,=20
their distribution and costs, for use (I) within the Department of =
Health and=20
Human Services, (II) by all programs administered or funded by the =
Secretary,=20
including the Federal-State-local cooperative health statistics system =
referred=20
to in subsection (e), and (III) to the extent possible as determined by =
the head=20
of the agency involved, by the Department of Veterans Affairs, the =
Department of=20
Defense, and other Federal agencies concerned with health and health=20
services;</P>
<P>"(iv) with respect to the design of and approval of health =
statistical and=20
health information systems concerned with the collection, processing, =
and=20
tabulation of health statistics within the Department of Health and =
Human=20
Services, with respect to the Cooperative Health Statistics System =
established=20
under subsection (e), and with respect to the standardized means for the =

collection of health information and statistics to be established by the =

Secretary under subsection (j)(1);</P>
<P>"(v) to review and comment on findings and proposals developed by =
other=20
organizations and agencies and to make recommendations for their =
adoption or=20
implementation by local, State, national, or international agencies;</P>
<P>"(vi) to cooperate with national committees of other countries and =
with the=20
World Health Organization and other national agencies in the studies of =
problems=20
of mutual interest;</P>
<P>"(vii) to issue an annual report on the state of the Nation's health, =
its=20
health services, their costs and distributions, and to make proposals =
for=20
improvement of the Nation's health statistics and health information =
systems;=20
and</P>
<P>"(viii) in complying with the requirements imposed on the Secretary =
under=20
part C of title XI of the Social Security Act;</P>
<P>"(B) shall study the issues related to the adoption of uniform data =
standards=20
for patient medical record information and the electronic exchange of =
such=20
information;</P>
<P>"(C) shall report to the Secretary not later than 4 years after the =
date of=20
the enactment of the Health Insurance Portability and Accountability Act =
of 1996=20
recommendations and legislative proposals for such standards and =
electronic=20
exchange; and</P>
<P>"(D) shall be responsible generally for advising the Secretary and =
the=20
Congress on the status of the implementation of part C of title XI of =
the Social=20
Security Act."; and</P>
<P>(5) by adding at the end the following:</P>
<P>"(7) Not later than 1 year after the date of the enactment of the =
Health=20
Insurance Portability and Accountability Act of 1996, and annually =
thereafter,=20
the Committee shall submit to the Congress, and make public, a report =
regarding=20
the implementation of part C of title XI of the Social Security Act. =
Such report=20
shall address the following subjects, to the extent that the Committee=20
determines appropriate:</P>
<P>"(A) The extent to which persons required to comply with part C of =
title XI=20
of the Social Security Act are cooperating in implementing the standards =
adopted=20
under such part.</P>
<P>"(B) The extent to which such entities are meeting the security =
standards=20
adopted under such part and the types of penalties assessed for =
noncompliance=20
with such standards.</P>
<P>"(C) Whether the Federal and State Governments are receiving =
information of=20
sufficient quality to meet their responsibilities under such part.</P>
<P>"(D) Any problems that exist with respect to implementation of such =
part.</P>
<P>"(E) The extent to which timetables under such part are being =
met.".</P>
<H4>SEC. <A name=3D264>264</A>. RECOMMENDATIONS WITH RESPECT TO PRIVACY =
OF CERTAIN=20
HEALTH INFORMATION.</H4>
<P>(a) IN GENERAL.--Not later than the date that is 12 months after the =
date of=20
the enactment of this Act, the Secretary of Health and Human Services =
shall=20
submit to the Committee on Labor and Human Resources and the Committee =
on=20
Finance of the Senate and the Committee on Commerce and the Committee on =
Ways=20
and Means of the House of Representatives detailed recommendations on =
standards=20
with respect to the privacy of individually identifiable health =
information.</P>
<P>(b) SUBJECTS FOR RECOMMENDATIONS.--The recommendations under =
subsection (a)=20
shall address at least the following:</P>
<P>(1) The rights that an individual who is a subject of individually=20
identifiable health information should have.</P>
<P>(2) The procedures that should be established for the exercise of =
such=20
rights.</P>
<P>(3) The uses and disclosures of such information that should be =
authorized or=20
required.</P>
<P>(c) REGULATIONS.--</P>
<P>(1) IN GENERAL.--If legislation governing standards with respect to =
the=20
privacy of individually identifiable health information transmitted in=20
connection with the transactions described in section 1173(a) of the =
Social=20
Security Act (as added by section 262) is not enacted by the date that =
is 36=20
months after the date of the enactment of this Act, the Secretary of =
Health and=20
Human Services shall promulgate final regulations containing such =
standards not=20
later than the date that is 42 months after the date of the enactment of =
this=20
Act. Such regulations shall address at least the subjects described in=20
subsection (b).</P>
<P>(2) PREEMPTION.--A regulation promulgated under paragraph (1) shall =
not=20
supercede a contrary provision of State law, if the provision of State =
law=20
imposes requirements, standards, or implementation specifications that =
are more=20
stringent than the requirements, standards, or implementation =
specifications=20
imposed under the regulation.</P>
<P>(d) CONSULTATION.--In carrying out this section, the Secretary of =
Health and=20
Human Services shall consult with--</P>
<P>(1) the National Committee on Vital and Health Statistics established =
under=20
section 306(k) of the Public Health Service Act (42 U.S.C. 242k(k)); =
and</P>
<P>(2) the Attorney General.</P>
<P><STRONG>...</STRONG></P>
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