HIPAA Compliance for Startups

In this article, you will find out:

  • Why Startups Need HIPAA
  • What’s HIPAA
  • HIPAA Rules
  • Who is subject to HIPAA and their permitted uses and disclosures

Why Do Startups Need To Be HIPAA-Compliant?

Health technology startups need to be HIPAA compliant for several reasons, primarily because it ensures the protection of sensitive patient health information. Here are few of those reasons:

  1. Protect Patient Privacy: HIPAA compliance helps safeguard the privacy of patients’ health information. It limits who can access, use, and disclose protected health information (PHI).
  2. Ensure Data Security: HIPAA sets standards for securing electronic protected health information (ePHI) to prevent data breaches, unauthorized access, and other security incidents. This includes administrative, physical, and technical safeguards.
  3. Build Trust: Compliance demonstrates to patients, providers, and partners that the startup takes the confidentiality and integrity of health information seriously. This can build trust and credibility in the market.
  4. Legal and Regulatory Obligation: For startups dealing with PHI, HIPAA compliance is not optional but a legal requirement. Non-compliance can result in significant financial penalties, legal action, and damage to the company’s reputation.
  5. Facilitate Partnerships: Many healthcare providers, insurers, and other potential partners require HIPAA compliance before engaging in business. Compliance can open up opportunities for collaborations and access to broader markets.
  6. Avoid Penalties: HIPAA violations can result in hefty fines, ranging from $100 to $50,000 per violation or per record, with a maximum penalty of $1.5 million per year for violations of the same provision. Compliance helps avoid these financial penalties.
  7. Promote Responsible Data Management: Adhering to HIPAA encourages startups to implement best practices in data management, including regular risk assessments, employee training on data privacy, and the establishment of policies and procedures for handling PHI.
  8. Support Patient Rights: HIPAA supports patients’ rights regarding their health information, including the right to obtain and control their health records, request corrections, and receive notifications of privacy practices.

What’s HIPAA?

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is a federal law that mandates the creation of national standards to prevent unauthorized disclosure of sensitive patient health information. The US Department of Health and Human Services (HHS) issued the HIPAA Privacy Rule to implement HIPAA requirements and the Security Rule to protect a subset of information covered by the Privacy Rule.


There are 3 main HIPAA rules that play pivotal roles in safeguarding healthcare data:

  • Privacy Rule: Governs the use and disclosure of protected health information (PHI). 
  • Security Rule: Establishes physical, administrative and technical safeguards to protect the confidentiality, integrity, and availability of electronic protected health information (ePHI).
  • Breach Notification Rule: Requires organizations to notify affected individuals and the HHS within 60 days following any breach of PHI.

In addition to the above, two other essential rules under HIPAA include:

  • Omnibus Rule: Empowers patients with more control over who can access their health records and when.
  • Enforcement Rule: Outlines the investigative procedures for complaints and violations, as well as the mechanisms for determining fines and penalties.

Why is HIPAA important?

HIPAA was designed to rectify specific shortcomings within the U.S. health insurance system, particularly in terms of insurance coverage portability and the responsibility of healthcare entities in safeguarding patient data.

  • Improve standardization

Universal code sets and identifiers facilitates the secure and streamlined exchange of information among healthcare providers.

  • Stronger data security

Robust data protection measures encompassing administrative, physical, and technical safeguards to protect sensitive information, such as name, address, Social Security Number, and so on.

  • Better access control

Patients’ requests to access their health records must be honored within 30 days, making it easier for new providers to access medical histories and provide better care.

  • Greater accountability

Covered entities failing to adequately safeguard PHI are subject to stringent fines and, in certain circumstances, criminal penalties.

Who is subject to HIPAA?

The following types of individuals and organizations are subject to the Privacy Rule and considered covered entities:

  • Healthcare providers: Every healthcare provider, regardless of their practice’s size, who electronically transmits health information pertinent to certain transactions, including:
  • Claims
  • Benefit eligibility inquiries
  • Referral authorization requests
  • Other transactions for which HHS has established standards under the HIPAA Transactions Rule.
  • Health plans:
    • Health, dental, vision, and prescription drug insurers
    • Health maintenance organizations (HMOs)
    • Medicare, Medicaid, Medicare+Choice, and Medicare supplement insurers
    • Long-term care insurers (excluding nursing home fixed-indemnity policies)
    • Employer-sponsored group health plans
    • Government- and church-sponsored health plans
    • Multi-employer health plans

Exception: Group health plans with fewer than 50 participants, administered solely by the employer who established and maintains them, is not a covered entity.

  • Healthcare clearinghouses: Entities that process nonstandard information received from another entity into a standardized format or data content, or vice versa. Typically, healthcare clearinghouses handle individually identifiable health information when providing these processing services to either a health plan or a healthcare provider as a business associate.
  • Business associates: A person or organization (other than a member of a covered entity’s workforce) using or disclosing individually identifiable health information to execute functions, activities, or services for a covered entity. These functions, activities, or services include:
    • Claims processing
    • Data analysis
    • Utilization review
    • Billing

Permitted Uses and Disclosures

The law permits a covered entity to use and disclose PHI, without an individual’s authorization, for the following purposes or situations:

  • Disclosure to the individual (if the information is required for access or accounting of disclosures, the entity MUST disclose to the individual)
  • Treatment, payment, and healthcare operations
  • Opportunity to agree or object to the disclosure of PHI
    • An entity can obtain informal permission by asking the individual outright, or by circumstances that clearly give the individual the opportunity to agree, acquiesce, or object
  • Incident to an otherwise permitted use and disclosure
  • Limited dataset for research, public health, or healthcare operations
  • Public interest and benefit activities (12 national priority purposes):
  1. When required by law
  2. Public health activities
  3. Victims of abuse or neglect or domestic violence
  4. Health oversight activities
  5. Judicial and administrative proceedings
  6. Law enforcement
  7. Functions (such as identification) concerning deceased persons
  8. Cadaveric organ, eye, or tissue donation
  9. Research, under certain conditions
  10. To prevent or lessen a serious threat to health or safety
  11. Essential government functions
  12. Workers’ compensation

What’s HIPAA Compliance and how to achieve it?

The Security Rule outlines three types of security safeguards that organizations should follow to achieve HIPAA compliance:

  • Administrative
  • Physical
  • Technical

Administrative safeguards entail conducting risk analysis as a part of a company’s security management processes.‍

Examples include:

  • Evaluating the likelihood and impact of potential risks to ePHI
  • Implementing security measures to address identified risks
  • Documenting security measures to be taken
  • Maintaining continuous and appropriate security protections

Administrative safeguards also include:

  • Designation of an official representative or team responsible for HIPAA security policies and procedures
  • Implementing role-based access to ePHI
  • Providing employee training
  • Regularly evaluating how a company’s policies and procedures are meeting the Security Rule

Physical safeguards encompass:

  • Controlling physical facility access while allowing authorized entry
  • Developing policies for workstation and electronic media use
  • Managing electronic media transfer, disposal, and reuse.

Technical safeguards include: 

  • ePHI access control policies
  • Audit control mechanisms for the recording and examination of activities in systems interacting with ePHI

To be HIPPA compliant, you’ll also need integrity controls to prevent improper data alteration or destruction, and transmission security measures to protect ePHI during network transmission.

In addition to implementing these safeguards, organizations handling patient PHI must conduct annual self-audits to ensure HIPAA compliance and thoroughly vet their vendor partnerships.

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