November 13, 2019

Annual Adjustment Leads to Uncertainty in HIPAA Penalty Maximums

Holland & Knight Healthcare Blog
Courtney A. Groh

On November 5, 2019, the Department of Health and Human Services (the Department) issued its annual inflation adjustment to civil monetary penalties that fall under the Department’s purview (2019 Inflation Rule), including penalties related to violations of the Health Insurance Portability and Accountability Act (HIPAA).  The annual adjustment is determined using the percent of increase in the Consumer Price Index for all Urban Consumers (CPI-U) for the month of October of the year in which the amount of each civil penalty was most recently established or modified.  The 2019 adjustment is based on a cost-of-living multiplier (based on the CPI-U for October 2018) of 1.02522.

Outlined below are the updated penalties under HIPAA based on the culpability tiers:

 

Culpability
Penalties for HIPAA Violations after February 17, 2019

                                                         

General Penalties
(Pre-Inflation Adjustment)

($)
2018
Maximum
adjusted
penalty
($)
 
 2018
Maximum
adjusted
penalty
($) 
   
No Knowledge
Minimum Per Violation
Maximum Per Violation
Calendar Year Cap 
 

100
50,000

1,500,000
  114

57,051
1,711,533

             117
 58,490 1,754,698

Reasonable Cause  Minimum Per Violation
Maximum Per Violation
Calendar Year Cap 

1,000
50,000

1,500,000 
         1,141

57,051
1,711,533

 1,170
 58,490 1,754,698

Willful Neglect – Corrected Minimum Per Violation
Maximum Per Violation
Calendar Year Cap 
 
10,000

50,000

1,500,000
       11,410

57,051
1,711,533

 11,698
 58,490 1,754,698

Willful Neglect 

- Not Corrected 
Minimum Per Violation
Maximum Per Violation
Calendar Year Cap 
 

50,000
50,000

1,500,000 
 57,051
57,0511

1,711,533

58,490 
 58,4902 1,754,698

However, the 2019 Inflation Rule penalties for HIPAA violations are seemingly inconsistent with the Department’s Notification of Enforcement Discretion Regarding HIPAA Civil Monetary Penalties, which was released in April 2019 (April Notice). Under the April Notice, the Department determined that the calendar year cap should vary based on the level of culpability (see table below for overview). In the April Notice, the Department noted that the revised tiered calendar year caps would be utilized by the Department until further notice and that it expected to engage in future rulemaking to formally amend the regulatory penalty structure. As the regulation has not yet been amended, the Department has legal standing to rely on the amounts identified in the 2019 Inflation Rule.  However, it is unlikely that the Department will, without notification, rescind the tiered structure approach adopted under the April Notice.  Specifically, the 2019 Inflation Rule is not specific to HIPAA, but instead is a statutorily required inflation adjustment for all civil monetary penalties identified in relevant regulations.  Until the regulation outlining HIPAA penalties is amended, the Department will be required to continue to increase the identified amounts annually.

It is important to note that the tiered approach adopted under the April Notice is subject to annual inflation adjustments.  Given the recent adoption of the tiered approach, it is unclear whether an adjustment would applied in 2019 or be stayed until 2020.  In the event the cost-of-living multiplier identified under the 2019 Inflation Rule applies, the current adjusted calendar year cap for multiple identical violations at each level of culpability is as follows:

 

Culpability
Calendar Year Cap
Established by April Notice

Calendar Year Cap
HIPAA Violations
after February 17, 2019  

 No Knowledge  $25,000  $25,630
 Reasonable Cause  $100,000  $102,522
Willful Neglect – Corrected   $250,000 $256,305 

Willful Neglect 

- Not Corrected
 $1,500,000  $1,754,698

Notes


1The 2019 Inflation Rule appears to erroneously identify the 2018 maximum as $1,711,533.
2The 2019 Inflation Rule appears to erroneously identify the 2019 maximum as $1,754,698.

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