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WASHINGTON-The Clinton administration will leave it to Congress to develop new rules governing the privacy of medical records.

An 80-page set of recommendations released earlier this month by the Department of Health and Human Services provides, for the most, only general guidelines on how individuals' medical records should be kept private.

The privacy issue is important to employers, managed care companies and insurers. Some fear, for example, if privacy rules are too strict it could become extremely costly and cumbersome for insurers and others to obtain the information they need from employees' physicians to review and process claims.

In at least one area-workers compensation-the administration is putting off, at least for another day, trying to balance an employee's right to keep medical information private and the need of insurers and self-funded employers for medical information to evaluate claims.

The administration said it would review the need for privacy standards in the workers compensation field and would advise Congress if and when it decides to make recommendations.

While workers compensation insurers receive medical information in much the same way as health plans, "The need under workers compensation systems to coordinate the health benefits provided with both indemnity benefits provided under the system and the determination of a worker's ability to return to work raises potential questions about the appropriateness of certain disclosures of medical information," the Department of Health and Human Services said in its paper "Confidentiality of Individually Identifiable Health Insurance."

Insurers are relieved that HHS has not-at least not yet-put any roadblocks in the way of handling workers compensation claims. In particular, insurers are concerned about any requirement that would force them to obtain employee permission each time they needed to see medical records.

"Any restrictions that are placed on the ability of insurers to expeditiously obtain information necessary to evaluate the merits of a claim and to protect against fraud could adversely affect the ability of insurers to meet their obligations under their contracts and under law," said Bruce Wood, assistant general counsel with the American Insurance Assn. in Washington.

"We have to be sure that we can get medical information in a timely manner, or state rules" on expeditious processing of claims could be violated, concurred John Lobert, senior vp of government relations in the Washington office of the National Assn. of Independent Insurers.

Still, recommendations how medical privacy rules should apply to workers compensation claims could emerge later, insurers say.

"I believe HHS will continue to look at this area," said Ken Schloman, federal affairs counsel with the Alliance of American Insurers in Washington.

The recommendations, while often vague, do provide some guidance on how medical records should be kept private.

For example, employers, such as a company that self-funds its health care benefits program, could not use medical information for hiring or firing employees.

In addition, under the recommendations, medical information regarding a claim could be exchanged freely between employers, insurers and case managers so long as the information was used strictly for the payment of the claim.

But other areas are not so clear. For example, the recommendations state that individuals have the right to bar the disclosure-without their permission-of treatment for a prior condition.

"A patient's sexually transmitted disease at the age of 22 need not be announced to all who are treating an athletic injury when the patient is 42," according to the recommendations.

But this so-called "opt-out" provision could cause problems to determine if an employee had a pre-existing medical condition and was not entitled to immediate health insurance coverage when joining a new employer, notes Kathy Bakich, an attorney with William M. Mercer Inc. in Washington.

Take the example of an employee who changes jobs and physicians. The employee, under a strict reading of the opt-out provision, could ask his first physician not to disclose any information about the condition for which he or she received treatment.

"At first blush, this would seem to cause problems," Ms. Bakich said of the opt-out provision.