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Employers that fear workers compensation claims-handling problems from a proposed federal standard on medical records privacy may have won a reprieve.

Federal authorities appear to have given the issue a pass, at least in the first round of congressional deliberations. The Clinton administration's recent proposals for assuring the confidentiality of individuals' medical records did not include any mention of workers compensation insurers (BI, Sept. 22).

However, the U.S. Department of Health and Human Services is continuing to review whether there is a need for federal medical privacy standards in workers comp, HHS Secretary Donna Shalala said in testimony before the Senate Labor and Human Resources Committee last month. Ms. Shalala will make recommendations to Congress at an unspecified time in the future.

Ms. Shalala said last month that while workers comp insurers receive health care information in much the same manner as health plans, they have a legitimate need to coordinate indemnity benefits-including lost wages and disability payments-and return-to-work determinations with any group health care benefits.

However, Ms. Shalala acknowledged that "raises potential questions" about the appropriateness of certain disclosures of medical information, according to Bruce Wood, assistant general counsel of the American Insurance Assn. in Washington.

Her presentation stemmed from a requirement of the Health Insurance Portability and Accounting Act, signed in August 1996. The act gives Congress until August 1999 to enact legislation governing the privacy of medical records. If it fails to act, then the HHS secretary will promulgate regulations.

Insurer and employer representatives generally support the Clinton administration's initial position of leaving workers comp alone.

"The Clinton Administration acted wisely when it decided not to make any recommendation with respect to covering workers compensation under medical privacy proposals," said Eric Oxfeld, president of the UWC Strategic Services on Unemployment and Workers Compensation, a Washington-based consulting firm.

In addition, "we are pleased that the administration privacy plan expressly recognizes the need to allow reports required under state workers compensation laws," he said in a statement.

However, "employers are still concerned because the HHS report leaves the door open to later imposing privacy restrictions on comp and because privacy restrictions on doctors and research may still delay the exchange of information needed to process claims and evaluate public policy," Mr. Oxfeld said.

"Employers agree that workers injured on the job have legitimate privacy expectations, but privacy standards must allow employers to keep their commitment to prompt and accurate delivery of workers compensation cash payments and medical treatment," Mr. Oxfeld said.

"We urge HHS and the Congress to leave comp out of any new privacy regulatory scheme and ensure that any legislation does not create exceptions to the workers compensation exclusive remedy doctrine by establishing a right to sue over paperwork infractions," he said.

Gains made by state legislatures enacting major cost-containment reforms "could be jeopardized if federal or state privacy legislation goes too far," Mr. Oxfeld warned.

As the AIA. sees it, "the HHS recommendations suggest that the federal legislation will not directly regulate liability insurers, at least to the extent the insurer obtained its health information pursuant to the claimants' authorization."

The HHS recommendations provide that the legislation should "apply primarily to health care providers and payers."

However, the definition of "health care payers" in the report states that "the definition does not encompass liability insurers who receive health information, as needed, pursuant to claimants' authorization," said AIA's Mr. Wood.

However, a labor spokesman disagrees and supports also applying any federal privacy rule to workers compensation.

"Medical (records) privacy should apply to all areas," including workers comp, said James Ellenberger, the AFL-CIO's assistant director for occupational safety and health in Washington.

However, his interpretation of the HHS secretary's current recommendations is that they would still allow workers comp claims to be handled as they are now. Employers and insurers have been "overstating" the problem by threatening that new rules would create new hurdles, Mr. Ellenberger said.

"What we want the law and secretary to do is prevent unauthorized access to workers compensation information," he said. Specifically, data-handling procedures that allow businesses to blacklist workers for merely filing a workers comp claim should be "absolutely prohibited," he said.

UWC's Mr. Oxfeld replied, "My organization and its members don't believe that it is appropriate to blacklist any worker because a worker has had a workers compensation claim."

While the recent HHS recommendations have brought the medical records privacy issue to a head, employers and workers comp insurers have wrestled with it for a long time.

Employers, especially those that self-administer claims, are in a "difficult" situation, said Billie Fae Fuschi, assistant director of workers comp for Memphis, Tenn.-based Methodist Health Systems Inc. To handle claims, "I want as much information as I can get, but I don't think I should get the information prior to a claim."

Running a hospital-related business presents special challenges to ensure a claimant's privacy, she said. Hospital workers should not feel compelled to go elsewhere for medical treatment to avoid the possibility that personal medical information might be wrongfully leaked to co-workers, she said.

"Protecting privacy is a wonderful thing, but you run into problems," said Douglas Stevenson, executive director of the National Council of Self-Insurers in Chicago.

Information about an injured worker's medical background is important to ensure the worker is treated appropriately and later to determine impairment and sometimes eligibility for compensation through a second-injury fund.

"When anyone submits his physical or mental condition as an issue in litigation, the privacy privilege should evaporate," Mr. Stevenson said.

The "critical" aspect is balancing the need to make that information available for improved medical care and to address safety concerns in the workplace site with protecting the individual's privacy, said Bill Gourley, senior vp and manager of commercial markets operations for Liberty Mutual Insurance Cos. in Boston. "We are partnering with customers to determine what is the best solution for getting this key information as well as controlling workers illnesses and injuries and the resulting cost," he said.

"It's not a new awareness for us; it's something we agonize over all the time: to have that balance between privacy and effective care," Mr. Gourley said. For example, any user of Liberty Mutual's risk management information system is greeted with a notice reminding them that the information is private and should be used only on a limited basis.

The issue is also a concern in states.

"Privacy of medical records is an emerging issue in nearly every state," said John B. Lennes Jr., vp and director of workers compensation/health for the Alliance of American Insurers in Schaumburg, Ill.

"Legislatures are recognizing that there is a greater sensitivity" on the issue of medical records privacy, although no one really thinks about the potential impact of such legislation on workers comp, said AIA's Mr. Wood.

"In almost every state, compensation carriers have authority by law to have access to a claimant's records," Mr. Lennes said. However, states vary in the "number of hoops" an insurer must jump through as well as in the definition of a medical record.

The National Assn. of Insurance Commissioners also is drafting guidelines for medical records privacy.