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The privacy of individuals' medical records continues to be a hot topic in workers compensation these days with federal and state regulations addressing confidentiality expected within the next year.

Potential legislation also raises other issues, including to what extent, if any, federal legislation will pre-empt any state efforts in this area. There are also lingering questions as to how federal confidentiality legislation would apply to workers comp.

Medical record confidentiality can be a divisive issue.

On the one hand, employers, insurers and workers comp administrators generally favor the free exchange of information and worry about the problems that may result if access to such information is restricted.

"The important thing for business and, really, anybody involved in the workers comp system is that there be free communications between the physician and employer's representative, particularly if it involves a modified duty or early return-to-work program," said John Toay, chairman-legislative affairs for the Carolinas chapter of the Risk & Insurance Management Society Inc. North Carolina lawmakers considered a proposal that would have limited communication between employers and physicians treating injured workers (BI, June 8).

On the other hand, labor representatives generally oppose unrestricted access to personal medical information.

"Everyone has a right to expect certain standards of privacy and decency when it comes to their personal medical information," said James N. Ellenberger, assistant director of the AFL-CIO's Department of Occupational Safety and Health.

"It's a most salient political issue," observed Bruce C. Wood, assistant general counsel for the American Insurance Assn. in Washington. "It touches everyone, quite literally. It's an issue that knows no party, nor does it know an ideology," he said of medical information privacy.

"Conservative Republicans and liberal Democrats can all agree on the need to ensure adequate protections for sensitive medical information, and for that reason the issue has the political profile that it does," Mr. Wood said.

Legislative activity may occur on both the state and the federal levels. States may consider adoption of a model law, the Health Information Privacy Model Act, that was approved by the National Assn. of Insurance Commissioners at its plenary session Sept. 14. The model law, which would apply to all insurers, would require them to develop and implement policies, standards and procedures to address the handling of all health information. It also would regulate protected, or individually identifiable, health information.

On the federal front, under the 1996 federal Health Insurance Portability and Accountability Act, Congress has until August 1999 to enact legislation governing the privacy of medical records. The secretary of Health and Human Services is directed to promulgate regulations if Congress fails to act, though inaction by lawmakers is considered unlikely.

Prominent among the bills introduced in Congress in this area is the Health Care Personal Information Non-disclosure Act of 1998, which was introduced in April by Sen. Jim Jeffords, R-Vt., who chairs the Labor and Human Resources Committee, where the bill now rests (BI, April 27). Its co-sponsor is Sen. Christopher Dodd, D-Conn.

The Jeffords-Dodd bill, S.B. 1921, is intended to "establish strong and effective mechanisms to protect against the unauthorized and inappropriate use of protected health information," according to the proposed legislation.

In addition, a patient protection bill that includes similar medical privacy provisions, H.R. 4250, has already been approved by the House, and the Senate may consider its own version of that bill next year (BI, July 27).

Although H.R. 4250, which was introduced by House Speaker Newt Gingrich, R-Ga., is a comprehensive health care bill, it is "much more modest" on the issue of privacy than the free-standing Jeffords-Dodd bill, which deals with that issue exclusively, said Eric J. Oxfeld, president of UWC Inc., a trade group that focuses on workers comp and unemployment insurance and represents both employers and insurers.

There was no Senate action on the Jeffords-Dodds bill before Congress adjourned.

With the August 1999 deadline still several months away, "it just was difficult to attract attention at this time, when there are other health-related issues in more active consideration," said a spokesman for the Senate Labor and Human Resources Committee.

But it will definitely be considered next year, he said. "Congress, I'm sure, will act with some kind of legislation rather than allow the HHS department to administratively take action," the spokesman said.

"It's still kind of early," Nancy Schroeder, director of workers comp for the National Assn. of Independent Insurers in Des Plaines, Ill., said of federal action on medical records privacy. "Part of the confusion has to do with everybody waiting for elections, particularly this year, before they make any predictions for next year."

The concept of how best to protect personal medical records "has not really gestated yet," agreed Mr. Oxfeld. "It has not yet matured as an issue," he said.

"The fact is that it has received very little public attention within the business community or the public at large, and we expect there to be, as people realize what is on the table, more attention paid to it next year," he said.

Sure to also receive additional scrutiny is the extent to which any federal privacy law would apply to workers comp.

This "is still very much up in the air, and the level of awareness among some of the (Senate committee) staff dealing with this issue is still pretty minimal," said Mr. Oxfeld. "There are conflicting answers sometimes when you ask the question, 'Does this apply to workers compensation?' " he said.

The AIA's Mr. Wood said the Jeffords-Dodd bill is flawed because, even though it does not explicitly include property and casualty and workers comp insurers, it does list several rules "the effect of which would be to require workers comp insurers to obtain multiple authorizations for obtaining information from entities that are covered in the bill."

The AFL-CIO wants injured workers to be provided for in any privacy legislation, said Mr. Ellenberger. "We have been in communication with the secretary at (Health and Human Resources) to insure that there's no exceptions made for workers comp insurers, that they be bound by the same privacy concerns that are all others who are privy to such information," said Mr. Ellenberger.

"There are really two levels'" of concern here, said Mr. Oxfeld. One is the procedures that will be in place to protect information that has already been gathered. The other is the procedures that will be imposed to give the person who is the subject of the information rights to withhold it, he said.

The Jeffords-Dodds bill, for example, would require workers to give written authorization before the employer or insurer could obtain information about their treatment. But once that information is obtained, there are not any restrictions on its disclosure. "We thought that was backwards," said Mr. Oxfeld.

By contrast, he said, the House bill says if you have the information, you must take certain steps to see it is not abused, "but it doesn't throw up roadblocks to getting information you need," said Mr. Oxfeld.

Mr. Oxfeld noted that the NAIC model law does not have prior authorization provisions for the release of records but does impose restrictions on disclosures once the employer or insurer has obtained the information.

Proposals such as the NAIC model bill, though, "would restrict employers' access to experience and loss data, a necessary tool in the evaluation and enhancement of risk management programs," warned RIMS in a position statement issued earlier this month.

One lingering question is the issue of federal pre-emption of any state action.

"My concern is the states aren't going to have the option" to take action on the issue because, unlike the property/casualty area, Congress usually dictates what the states may do in the health area, said South Dakota Insurance Director Darla Lyon, who chairs the NAIC's Commercial Lines (D) subcommittee and its workers compensation task force.

Congress will likely establish a certain minimal level and tell the states that, while they may be more restrictive than the federal rules, they cannot be less so, said Ms. Lyon.

"The question is whether the federal bill is the ceiling or the floor," agreed Ms. Schroeder of the NAII. Also unknown is whether Congress will pre-empt any state legislation or allow the states to adopt stronger legislation, she added.

The issue of pre-emption is one of the "fault lines" on this issue, said AIA's Mr. Wood. Although some observers find the bill's language on this aspect unclear, Mr. Wood said he believes that, under the Jeffords-Dodds bill, state law would be pre-empted only to the extent it is inconsistent with federal law. "That is a weak pre-emption standard and would result in a proliferation of varying medical privacy standards," he said.

"A strong pre-emption standard would provide that federal law pre-empts any and all state law on medical privacy. In constitutional parlance, it would occupy the field," said Mr. Wood, adding that would be a "steeper hill to climb."

While declining to explicitly state whether he favors this approach, Mr. Wood said, "I think the (insurance) companies' interest is in ensuring that there are uniform rules applicable to the exchange of information. I favor any way we could get from here to there.

"Without sounding disingenuous about that," he continued, "we are, on the one hand, supportive of state regulation of insurance, but historically, traditionally, there are some exceptions made to that, and this may very well be one of them," said Mr. Wood.

With a weak pre-emption, he said, there could well be a federal floor as well as state laws that go above that, "so you still end up with 50 states plus the District of Columbia plus the federal standard, and we're not better off under that system than we are under today's system. In fact, we're worse off."

Another approach is possible as well, said Mr. Wood. For example, instead of descriptive rules, federal legislation could set out broad principles governing any privacy legislation and provide that any state law incorporate those standards, said Mr. Wood.

In the meantime, states may delay any legislative activity on the model law in light of possible federal action in 1999. "I seriously doubt that states will take a look at it until they know what Congress is going to do" with the Jeffords-Dodd bill, said Ms. Lyon.

However, Ms. Schroeder said, "I would expect there to be some activity, but not as much as there would be otherwise," she said.

"I expect that it will be introduced in some of the states in January," said Mr. Wood, who added there has been an increasing amount of state activity in this area.

In North Carolina, for instance, hearings were held earlier this year by a state Industrial Commission on a proposal that would virtually prohibit spoken communication between employers and physicians and would require that injured workers be notified of written communications.

Risk managers and insurers oppose the proposal, which the commission prepared after the North Carolina General Assembly instructed it to do so last year.

J. Howard Baum, the commission chairman, said it has been sitting on the back burner because a number of those involved have been tied up with the Legislature, which is expected to adjourn shortly.

At that point, "we will get into gear," said Mr. Baum. A committee that includes representatives from the private sector is expected to present recommendations to the commission, he said.

Mr. Toay of the Carolinas RIMS chapter, who is also president of Fort Mill, S.C.-based Loss Prevention Management, said he is optimistic a satisfactory solution will be reached on the issue. "The commission is really working hard to try to find a middle ground," he said.