HIPAA is an acronym for a federal mandate that significantly affects both health care providers and health care payers. The Health Insurance Portability and Accountability Act of 1996 [also sometimes called the Kennedy Kassebaum Act] is suppose to lead to administrative simplification of the business side of health care.

By the end of the twentieth century, there were more than 400 different health claim forms! HIPAA streamlines the process by identifying standard transactions that occur in the health care environment every day. These include health plan enrollment, eligibility, pre-authorization for treatment, claims, claim status, and claim remittance and advice. For these standard transactions, health plans must be prepared to perform them electronically on October 16, 2002, or October 16, 2003 if an extension has been obtained. And, health care providers who choose to do these transactions electronically must adhere to the rules governing them.

What are the rules? The rules establish a certain format for each transaction and a certain set of data elements that must be in each transaction. The transaction cannot contain any less or any more of the specified data elements. The rules also seek to standardize the medical code sets for coding the transactions - ICD 9 for diagnosis, CPT 4 for treatment, NCPT for drugs, and HCPCS for certain special procedures.

HIPAA also imposes new restrictions on the use and disclosure of identifiable health information. Patients must be notified before hand of the intended uses and disclosures of their health information. Where possible, patients must sign an acknowledgement of the notice. In performance of health care functions, persons must use the minimally necessary information to accomplish the intended tasks. The regulations also establish new procedures, and put limitations on the use of patient information, for both marketing and research.