CMS Pub. 100-04, ch. 24, § 20.1

EDI practices for healthcare business were embraced more than 20 years ago to

standardize electronic formats throughout the healthcare industry. Usage of EDI in

Health care claim processing was initiated by the Health Insurance Portability and

Accountability Act of 1996(HIPAA), Public Law 104,191. Subtitle F of Title II of

HIPAA, added to Title XI of the Social Security Act (the Act) a new part called section

C, entitled “Administrative Simplification” and consists of sections 1171 through 1180.

This Federal legislation adopted standards for electronic transactions under an

Administrative Simplification subtitle. HIPAA mandated the adoption of standards for

electronically transmitting certain health care administrative transactions between all

covered entities.

Sections 1171 through 1179 are described below:

• Section 1171 of the Act, established definitions for the following: code sets, health

care clearinghouses, health care provider, health information, health plan,

individually identifiable health information, standard, and standard setting

organizations (SSO) such as the American National Standards Institute (ANSI).

• Section 1172 made any standard adopted applicable to covered entities that transmit

health information in electronic formats. Covered entities include the following:

1) health plans

2) health care clearinghouses

3) health care providers

• Section 1173 required the adoption of standards for transactions, code sets, and

unique health identifiers for each individual, employer, health plan, and health care

provider.

• Section 1174 required the adoption of standards for designated transactions, except

electronic attachments.

• Section 1175 prohibited health plans from refusing to conduct a transaction as a

standard transaction, and delaying the processing and or adversely affecting its

processing.

• Section 1176 established civil monetary penalties for violation of the provisions of

Part C of Title XI.

• Section 1177 established penalties for any person that knowingly misuses a unique

health identifier, or obtains or discloses individually identifiable health information.

• Section 1178 indicated provisions of Part C of Title XI of the Act, as well as any

standards or implementation specifications adopted under them generally supersede

contrary provisions of State law.

• Section 1179 makes these provisions of the Act inapplicable to financial institutions

or anyone acting on behalf of a financial institution when “authorizing, processing,

clearing, selling, billing, transferring, reconciling, or collecting payments for financial

institutions.

HIPAA mandates all covered entities to comply with the use and maintenance of certain

standards. More recently the passing of The America Reinvestment and Recovery Act

(ARRA) has further enhanced the definitions and requirements mandated under HIPAA.