The history of modern US healthcare can pretty much be broken into two parts: before HIPAA, and after HIPAA. 

This landmark legislation changed the healthcare industry by modernizing how private patient data is collected, stored, accessed, and shared. 

Now, more than 25 years after HIPAA was first signed into law, its statutes are more impactful than ever. 

This article covers what HIPAA is, why it’s important, and what the law means for organizations handling PHI today. 

What is HIPAA?

The Health Insurance Portability and Accountability Act (HIPAA) is a milestone piece of legislation for the US healthcare industry. 

Signed into law by President Bill Clinton in 1996, HIPAA applies to healthcare providers, health plans, healthcare clearinghouses, and business associates of HIPAA-covered entities.

Why was HIPAA created? It was passed to address two key issues: 

  • Ensure health insurance coverage for employees who are between jobs. Without HIPAA, individuals in this situation could be left without access to health insurance and potentially unable to pay for necessary healthcare. 
  • Prevent healthcare fraud by securing protected health information (PHI). HIPAA’s privacy rule introduced critical changes to how healthcare organizations can store, handle, access, and share sensitive patient information. 

HIPAA is now widely known for its impact on improving the privacy and security of patient health data. 

Understanding the importance of HIPAA

HIPAA stands for Health Insurance Portability and Accountability Act, and it was designed to address specific flaws within the US health insurance system. Namely, the portability of insurance coverage and the accountability of healthcare organizations when it comes to protecting patient data. 

Here are a few reasons why HIPAA is so important: 

HIPAA introduces a higher level of standardization

HIPAA legislation was introduced during a time of major transition between paper and electronic health records. It created ways to help healthcare providers manage that transition by streamlining administrative tasks, improving efficiency, and ensuring PHI is stored and shared securely. 

These changes helped standardize processes, since all organizations covered by HIPAA must use the same code sets and identifiers. Transferring information between healthcare providers, insurance companies, and other entities is simpler and more secure. 

HIPAA establishes safeguards for protecting personal health information

PHI includes all kinds of sensitive information. It goes beyond names and addresses to include credit card information, social security numbers, and details around medical conditions and procedures. 

Because of its potential for identity theft, PHI holds significant value. 

Without HIPAA, there would be no legal requirement for healthcare organizations to protect this private data — and no penalties if they didn’t. 

Now, healthcare organizations are legally required to put a series of strict security controls in place to protect personal health information. They must train their staff to protect patient data. And they must prove to an auditor that they are HIPAA compliant. 

HIPAA grants patients greater control over their personal information

Before the HIPAA Privacy Rule, healthcare organizations did not have to release copies of a patient’s health information. 

Now, a patient’s request to access their health records must be honored within 30 days. If a patient changes healthcare providers, they can request that their old provider share their complete records. Their new doctor can have access to their health history so they can provide better care. 

In addition, covered entities cannot use private data for marketing, fundraising, or research purposes without express written permission from patients. 

HIPAA ensures that anyone violating its standards is held accountable 

Covered entities that fail to protect PHI are subject to strict fines and, in some cases, criminal penalties. 

The Department of Health and Human Services Office for Civil Rights enforces HIPAA and investigates any reported HIPAA violations. OCR also conducts periodic audits of covered entities and their business associates. 

Violations are broken down into tiers, depending on the offending organization’s level of negligence and the steps they took to resolve the issue afterward. Fines range from $100-$1.5M, and the harshest criminal penalties can include up to 10 years in jail. 

How does HIPAA provide security? 

Advances in technology have dramatically improved the ability of healthcare organizations and their patients to access health information, resulting in better care. 

But those improvements also introduce new risks. More than 40 million patient records were compromised in 2021 in data breaches reported to the federal government. 

To achieve HIPAA compliance, healthcare organizations have to have certain safeguards in place to protect patient data against these types of breaches. The HIPAA Security Rule outlines a set of administrative, physical, and technical safeguards. 

Administrative safeguards

These policies and procedures explain what the organization does to protect PHI. Examples include employee training, incident response plans, business associate contracts, and access management policies. 

Physical safeguards

Who has access to your physical offices and electronic equipment? These safeguards are designed to protect physical assets from unauthorized access. Examples include access cards with photo ID, turning computer screens away from public view, and shredding documents. 

Technical safeguards

These safeguards define what your organization must do when handling electronic protected health information (ePHI). For example, using data encryption, automatic logoff, and unique user identification. 

HIPAA risk assessments

As part of the Security Rule, covered entities must complete a risk assessment. The HIPAA risk assessment process helps organizations understand their threat landscape, define their risk tolerance, and identify the probability and potential impact of each risk. 

With this knowledge in hand, covered entities can build more effective strategies for mitigating risks and improving data security.

Benefits of HIPAA compliance

Why is HIPAA important to privacy and security? Because it establishes information security standards that all healthcare organizations must adhere to. 

HIPAA compliance ensures covered entities understand and take steps to prevent the risks that could compromise patient data. It establishes key safeguards for keeping sensitive data safe. And it motivates organizations to maintain and improve their security posture or face significant penalties. 

For healthcare organizations, HIPAA compliance results in a strong security posture, improved internal processes, and increased patient trust. 

Secureframe makes achieving HIPAA compliance faster and easier by simplifying the process into a few key steps:

  • Create HIPAA privacy and security policies
  • Train employees on HIPAA requirements and best practices
  • Manage vendors with access to PHI
  • Ensure business associates protect PHI
  • Monitor your HIPAA safeguards

Learn more about how you can automate your HIPAA compliance today.


What is protected by HIPAA?

HIPAA covers Protected Health Information (PHI), which encompasses a wide range of identifiable health information held or transmitted by covered entities or their business associates, whether electronic, paper, or oral. PHI includes information that relates to the following:

  • An individual's past, present, or future physical or mental health or condition.
  • The provision of health care to the individual.
  • The past, present, or future payment for the provision of health care to the individual.
  • PHI includes many common identifiers such as name, address, birth date, Social Security Number, and more when they can be associated with the health information listed above.

What are the three main rules of HIPAA?

The Privacy, Security, and Breach Notification rules are essential to HIPAA.

  • Privacy Rule: Regulates the use and disclosure of protected health information (PHI). 
  • Security Rule: Requires healthcare providers to take steps to protect electronic protected health information (ePHI).
  • Breach Notification Rule: Requires organizations to notify affected individuals and the U.S. Department of Health and Human Services (HHS) when unsecured PHI has been breached.

Why is HIPAA important in healthcare?

HIPAA is crucial in healthcare for several reasons:

  • Privacy Protection: It ensures the confidentiality of personal health information.
  • Security Measures: It mandates that covered entities and business associates put in place physical, technical, and administrative safeguards to protect PHI
  • Trust and Confidentiality: HIPAA fosters trust between patients and healthcare providers, allowing patients to be open and honest with their healthcare providers without fear their personal information will be exposed.
  • Regulatory Compliance: It provides a clear framework for how PHI should be handled, used, and disclosed, ensuring a standardized approach to patient data across the healthcare industry.
  • Legal and Financial Repercussions: It establishes legal and financial consequences for breaches and non-compliance, incentivizing healthcare providers and their associates to adhere to privacy and security standards.

What is considered a HIPAA violation?

Failure to comply with any of the provisions of the Privacy, Security, Breach Notification, Minimum Necessary, or Omnibus rules is a HIPAA violation.

What does HIPAA mean and what is its purpose?

Health Insurance Portability and Accountability Act (HIPAA) was signed into law by President Bill Clinton in 1996. It was passed to address two key issues: 

  • Ensure health insurance coverage for employees who are between jobs. Without HIPAA, individuals in this situation could be left without access to health insurance and potentially unable to pay for necessary healthcare. 
  • Prevent healthcare fraud by securing protected health information (PHI). HIPAA’s privacy rule introduced critical changes to how healthcare organizations can store, handle, access, and share sensitive patient information.