HIPAA: Overview, definition, and example
What is HIPAA?
HIPAA stands for the Health Insurance Portability and Accountability Act of 1996, a U.S. federal law that sets national standards for protecting individually identifiable health information. HIPAA applies to healthcare providers, health plans, healthcare clearinghouses, and their business associates. It governs how protected health information (PHI) is collected, stored, used, and shared, particularly in electronic form.
Why is HIPAA important?
HIPAA is important because it establishes privacy and security rules that safeguard patient data and prevent unauthorized access, disclosure, or misuse of health information. For covered entities and business associates, compliance is not optional—violations can result in significant fines, audits, and reputational damage. HIPAA also gives individuals rights over their health data, including the right to access and request corrections.
Understanding HIPAA through an example
A cloud-based medical billing company processes patient records for several clinics. Because it handles protected health information on behalf of covered entities, the company must enter into business associate agreements (BAAs) and implement safeguards under HIPAA. If it suffers a data breach and fails to notify clients or secure its systems, it could face penalties from the U.S. Department of Health and Human Services (HHS).
Example of how a HIPAA clause may appear in a contract
Here’s how a HIPAA clause may appear in a services or business associate agreement:
"Each party shall comply with all applicable provisions of HIPAA and its implementing regulations, including the Privacy Rule, Security Rule, and Breach Notification Rule, and shall ensure that any use or disclosure of Protected Health Information is limited to what is permitted under this Agreement and applicable law."
Conclusion
HIPAA is a foundational law in the U.S. healthcare system that protects the privacy and security of patient data. Any organization that handles health information—whether directly or indirectly—must understand and comply with its requirements. Including HIPAA-related clauses in contracts helps clarify responsibilities and reduce the risk of violations or data breaches.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.