Obligations of covered entity: Overview, definition, and example
What are the obligations of a covered entity?
The obligations of a covered entity refer to the legal duties and responsibilities that a specific organization, typically defined under healthcare or data protection regulations, must fulfill. A "covered entity" is a term used in laws such as the Health Insurance Portability and Accountability Act (HIPAA) to describe organizations that must comply with certain legal requirements to protect sensitive information. In the healthcare context, a covered entity may include healthcare providers, health plans, or healthcare clearinghouses. These obligations can include safeguarding patient data, ensuring confidentiality, providing access to information when necessary, and adhering to regulations regarding the use and disclosure of sensitive information.
For example, a hospital is a covered entity under HIPAA and is obligated to protect patient health information from unauthorized access and disclose it only under specific circumstances.
Why are the obligations of a covered entity important?
The obligations of a covered entity are important because they ensure the protection of sensitive data and maintain trust with individuals or clients. For instance, healthcare providers must safeguard patient privacy, while financial institutions must protect customers’ personal and financial data. By enforcing these obligations, covered entities ensure compliance with laws designed to prevent identity theft, fraud, and the misuse of personal information. Failure to meet these obligations can result in legal consequences, financial penalties, and damage to the organization’s reputation.
For individuals, these obligations ensure their sensitive information is protected and only used appropriately. For businesses and organizations, fulfilling their obligations helps maintain compliance with regulatory requirements and avoids costly fines or penalties.
Understanding obligations of covered entity through an example
Imagine a healthcare provider such as a hospital that is a covered entity under HIPAA. One of its obligations is to ensure that all patient health records are stored securely and can only be accessed by authorized personnel. The hospital must also provide patients with the right to request copies of their health records or ask for corrections if necessary. Additionally, the hospital must implement safeguards, such as encryption, to protect sensitive data when transmitted electronically.
In another example, a financial institution acting as a covered entity under the Gramm-Leach-Bliley Act (GLBA) is required to protect its clients' nonpublic personal information (NPI). The bank must implement strong security measures to prevent unauthorized access to NPI and notify customers if their information is at risk of being compromised.
An example of obligations of covered entity clause
Here’s how a clause regarding the obligations of a covered entity might appear in a contract or policy:
“The Covered Entity agrees to comply with all applicable data protection laws and regulations, including the Health Insurance Portability and Accountability Act (HIPAA) and other relevant privacy legislation. The Covered Entity shall ensure that all sensitive information, including personal health data, is securely stored, transmitted, and accessed only by authorized personnel. The Covered Entity shall also provide individuals with the right to access, amend, or request the disclosure of their personal information, and shall implement appropriate security measures to prevent unauthorized access.”
Conclusion
The obligations of a covered entity are critical for protecting sensitive information, ensuring compliance with privacy and security regulations, and maintaining public trust. These obligations help ensure that personal data, such as health records or financial information, is safeguarded against unauthorized access or misuse. For organizations, understanding and fulfilling these obligations is key to avoiding legal repercussions, maintaining good business practices, and promoting transparency and trust with clients, customers, and patients.
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.