$400K HIPAA Penalty Teaches Risk Assessment Importance

April 12, 2017

Metro Community Provider Network (MCPN), a federally-qualified health center (FQHC), must pay $400,000 and implement a corrective action plan to resolve U.S. Department of Health and Human Services, Office for Civil Rights (OCR) charges it violated the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Security Rule by failing to implement a security management process to safeguard electronic protected health information (ePHI).  The latest in a growing series of high-dollar HIPAA settlements and penalty assessments, it reminds health plans and other HIPAA-covered entities of the importance of conducting risk assessments and  other actions to prevent and prepare to respond to hacking and other data breach and security events.

The Resolution Agreement and Corrective Action Plan, like most others before it, resulted from an investigation opened in response to a breach report. On January 27, 2012, MCPN filed a breach report with OCR indicating that a hacker accessed employees’ email accounts and obtained 3,200 individuals’ ePHI through a phishing incident. OCR’s investigation revealed that MCPN took necessary corrective action related to the phishing incident. However, the investigation also revealed that MCPN failed to conduct a risk analysis until mid-February 2012 – well after the hacking incident reported in the breach report.Prior to the breach incident, MCPN had not conducted a risk analysis to assess the risks and vulnerabilities in its ePHI environment, and, consequently, had not implemented any corresponding risk management plans to address the risks and vulnerabilities identified in a risk analysis. 

When MCPN finally conducted a risk analysis, OCR found that risk analysis, as well as all subsequent risk analyses, were insufficient to meet the requirements of the Security Rule.

OCR made a point in announcing the Resolution Agreement of noting it considered MCPN’s status as a FQHC when balancing the significance of the violation with MCPN’s ability to maintain sufficient financial standing to ensure the provision of ongoing patient care. MCPN provides primary medical care, dental care, pharmacies, social work, and behavioral health care services throughout the greater Denver, Colorado metropolitan area to approximately 43,000 patients per year, a large majority of whom have incomes at or below the poverty level. It is likely that OCR would have imposed a much greater settlement amount had the covered entity not been a FQHC serving the poor.

About The Author

Recognized by LexisNexis® Martindale-Hubbell® as a “AV-Preeminent” (Top 1%/ the highest) and “Top Rated Lawyer,” with special recognition as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Health Care,” “Labor & Employment,” “Tax: Erisa & Employee Benefits” and “Business and Commercial Law” by D Magazine, the author of this update is widely known for her 29 plus years’ of work in health care, health benefit, health policy and regulatory affairs and other health industry concerns as a practicing attorney and management consultant, thought leader, author, public policy advocate and lecturer.

Throughout her adult life and nearly 30-year legal career, Ms. Stamer’s legal, management and governmental affairs work has focused on helping health industry, health benefit and other organizations and their management use the law, performance and risk management tools and process to manage people, performance, quality, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer supports these organizations and their leaders on both a real-time, “on demand” basis as well as outsourced operations or special counsel on an interim, special project, or ongoing basis with strategic planning and product and services development and innovation; workforce and operations management, crisis preparedness and response as well as to prevent, stabilize and cleanup legal and operational crises large and small that arise in the course of operations. 

Throughout her career, she has helped health industry clients manage workforce, medical staff, vendors and suppliers, medical billing, reimbursement, claims and other provider-payer relations, business partners, and their recruitment, performance, discipline, compliance, safety, compensation, benefits, and training ;board, medical staff and other governance; compliance and internal controls; strategic planning, process and quality improvement; change management; assess, deter, investigate and address staffing, quality, compliance and other performance; meaningful use, EMR, HIPAA and other data security and breach and other health IT and data; crisis preparedness and response; internal, government and third-party reporting, audits, investigations and enforcement; government affairs and public policy; and other compliance and risk management, government and regulatory affairs and operations concerns.

Author of leading works on HIPAA and other privacy and data security works and the scribe leading the American Bar Association Joint Committee on Employee Benefits Annual Agency Meeting with OCR, her experience includes extensive compliance, risk management and data breach and other crisis event investigation, response and remediation under HIPAA and other laws.  

The American Bar Association (ABA) International Section Life Sciences Committee Vice Chair, a Scribe for the ABA Joint Committee on Employee Benefits (JCEB) Annual OCR Agency Meeting, former Vice President of the North Texas Health Care Compliance Professionals Association, past Chair of the ABA Health Law Section Managed Care & Insurance Section, past ABA JCEB Council Representative, past Board President of Richardson Development Center (now Warren Center) for Children Early Childhood Intervention Agency, past North Texas United Way Long Range Planning Committee Member, and past Board Member and Compliance Chair of the National Kidney Foundation of North Texas, Ms. Stamer has worked closely with a diverse range of physicians, hospitals and healthcare systems, DME, Pharma, clinics, health care providers, managed care, insurance and other health care payers, quality assurance, credentialing, technical, research, public and private social and community organizations, and other health industry organizations and their management deal with governance; credentialing, patient relations and care; staffing, peer review, human resources and workforce performance management; outsourcing; internal controls and regulatory compliance; billing and reimbursement; physician, employment, vendor, managed care, government and other contracting; business transactions; grants; tax-exemption and not-for-profit; licensure and accreditation; vendor selection and management; privacy and data security; training; risk and change management; regulatory affairs and public policy and other concerns.

As a core component of her work, Ms. Stamer has worked extensively throughout her career with health care providers, health plans and insurers, managed care organizations, health care clearinghouses, their business associates, employers, banks and other financial institutions, management services organizations, professional associations, medical staffs, accreditation agencies, auditors, technology and other vendors and service providers, and others on legal and operational compliance, risk management and compliance, public policies and regulatory affairs, contracting, payer-provider, provider-provider, vendor, patient, governmental and community relations and matters including extensive involvement advising, representing and defending public and private hospitals and health care systems; physicians, physician organizations and medical staffs; specialty clinics and pharmacies; skilled nursing, home health, rehabilitation and other health care providers and facilities; medical staff, accreditation, peer review and quality committees and organizations; billing and management services organizations; consultants; investors; technology, billing and reimbursement and other services and product vendors; products and solutions consultants and developers; investors; managed care organizations, insurers, self-insured health plans and other payers; and other health industry clients to establish and administer compliance and risk management policies; comply with requirements, investigate and respond to Board of Medicine, Health, Nursing, Pharmacy, Chiropractic, and other licensing agencies, Department of Aging & Disability, FDA, Drug Enforcement Agency, OCR Privacy and Civil Rights, Department of Labor, IRS, HHS, DOD, FTC, SEC, CDC and other public health, Department of Justice and state attorneys’ general and other federal and state agencies; JCHO and other accreditation and quality organizations; private litigation and other federal and state health care industry investigation, enforcement including insurance or other liability management and allocation; process and product development, contracting, deployment and defense; evaluation, commenting or seeking modification of regulatory guidance, and other regulatory and public policy advocacy; training and discipline; enforcement, and a host of other related concerns for public and private health care providers, health insurers, health plans, technology and other vendors, employers, and others.and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns.

Past Chair of the ABA Managed Care & Insurance Interest Group and, a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also has extensive health care reimbursement and insurance experience advising and defending health care providers, payers, and others about Medicare, Medicaid, Medicare and Medicaid Advantage, Tri-Care, self-insured group, association, individual and group and other health benefit programs and coverages including but not limited to advising public and private payers about coverage and program design and documentation, advising and defending providers, payers and systems and billing services entities about systems and process design, audits, and other processes; provider credentialing, and contracting; providers and payer billing, reimbursement, claims audits, denials and appeals, coverage coordination, reporting, direct contracting, False Claims Act, Medicare & Medicaid, ERISA, state Prompt Pay, out-of-network and other nonpar insured, and other health care claims, prepayment, post-payment and other coverage, claims denials, appeals, billing and fraud investigations and actions and other reimbursement and payment related investigation, enforcement, litigation and actions.

Heavily involved in health care and health information technology, data and related process and systems development, policy and operations innovation and a Scribe for ABA JCEB annual agency meeting with OCR for many years who has authored numerous highly-regarded works and training programs on HIPAA and other data security, privacy and use, Ms. Stamer also is widely recognized for her extensive work and leadership on leading edge health care and benefit policy and operational issues including meaningful use and EMR, billing and reimbursement, quality measurement and reimbursement, HIPAA, FACTA, PCI, trade secret, physician and other medical confidentiality and privacy, federal and state data security and data breach and other information privacy and data security rules and many other concerns. Her work includes both regulatory and public policy advocacy and thought leadership, as well as advising and representing a broad range of health industry and other clients about policy design, drafting, administration, business associate and other contracting, risk assessments, audits and other risk prevention and mitigation, investigation, reporting, mitigation and resolution of known or suspected violations or other incidents and responding to and defending investigations or other actions by plaintiffs, DOJ, OCR, FTC, state attorneys’ general and other federal or state agencies, other business partners, patients and others.

Ms. Stamer has worked extensively with health care providers, health plans, health care clearinghouses, their business associates, employers and other plan sponsors, banks and other financial institutions, and others on risk management and compliance with HIPAA, FACTA, trade secret and other information privacy and data security rules, including the establishment, documentation, implementation, audit and enforcement of policies, procedures, systems and safeguards, investigating and responding to known or suspected breaches, defending investigations or other actions by plaintiffs, OCR and other federal or state agencies, reporting known or suspected violations, business associate and other contracting, commenting or obtaining other clarification of guidance, training and and enforcement, and a host of other related concerns. Her clients include public and private health care providers, health insurers, health plans, technology and other vendors, and others. In addition to representing and advising these organizations, she also has conducted training on Privacy & The Pandemic for the Association of State & Territorial Health Plans, as well as HIPAA, FACTA, PCI, medical confidentiality, insurance confidentiality and other privacy and data security compliance and risk management for Los Angeles County Health Department, MGMA, ISSA, HIMMS, the ABA, SHRM, schools, medical societies, government and private health care and health plan organizations, their business associates, trade associations and others.

A former lead consultant to the Government of Bolivia on its Pension Privatization Project with extensive domestic and international public policy concerns in Pensions, healthcare, workforce, immigration, tax, education and other areas.

A popular lecturer and widely published author on health industry concerns, Ms. Stamer continuously advises health industry clients about compliance and internal controls, workforce and medical staff performance, quality, governance, reimbursement, privacy and data security, and other risk management and operational matters. Ms. Stamer also publishes and speaks extensively on health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns.

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other related concerns by her service in the leadership of the Solutions Law Press, Inc. Coalition for Responsible Health Policy, its PROJECT COPE: Coalition on Patient Empowerment, and a broad range of other professional and civic organizations including North Texas Healthcare Compliance Association, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children (now Warren Center For Children); current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, past Representative and chair of various committees of ABA Joint Committee on Employee Benefits; a ABA Health Law Coordinating Council representative, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.
Ms. Stamer also is a highly popular lecturer, symposium and chair, faculty member and author, who publishes and speaks extensively on health and managed care industry, human resources, employment and other privacy, data security and other technology, regulatory and operational risk management. Examples of her many highly regarded publications on these matters include “Protecting & Using Patient Data In Disease Management: Opportunities, Liabilities And Prescriptions,” “Privacy Invasions of Medical Care-An Emerging Perspective,” “Cybercrime and Identity Theft: Health Information Security: Beyond HIPAA,” as well as thousands of other publications, programs and workshops these and other concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, Insurance Thought Leadership and many other prominent publications and speaks and conducts training for a broad range of professional organizations.
For more information about Ms. Stamer or her health industry and other experience and involvements, see here or contact Ms. Stamer via telephone at (469) 767-8872 or via e-mail here.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources at www.solutionslawpress.com
If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating your profile here.
©2017 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ All other rights reserved. For information about republication or other use, please contact Ms. Stamer here.

 


MHS $5.5M HIPAA Settlement Reminds Health Plans To Implement & Audit HIPAA Compliance

February 16, 2017

A $5.5 million settlement payment that Memorial Healthcare Systems (MHS) just paid the U.S. Department of Health and Human Services (HHS) to settle potential violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy and Security Rules sends a clear warning message to all health plans, healthcare providers and health care clearinghouses (Covered Entities) and their business associates that simply adopting HIPAA policies alone is insufficient to avoid getting nailed by OCR under HIPAA; Covered Entities and their business associates also must implement, audit and enforce those policies.

MHS, a nonprofit corporation which operates six hospitals, an urgent care center, a nursing home, and a variety of ancillary health care facilities throughout the South Florida area with affiliated physician offices through an Organized Health Care Arrangement (OHCA) also agreed to implement a robust corrective action plan as part of the Resolution Agreement.

The MHS Resolution Agreement resulted from an investigation initiated by the HHS Office for Civil Rights (OCR) after MHS reported to OCR that protected health information (PHI) of 115,143 individuals had been impermissibly accessed by its employees and impermissibly disclosed to affiliated physician office staff. This information consisted of the affected individuals’ names, dates of birth, and social security numbers. The login credentials of a former employee of an affiliated physician’s office had been used to access the ePHI maintained by MHS on a daily basis without detection from April 2011 to April 2012, affecting 80,000 individuals.

The investigation revealed that although MHS had workforce access policies and procedures in place, MHS failed to implement procedures with respect to reviewing, modifying and/or terminating users’ right of access, as required by the HIPAA Rules. Further, MHS failed to regularly review records of information system activity on applications that maintain electronic protected health information by workforce users and users at affiliated physician practices, despite having identified this risk on several risk analyses conducted by MHS from 2007 to 2012.

MHS’ failure to follow through to implement the controls required by its policies and audit and enforce compliance with HIPAA and its HIPAA policies was a costly mistake. Other Covered Entities should heed MHS’ painful lesson and take documented steps to ensure its HIPAA policies not only are adopted, but also implemented and monitored and audited for compliance.

In response to the MHS settlement, health plans, their sponsors, fiduciaries and business associates should take documented action to audit and correct as needed both their written policies, procedures and notices as well as their operational compliance with HIPAA to mitigate their exposure to similar enforcement action for HIPAA violations.

About The Author

Recognized by LexisNexis® Martindale-Hubbell® as a “AV-Preeminent” (Top 1%/ the highest) and “Top Rated Lawyer,” with special recognition as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: Erisa & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, the author of this update is widely known for her 28 plus years’ of work in health care, health benefit, health policy and regulatory affairs and other health industry concerns as a practicing attorney and management consultant, thought leader, author, public policy advocate and lecturer.

Throughout her adult life and nearly 30-year legal career, Ms. Stamer’s legal, management and governmental affairs work has focused on helping health industry, health benefit and other employee benefit, insurance, technology and other highly regulated organizations and their management use the law, performance and risk management tools and process to manage people, performance, quality, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer helps these and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup legal and operational crises large and small that arise in the course of operations.

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, current American Bar Association (ABA) International Section Life Sciences Committee Vice Chair, Scribe for the ABA Joint Committee on Employee Benefits (JCEB) Annual OCR Agency Meeting, former Vice President of the North Texas Health Care Compliance Professionals Association, past Chair of the ABA Health Law Section Managed Care & Insurance Section, past ABA JCEB Council Representative, past Board President of Richardson Development Center (now Warren Center) for Children Early Childhood Intervention Agency, past North Texas United Way Long Range Planning Committee Member, and past Board Compliance Chair of the National Kidney Foundation of North Texas, and Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Ms. Stamer’s includes nearly 30 years’ of work with a diverse range of health industry clients on an extensive range of matters.

Ms. Stamer has worked closely with health industry, managed care and insurance, employee benefit, financial services, technology, restructuring, retail, hospitality, manufacturing, consulting, sales, energy, import-export, staffing and other businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of staffing, human resources and workforce performance management, internal controls and regulatory compliance, change management and other performance and operations management and compliance. She supports her clients both on a real-time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

As a core component of her work, Ms. Stamer has worked extensively throughout her career with health care providers, health plans and insurers, managed care organizations, health care clearinghouses, their business associates, employers, banks and other financial institutions, management services organizations, professional associations, medical staffs, accreditation agencies, auditors, technology and other vendors and service providers, and others on legal and operational compliance, risk management and compliance, public policies and regulatory affairs, contracting, payer-provider, provider-provider, vendor, patient, governmental and community relations and matters including extensive involvement advising, representing and defending public and private hospitals and health care systems; physicians, physician organizations and medical staffs; specialty clinics and pharmacies; skilled nursing, home health, rehabilitation and other health care providers and facilities; medical staff, accreditation, peer review and quality committees and organizations; billing and management services organizations; consultants; investors; technology, billing and reimbursement and other services and product vendors; products and solutions consultants and developers; investors; managed care organizations, insurers, self-insured health plans and other payers; and other health industry clients to establish and administer compliance and risk management policies; comply with requirements, investigate and respond to Board of Medicine, Health, Nursing, Pharmacy, Chiropractic, and other licensing agencies, Department of Aging & Disability, FDA, Drug Enforcement Agency, OCR Privacy and Civil Rights, Department of Labor, IRS, HHS, DOD, FTC, SEC, CDC and other public health, Department of Justice and state attorneys’ general and other federal and state agencies; JCHO and other accreditation and quality organizations; private litigation and other federal and state health care industry investigation, enforcement including insurance or other liability management and allocation; process and product development, contracting, deployment and defense; evaluation, commenting or seeking modification of regulatory guidance, and other regulatory and public policy advocacy; training and discipline; enforcement, and a host of other related concerns for public and private health care providers, health insurers, health plans, technology and other vendors, employers, and others, and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns.

Best known for her thoughleadership and experience on health benefit and other health and insurance industy matters, Ms. Stamer has worked throughout her career health care, health benefit and insurance and health information technology, data and related process and systems development, policy and operations design, management, product development, innovation, administration, public policy, regulatory compliance, enforcement, contracting, privacy and data security and related matter.  Ms. Stamer continuously advises health and insurance industry clients about licensing, regulatory compliance and internal controls, workforce, agent and broker and medical staff performance, claims and reimbursement, quality, governance, reimbursement, privacy and data security, and other risk management and operational matters. Scribe for ABA JCEB annual agency meeting with OCR for many years, Ms. Stamer also is widely recognized for her extensive work and leadership on HIPAA, FACTA, PCI, IRC and other tax, Social Security, GLB, rade secret, physician and other medical confidentiality and privacy, federal and state data security and data breach and other information privacy and data security rules and concerns including policy design, drafting, administration and training; business associate and other contracting; risk assessments, audits and other risk prevention and mitigation; investigation, reporting, mitigation and resolution of known or suspected breaches, violations or other incidents; and defending investigations or other actions by plaintiffs, OCR, FTC, state attorneys’ general and other federal or state agencies, other business partners, patients and others. Ms. Stamer has worked extensively with health care providers, health plans, health care clearinghouses, their business associates, employers and other plan sponsors, banks, insurers and other financial institutions, and others on trade secret confidentiality, privacy, data security and other risk management and compliance including the design, establishment, documentation, implementation, audit and enforcement of policies, procedures, systems and safeguards, investigating and responding to known or suspected breaches, defending investigations or other actions by plaintiffs, OCR, FTC and other federal or state agencies, reporting known or suspected violations, business associate and other contracting, commenting or obtaining other clarification of guidance, training and enforcement, and a host of other related concerns. Her clients include public and private health care providers, health insurers, health plans, employers, payroll, staffing, recruitment, insurance and financial services, technology and other vendors, and others.  In addition to representing and advising these organizations, she also has conducted training on Privacy & The Pandemic for the Association of State & Territorial Health Plans, as well as HIPAA, FACTA, PCI, medical confidentiality, insurance confidentiality and other privacy and data security compliance and risk management for Los Angeles County Health Department, ISSA, HIMMS, the ABA, SHRM, schools, medical societies, government and private health care and health plan organizations, their business associates, trade associations and others. Ms. Stamer also has authored numerous highly-regarded works and training programs on HIPAA and other data security, privacy and use published by BNA, the ABA and other premier legal industy publishers.

Ms. Stamer also has extensive experience with a diverse array of other human resources and other staffing, services, outsourcing and other workforce, qualified and nonqualified employee benefit, compensation, and related matters, their design, documentation, administration, modification, enforcement and defense and other related operational, compliance and risk management.  Her experience includes advising andassisting employer and other plan sponsors, fiduciaries, administrators, vendors and others with and program design, documentation and ongoing administration administration for compliance and defensibility under IRS and other federal and state tax, OFCCP, CAS, SCA, Davis Bacon, SEC and other corporate, ERISA and other federal and state labor and employment, SEC and other corporate, Department of Insurance and other laws and regulations; advising and assisting buyers, sellers, investors, debtors, creditors, trustees, plan fiduciaries and service providers and others in relation to business transactions, restructurings, bankruptcies and other substantial corporate and business events and transactions including significant work involving amendment, termination, windup and restructuring of employee benefit plans and workforce concerns in highly publicized fiduciary, securities or other misconduct investigation and enforcement, bankruptcy, restructuring or other distress situations.

A former lead consultant to the Government of Bolivia on its Pension Privatization Project with extensive domestic and international public policy and governmental and regulatory affairs experience, Ms. Stamer also is widely recognized for regulatory and policy work, advocacy and outreach on healthcare, education, aging, disability, savings and retirement, workforce, ethics, and other policies. Throughout her adult life and career, Ms. Stamer has provided thought leadership; policy and program design, statutory and regulatory development design and analysis; drafted legislation, proposed regulations and other guidance, position statements and briefs, comments and other critical policy documents; advised, assisted and represented health care providers, health plans and insurers, employers, professional. and trade associations, community and government leaders and others on health care, health, pension and retirement, workers’ compensation, Social Security and other benefit, insurance and financial services, tax, workforce, aging and disability, immigration, privacy and data security and a host of other international and domestic federal, state and local public policy and regulatory reforms through her involvement and participation in numerous client engagements, founder and Executive Director of the Coalition for Responsible Health Policy and its PROJECT COPE: the Coalition on Patient Empowerment, adviser to the National Physicians Congress for Healthcare Policy, leadership involvement with the US-Mexico Chamber of Commerce, the Texas Association of Business, the ABA JCEB, Health Law, RPTE, Tax, Labor, TIPS, International Life Sciences, and other Sections and Committees, SHRM Governmental Affairs Committee and a host of other involvements and activities.

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also publishes and speaks extensively on health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns. Her insights on these and other related matters appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications.  In addition to her many years of service as a scrivener for the ABA JCEB’s meeting with OCR, for instance, she also serves as Chair the Southern California ISSA Health Care Privacy & Security Summit, and an editorial advisory board member, author, program chair or steering committee member, and faculties for a multitude of other programs and publications regarding privacy, data security, technology and other compliance, risk management and operational concerns in the health care, health and other insurance, employee benefits and human resources, retail, financial services and other arenas.Ms. Stamer also shares her thought leadership, experience and advocacy on HIPAA and other concerns by her service in the leadership of a broad range of other professional and civic organization including her involvement as the Vice Chair of the North Texas Healthcare Compliance Association, Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE: Coalition on Patient Empowerment, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; former Board Compliance Chair and Board member of the National Kidney Foundation of North Texas, current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, immediate past RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative and current RPTE Representative to the ABA Health Law Coordinating Council, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.

Ms. Stamer also is a highly popular lecturer, symposium and chair, faculty member and author, who publishes and speaks extensively on health and managed care industry, human resources, employment and other privacy, data security and other technology, regulatory and operational risk management. Examples of her many highly regarded publications on these matters include “Protecting & Using Patient Data In Disease Management: Opportunities, Liabilities And Prescriptions,” “Privacy Invasions of Medical Care-An Emerging Perspective,” “Cybercrime and Identity Theft: Health Information Security: Beyond HIPAA,” as well as thousands of other publications, programs and workshops these and other concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, Insurance Thought Leadership and many other prominent publications and speaks and conducts training for a broad range of professional organizations.

For more information about Ms. Stamer or her health industry and other experience and involvements, see here or contact Ms. Stamer via telephone at (469) 767-8872 or via e-mail here.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources here such as:

 

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating or your profile here.

©2017 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ All other rights reserved.


DOL Aggressively Targeting Restaurants For Wage & Hour & Child Labor Law Violations

November 3, 2016

Restaurant employers beware! Restaurants are the target of a highly successful, U.S. Department of Labor Wage and Hour Division (WHD) restaurant enforcement and compliance initiative that WHD already has used to nail a multitude of restaurants across the country for “widespread violations” of Fair Labor Standards Act (FLSA) minimum wage, overtime, child labor and other wage and hour laws (WH Law).

Having reportedly found WH Law violations in “nearly every one” of the WH Law investigations conducted against restaurant employers during 2016 and recovered millions of dollars of back pay and penalties from restaurants caught through investigations conducted under its WHD Restaurant Enforcement Initiative, WHD Administrator Dr. David Weil recently confirmed WHD plans to expand the restaurant employers targeted for investigation and other efforts to punish and correct WH Law violations under the Restaurant Enforcement Initiative through 2017 in an October 5, 2016 WHD News Release: Significant Violations In The Austin Restaurant Industry Raise Concerns For Us Labor Department Officials (News Release).

The News Release quotes Administrator Weil as stating:

The current level of noncompliance found in these investigations is not acceptable …WHD will continue to use every tool we have available to combat this issue. This includes vigorous enforcement as well as outreach to employer associations and worker advocates to ensure that Austin restaurant workers receive a fair day’s pay for a fair day’s work.

Given the substantial back pay, interest, civil or in the case of willful violations, criminal penalties, costs of defense and prosecution and other sanctions that restaurant employers, their owners and management can face if their restaurant is caught violating FLSA or other WH Laws, restaurants and their leaders should arrange for a comprehensive review within the scope of attorney-client privilege of the adequacy and defensibility of their existing policies, practices and documentation for classifying, assigning duties, tracking regular and overtime hours, paying workers and other WH Law compliance responsibilities and opportunities to mitigate risks and liabilities from WH Law claims and investigations.

Many Restaurants Already Nailed Through Restaurant Enforcement Initiative

Even before the planned 2017 expansion of its Restaurant Enforcement Initiative, WHD’s enforcement record shows WHD’s efforts to find and punish restaurants that violate WH Laws are highly successful. Restaurant employers overwhelmingly are the employers targeted by WHD in the vast majority of the WH Law settlements and prosecutions announced in WHD News Releases published over the past two years, including aggregate back pay and penalty awards of more than $11.4 million recovered through the following 31 actions announced by WHD between January 1, 2016 and October 31, 2016:

Enforcement Actions Highlight Common Restaurant WH Law Compliance Concerns

Restaurant employers, like employers in most other industries, are subject to a host of minimum wage, overtime and other requirements including the FLSA requirement that covered, nonexempt employees earn at least the federal minimum wage of $7.25 per hour for all regular hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Employers also are required to maintain accurate time and payroll records and must comply with child labor, anti-retaliation and other WH Law requirements.

The News Release identified some of the common violations WHD uncovered in these investigations included employers:

  • Requiring employees to work exclusively for tips, with no regard to minimum-wage standards;
  • Making illegal deductions from workers’ wages for walkouts, breakages, credit card transaction fees and cash register shortages, which reduce wages below the required minimum wage;
  • Paying straight-time wages for overtime hours worked.
  • Calculating overtime incorrectly for servers based on their $2.13 per hour base rates before tips, instead of the federal minimum wage of $7.25 per hour.
  • Failing to pay proper overtime for salaried non-exempt cooks or other workers;
  • Creating illegal tip pools involving kitchen staff;
  • Failing to maintain accurate and thorough records of employees’ wages and work hours.
  • Committing significant child labor violations, such as allowing minors to operate and clean hazardous equipment, including dough mixers and meat slicers.

Use Care To Verify Tipped Employees Paid Properly

Based on the reported violations, restaurants employing tipped employees generally will want to carefully review their policies, practices and records regarding their payment of tipped employees. Among other things, these common violations reflect a widespread misunderstanding or misapplication of special rules for calculating the minimum hourly wage that a restaurant must pay an employee that qualifies as a tipped employee.  While special FLSA rules for tipped employees may permit a restaurant to claim tips (not in excess of $5.12 per hour) actually received and retained by a “tipped employee,” not all workers that receive tips are necessarily covered by this special rule. For purposes of this rule, the definition of “tipped employee” only applies to an employee who customarily and regularly receives more than $30 per month in tips.

Also, contrary to popular perception, the FLSA as construed by the WHD does not set the minimum wage for tipped employees at $2.13 per hour. On the contrary, the FLSA requirement that non-exempt workers be paid at least the minimum wage of $7.25 per hour for each regular hour worked also applies to tipped employees. When applicable, the special rule for tipped employees merely only allows an employer to claim the amount of the tips that the restaurant can prove the tipped employee actually received and retained (not in excess of $5.13 per hour) as a credit against the minimum wage of $7.25 per hour the FLSA otherwise would require the employer to pay the tipped employee. Only tips actually received by the employee may be counted in determining whether the employee is a tipped employee and in applying the tip credit.  If a tipped employee earns less than $5.13 per hour in tips, the restaurant must be able to demonstrate that the combined total of the tips retained by the employee and the hourly wage otherwise paid to the tipped employee by the restaurant equaled at least the minimum wage of $7.25 per hour.

Furthermore, restaurant or other employers claiming a tip credit must keep in mind that the FLSA generally provides that tips are the property of the employee. The FLSA generally prohibits an employer from using an employee’s tips for any reason other than as a credit against its minimum wage obligation to the employee (“tip credit”) or in furtherance of a valid tip pool.

Also, whether for purposes of applying the tip credit rules or other applicable requirements of the FLSA and other wage and hour laws, restaurant employers must create and retain appropriate records and other documentation regarding worker age, classification, hours worked, tips and other compensation paid and other evidence necessary to defend their actions with respect to tipped or other employees under the FLSA and other WH Law rules. Beyond accurately and reliably capturing all of the documentation required to show proper payment in accordance with the FLSA, restaurants also should use care to appropriately document leave, discipline and other related activities as necessary to show compliance with anti-retaliation, equal pay, family and medical leave, and other mandates, as applicable.  Since state law also may impose additional minimum leave, break time or other requirements, restaurants also generally will want to review their policies, practices and records to verify their ability to defend their actions under those rules as well.

Child Labor Rules Require Special Care When Employing Minors

While hiring workers under the age of 18 (minors) can help a restaurant fulfill its staffing needs while providing young workers valuable first time or other work experience, restaurants that hire minors must understand and properly comply with any restrictions on the duties, work hours or other requirements for employment of the minor imposed by federal or state child labor laws.

As a starting point, the legal requirements for employing minors generally greater, not less, than those applicable to the employment of an adult in the same position.  Employers employing workers who are less than 18 years of age (minors) should not assume that the employer can pay the minor less than minimum wage or skip complying with other legal requirements that normally apply to the employment of an adult in that position by employing the minor in an “internship” or other special capacity. The same federal and state minimum wage, overtime, safety and health and nondiscrimination rules that generally apply to the employment of an adult generally will apply to its employment of a worker who is a minor.

Beyond complying with the rules for employment of adults, restaurants employing minors also must ensure that they fully comply with all applicable requirements for the employment of minors imposed under the FLSA child labor rules and applicable state law enacted to ensure that when young people work, the work is safe and does not jeopardize their health, well-being or educational opportunities.   Depending on the age of the minor, the FLSA or state child labor rules may necessitate that a restaurant tailor the duties and hours of work of an employee who is a minor to avoid the substantial liability that can result when an employer violates one of these child labor rules.

The FLSA child labor rules, for instance, impose various special requirements for the employment of youth 14 to 17 years old. See here.  As a starting point, the FLSA child labor rules prohibit the any worker less than 18 years of age from operating or cleaning dough mixers, meat slicers or other hazardous equipment. Depending on the age of the minor worker, the FLSA child labor rules or state child labor laws also may impose other restrictions on the duties that the restaurant can assign or allow the minor to perform.  Restaurants hiring any worker that is a minor must evaluate the duties identified as hazardous “occupations” that the FLSA child labor rules prohibit a minor of that age to perform here as an “occupation” and take the necessary steps to ensure the minor is not assigned and does not perform any of those prohibited activities in the course of his employment.

In addition to ensuring that minors don’t perform prohibited duties, restaurants employing minors also comply with all applicable restrictions on the hours that the minor is permitted to work based on the age of the minor worker.  For instance, the FLSA and state child labor rules typically prohibit scheduling a minor less than 16 years of age to work during school hours and restrict the hours outside school hours the minor can work based on his age.  Additional restrictions on the types of jobs and hours 14- and 15-year-olds may work also may apply.

Compliance with the FLSA child labor rules is critically important for any restaurant or other employer that employs a minor, particularly since the penalties for violation of these requirements were substantially increased in 2010, as Streets Seafood Restaurant learned earlier this year.

According to a WHD News Release, Street’s Seafood Restaurant paid $14,288 in minimum wage and overtime back wages and an equal amount in liquidated damages totaling $28,577 to eight employees, and also was assessed a civil money penalty of $14,125 for FLSA child labor violations committed in the course of its employment of four minors ages 15 to 17. Specifically, investigators found Street’s Seafood Restaurant:

WHD’s announcement of the settlement resolving these child labor laws quotes Kenneth Stripling, director of the division’s Birmingham District Office as stating:

Employing young people provides valuable experience, but that experience must never come at the expense of their safety …Additionally, employers have an obligation to pay employees what they have legally earned. All workers deserve a fair day’s pay for a fair day’s work. Unfortunately, Street’s Seafood violated not only child labor laws, but has also shorted workers’ pay. The resolution of this case sends a strong message that we will not tolerate either of those behaviors.

Restaurants Must Act To Minimize Risks

Beyond WHD’s direct enforcement actions, WHD also is seeking to encourage private enforcement of WH Law violations by conducting an aggressive outreach to employees, their union and private plaintiff representatives, states and others. Successful plaintiffs in private actions typically recover actual back pay, double damage penalties plus attorneys’ fees and costs. The availability of these often lucrative private damages makes FLSA and other WH Law claims highly popular to disgruntled or terminated workers and their lawyers.  When contemplating options to settle claims WH Law claims made by a worker, employers need to keep in mind that WHD takes the position that settlements with workers do not bar the WHD from taking action unless the WHD joins in the settlement and in fact, past settlements may provide evidence of knowingness or willfulness by the employer in the event of a WHD prosecution.  The substantial private recoveries coupled with these and other WHD enforcement and other compliance actions mean bad news for restaurant employers that fail to manage their FLSA and other WH Law compliance.  Restaurant employers should act within the scope of attorney-client privilege to review and verify their compliance and consult with legal counsel about other options to minimize their risk and streamline and strengthen their ability to respond to and defend against audits, investigations and litigation.

Beyond verifying the appropriateness of their timekeeping and compensation activities and documentation, restaurants and staffing or management organizations working with them also should use care to mitigate exposures that often arise from missteps or overly aggressive conduct by others providing or receiving management services or staffing services. All parties to these arrangements and their management should keep in mind that both parties participating in such arrangements bear significant risk if responsibilities are not properly performed.   Both service and staffing providers and restaurants using their services should insist on carefully crafted commitments from the other party to properly classify, track hours, calculate and pay workers, keep records, and otherwise comply with WH Laws and other legal requirements.  Parties to these arrangements both generally also will want to insist that these contractual reassurances are backed up with meaningful audit and indemnification rights and carefully monitor the actions of service providers rendering these services.

About The Author

Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,”“Tax: Erisa & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney and management consultant, author, public policy advocate and lecturer widely known for work, teachings and publications.

Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce, internal controls and regulatory compliance, change management and other performance and operations management and compliance. She supports her clients both on a real-time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares shared her thought leadership, experience and advocacy on these and other concerns by her service in the leadership of a broad range of other professional and civic organization including her involvement as the Vice Chair of the North Texas Healthcare Compliance Association, Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE: Coalition on Patient Empowerment, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; former Board Compliance Chair and Board member of the National Kidney Foundation of North Texas, current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, immediate past RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative and current RPTE Representative to the ABA Health Law Coordinating Council, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.

Ms. Stamer also is a highly popular lecturer, symposia chair and author, who publishes and speaks extensively on health and managed care industry, human resources, employment, employee benefits, compensation, and other regulatory and operational risk management. Examples of her many highly regarded publications on these matters include the “Texas Payday Law” Chapter of Texas Employment Law, as well as thousands of other publications, programs and workshops these and other concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications and speaks and conducts training for a broad range of professional organizations and for clients on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. For additional information about Ms. Stamer, see CynthiaStamer.com or contact Ms. Stamer via email here or via telephone to (469) 767-8872.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources at http://www.solutionslawpress.com such as:

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©2016 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ All other rights reserved.


Health Plans, Other Covered Entities Have Continuing Duty To Reevaluate HIPAA Enterprise Risk To PHI & Address Security Risks & Other Compliance Concern On Ongoing Basis

October 27, 2016

Compliance with the Privacy and Security Rules of the Health Insurance Portability & Accountability Act (HIPAA) is a living process that requires employer and other health plans, health insurers, health care providers and healthcare clearinghouses to recurrently reevaluate their HIPAA enterprise risk and timely act to mitigate security threats to electronic (ePHI) and other  protected health information and other HIPAA compliance concerns on an ongoing basis.  That’s the clear take away applicable to all HIPAA-Covered Entities and business associates from the St. Joseph Health Resolution Agreement and Corrective Action Plan (SJH Settlement) and the Oregon Health & Science University Resolution Agreement and Corrective Action Plan (OHSU Settlement) announced by the Department of Health & Human Services Office of Civil Rights (OCR)  in the past 30 days.  Health plans, their sponsors, fiduciaries and vendors, health care providers and health care clearinghouses should carefully heed this message and in response take documented steps to ensure

  • Their existing policies, practices and procedures properly are updated in response to changing guidance and events;
  • They in place the current, comprehensive enterprise risk assessment along with a mitigation plan documenting actions taken to address these risks;
  • Ensure that the organization has and is administering appropriate, documented processes and procedures to ensure that the organization reassesses its enterprise risk assessment and compliance on a timely basis as warranted by changes or other events that could impact ePHI, regulatory developments or other events that might impact its compliance; and
  • Have an appropriate, documented process for oversight by C-level management.

OHSU Charges & Settlement

The OHSU Settlement Agreement announced by OCR on September 23, 2016 requires OHSU to pay a $2.7 million settlement payment and adopt and implement a comprehensive three-year corrective action plan to address “widespread and diverse” HIPAA compliance problems OCR reports uncovering while investigating multiple HIPAA breach reports the large public academic health center and research university centered in Portland, Oregon.

OCR began investigating OHSU after the large public academic health center and research university centered in Portland, Oregon, submitted three HIPAA breach reports affecting thousands of individuals, including two reports involving unencrypted laptops and another large breach involving a stolen unencrypted thumb drive:

  • On March 23, 2013, HHS received notification from OHSU regarding a breach of its unsecured electronic protected health information (“ePHI”) resulting from a stolen laptop computer;
  • On July 28, 2013, HHS received notification from OHSU regarding a breach of its ePHI resulting from storing ePHI at an internet-based service provider without a business associate agreement; and.

These incidents each garnered significant local and national press coverage. OCR’s investigation uncovered evidence of widespread vulnerabilities within OHSU’s HIPAA compliance program, including the storage of the ePHI of more than 3,000 individuals on a cloud-based server without a business associate agreement.  OCR found significant risk of harm to 1,361 of these individuals due to the sensitive nature of their diagnoses.

OCR’s investigation showed the reported breaches resulted from widespread, long-term, systematic and unresolved HIPAA violations by OHSU that OCR attributed to an inadequate commitment to and oversight of HIPAA compliance by OHSU C-level management which resulted in the failure by OHSU to appropriately monitor the adequacy of its ongoing compliance and to assess and address changes in its enterprise-wide risk and compliance obligations on an ongoing basis. OHSU performed risk analyses in 2003, 2005, 2006, 2008, 2010, and 2013, but OCR’s investigation found that these analyses did not cover all ePHI in OHSU’s enterprise, as required by the Security Rule.  While the analyses identified vulnerabilities and risks to ePHI located in many areas of the organization, OHSU did not act in a timely manner to implement measures to address these documented risks and vulnerabilities to a reasonable and appropriate level. OHSU also lacked policies and procedures to prevent, detect, contain, and correct security violations and failed to implement a mechanism to encrypt and decrypt ePHI or an equivalent alternative measure for ePHI maintained on its workstations, despite having identified this lack of encryption as a risk.

OCR concluded that the reported breaches were the result of long-standing, systematic deficiences in OHSU’s  processes and procedures for HIPAA compliance, including the following:

  • While OHSU reportedly performed risk analyses in 2003, 2005, 2006, 2008, 2010, and 2013, OCR says its investigation found that these analyses did not cover all ePHI in OHSU’s enterprise, as required by the Security Rule;
  • While the analyses identified vulnerabilities and risks to ePHI located in many areas of the organization, OHSU did not act in a timely manner to implement measures to address these documented risks and vulnerabilities to a reasonable and appropriate level;
  • OHSU also lacked policies and procedures to prevent, detect, contain, and correct security violations and failed to implement a mechanism to encrypt and decrypt ePHI or an equivalent alternative measure for ePHI maintained on its workstations, despite having identified this lack of encryption as a risk;
  • OHSU failed to comply with its duty under HIPAA to enter into a business associate agreement with a vendor before allowing a vendor business associate to store ePHI; and
  • The absence of meaningful C-suite leadership oversight and commitment to HIPAA compliance.

Based on these investigations, OCR concluded that while OHSU initially adopted HIPAA Policies, the reported breaches were the result of a series of widespread and ongoing breaches of HIPAA resulted including the following:

  • From January 5, 2011, until July 3, 2013, OHSU disclosed the ePHI of 3,044 individuals in violation of Privacy Rules §§160.103 and 164.502(a) when workforce members disclosed the ePHI to a third party internet-based service provider without obtaining a business associate agreement or other satisfactory assurance that the internet-based service provider would safeguard the ePHI;
  • From January 5, 2011 until July 3, 2013 OHSU failed to obtain a business associate agreement from an internet-based service provider that was storing ePHI on its behalf as a business associate as required by 45 C.F.R. § 164.308(b);
  • From January 5, 2011 until July 3, 2013 OHSU failed to implement policies and procedures to prevent, detect, contain, and correct security violations as required under Privacy Rule § 164.308(a)(1)(i);
  • From July 12, 2010 to present, OHSU failed to implement a mechanism to encrypt and decrypt ePHI or an equivalent alternative measure for all ePHI maintained in OHSU’s enterprise as required by Privacy Rules §§ 164.312(a)(2)(iv) and 164.306(d)(3)); and
  • From May 29, 2013 until July 3, 2013, OHSU failed to implement policies and procedures to address security incidents in violation of Privacy Rule § 164.308(a)(6)(i).

According to statements made by OCR Director Jocelyn Samuels in OCR’s announcement of the OHSU Settlement, the breaches should not have happened.  “From well-publicized large scale breaches and findings in their own risk analyses, OHSU had every opportunity to address security management processes that were insufficient,” said OCR Director Jocelyn Samuels.  OCR’s announcement also signals that OCR views inadequate commitment and oversight by OHSU’s senior management to have played a key role in the creation and perpetuation of the OHSU violations.  It quotes OCR Director Jocelyn Samuels  as stating,  “This settlement underscores the importance of leadership engagement and why it is so critical for the C-suite to take HIPAA compliance seriously.”

OCR’s announcement of the OHSU Settlement emphasizes its determination that a lack of commitment and oversight by C-level management resulted in the failure by OHSU to periodically perform a comprehensive enterprise risk analysis and to reevaluate and update that analysis and its policies, practices, procedures and training as warranted by changing events and guidance.

To resolve the HIPAA charges, the OHSU Settlement requires OHSU to pay OCR $2,700,000 as well as take a long series of corrective actions detailed in the Corrective Action Plan incorporated into the Settlement Agreement.  The requirements of the Corrective Action Plan both seek to address the specific weaknesses that lead to the breaches of unsecured ePHI reported by OHSU in its breach notifications as well as the broader deficiencies in OHSU’s overall HIPAA compliance practice by requiring among other things that OHSU:

  • Conduct an accurate and thorough assessment of the potential risks and vulnerabilities to the confidentiality, integrity, and availability of ePHI at all OHSU facilities and on all systems, networks, and devices that create, receive, maintain, or transmit ePHI;.
  • Develop and present to OCR for approval a comprehensive written risk management plan that explains OHSU’s strategy for implementing security measures sufficient to reduce the risks and vulnerabilities identified in the risk analysis to a reasonable and appropriate level based on OHSU’s circumstances as well as a comprehensive, enterprise-wide plan to implement effective oversight of OHSU workforce members to ensure their adherence to HIPAA Rules and OHSU’s internal privacy and security policies and procedures with specific timelines for their expected completion and compensating controls identified in the interim to safeguard OHSU’s ePHI;
  • Implement and administer the written risk management plan and other safeguards as approved by OCR;
  • Provide updates to OCR about OHSU’s implementation of required encryption including a Mobile Device Management (MDM) solution that ensures all OHSU- owned and personally-owned mobile devices (tablets, smart phones, and other mobile devices) that access ePHI on OHSU’s secure network are encrypted other than mobile devices for which OHSU has granted exceptions based on documented evidence of the implementation of alternative reasonable compensating controls to protect the ePHI on such devices;
  • Report to OCR on OHSU’s efforts to a solution to enforce encryption of ePHI on OHSU-owned and personally- owned devices (laptops, desktops, and medical equipment) connecting to OHSU’s secure wired and wireless networks except for any devices for which OHSU has granted exceptions to the encryption requirement;
  • Report to OCR about its implementation of policies that prohibit the transfer of data containing ePHI from OHSU-owned and personally-owned devices to unencrypted removable storage devices (USB drives and portable hard drives) and implementation of a technical solution that enforces the policies prohibiting transfers of this type when attached to the OHSU secure network, except for any removable storage devices for which OHSU has granted exceptions based on documented evidence of reasonable compensating controls that have been implemented to protect the ePHI on such devices;
  • Send a communication to all members of the OHSU community describing its commitment to enterprise encryption;
  • Prepare to the satisfaction of OCR security awareness training materials needed to implement its security management processing including specific privacy and security awareness related to a) use of internet-based information storage services; b) disclosures to third party entities that require a business associate agreement or other reasonable assurance in place to ensure that the business associate will safeguard the protected health information (PHI) and/or ePHI; c) regarding managers, effective oversight of workforce members’ uses and disclosures of PHI, including ePHI, to ensure the workforce members’ compliance with the Privacy and Security Rules and OHSU’s internal policies and procedures; d) security incident reporting; and e) password management;
  • Initially train all workforce members with access to PHI and/or ePHI with 120 days of OCR’s approval of the training and thereafter ensure that new workforce members are trained with 15 days of hire and that all workforce members subsequently continue to receive training on an on-going basis;
  • Review the security awareness training materials annually, and, where appropriate, update the training to reflect changes in Federal law or HHS guidance, any issues discovered during audits or reviews, and any other relevant developments;
  • Management oversight and supervision of the implementation and administration of the corrective actions required by the Corrective Action Plan and HIPAA compliance; and
  • Management reporting to OCR on its actions and compliance with the Corrective Action Plan.

SJH Settlement

Similarly, the SJH Settlement OCR announced on October 18, 2016 with St. Joseph Health (SJH) requires SJH to pay  a $2.4 million plus settlement payment, conduct an enterprise-wide risk analysis and implement and administer a comprehensive correction plan to settle OCR charges that SJH violated HIPAA by allowing files containing ePHI of 31,800 individuals that SJH created for its participation in the Medicare meaningful use program to be publicly accessible on the internet from February 1, 2011, until February 13, 2012.

A nonprofit integrated Catholic health care delivery system sponsored by the St. Joseph Health Ministry, who through its 24,000 employees and 6,000 physicians provides a range of health care services to more than 137,000 inpatients and 3.6 million outpatients each year at SHS’ 4 acute care hospitals, home health agencies, hospice care, outpatient services, skilled nursing facilities, community clinics and physician organizations located throughout California and in parts of Texas and New Mexico.

OCR’s charges against SJH arose out of OCR’s investigation into a 2012 breach notification report SJS filed with OCR.  On February 14, 2012, SJH reported to OCR that files containing electronic protected health information (ePHI) of 31,800 individuals from five of the SJH hospitals-St. Jude Medical Center, Mission Hospital, Queen of the Valley Medical Center, Santa Rosa Memorial Hospital, and Petaluma Valley Hospital that SJH created for its participation in the meaningful use program were publicly accessible on the internet from February 1, 2011, until February 13, 2012, via Google and possibly other internet search engines.

SJH’s report to OCR indicated that this public access resulted from a configuration within its network server in which PDF files containing following patient information were uploaded: patient names; BMI; blood pressure; lab results; smoking status; diagnoses lists; medication allergies; advance directive status and demographic information (language, ethnicity, race, sex, and birth date). The server SJH purchased to store the files included a file sharing application whose default settings allowed anyone with an internet connection to access them. Upon implementation of this server and the file sharing application, SJH did not examine or modify it. As a result, the public had unrestricted access to PDF files containing the ePHI of 31,800 individuals, including patient names, health statuses, diagnoses, and demographic information  from February 14, 2012 until SJH blocked external access to the ePHI when it shut down the application February 13, 2012.

OCR’s investigation indicated the following potential violations of the HIPAA Rules:

  • From February 1, 2011 to February 13, 2012, SJH potentially disclosed the PHI of 31,800 individuals;
  • Evidence indicated that SJH failed to conduct an evaluation in response to the environmental and operational changes presented by implementation of a new server for its meaningful use project, thereby compromising the security of ePHI;
  • Although SJH hired a number of contractors to assess the risks and vulnerabilities to the confidentiality, integrity and availability of ePHI held by SJH, evidence indicated that this was conducted in a patchwork fashion and did not result in an enterprise-wide risk analysis, as required by the HIPAA Security Rule.

To resolve charges resulting from these findings, the SJH Resolution Agreement requires SJH to pay OCR a $2,140,500 settlement payment and adopt a comprehensive corrective action plan which among other things, requires SJH to conduct an enterprise-wide risk analysis, develop and implement a risk management plan, revise its policies and procedures, and train its staff on these policies and procedures.  SJH’s Chief Executive Officer, Annette M. Walker, is named in the Corrective Action Plan as the SJH authorized representative and contact person responsible for overseeing the CAP implementation.

Among other things, the Corrective Action Plan specifically requires that SJH:

  • Within 240 days, conduct an enterprise-wide analysis and provide a report to OCR which includes a complete inventory of all electronic equipment, data systems, and applications that contain or store ePHI, and prepare and deliver to OCR for review an enterprise-wide risk analysis that identifies all security risks and vulnerabilities that incorporates all electronic equipment, data systems, and applications controlled, administered, or owned by SJH, its workforce members, and affiliated staff that contains, stores, transmits, or receives electronic protected health information (ePHJ);
  • Revise this risk analysis plan as directed by OCR based on its review of the presented risk analysis;
  • Develop and implement to the satisfaction of OCR an organization-wide risk management plan to address and mitigate any security risks and vulnerabilities identified in the risk analysis;
  • Distribute the risk management plan as finally approved by OCR to to workforce members involved with implementation of the plan within 30 days of OCR approval;
  • Revise to OCR’s satisfaction, adopt and implement within 30 days of OCR’s approval compliant HIPAA policies and procedures;
  • Prepare for review of OCR training materials and once approved by OCR, provide initial training to required workforce members, and obtain certification of completion of that training from each required workforce member within 60 days of OCR’s approval of the training and thereafter at least annually as long as the Corrective Action Plan remains in force;
  • Promptly conduct a documented investigation of any information indicating a potential workforce member violation of the new HIPAA policies in the manner required by OCR and if the investigation confirms a violation (Reportable Event), notify OCR of the relevant facts, findings, corrective actions and sanctions imposed against the violating workforce member in the manner required by the Corrective Action Plan;
  • Submit annual report to OCR signed and attested to by an SJH officer, which contains the information and attestations of compliance with the requirements of the Corrective Action Plan in accordance with the Corrective Action Plan;
  • Retain for inspection and copying and provide to OCR upon request all documents and records relating to compliance with this Corrective Action Plan for six (6) years from the Effective Date of the SJH Settlement Agreement.

Take Away For Other Covered Entities & Business Associates

The OHSU and SJH Settlement Agreements send a clear message to all Covered Entities and business associates that they must be prepared to demonstrate not only that their initial adoption and implementation of required HIPAA Privacy and Security policies and safeguards, but also that their organization’s leadership needs to be prepared to demonstrate their commitment to HIPAA compliance by making adequate provision for HIPAA compliance, and appropriately monitoring developments that could impact the adequacy of their existing measures and timely update their systems and security, policies, procedures, training and other relevant safeguards.

The Settlements make clear that Covered Entities and their business associates should ensure that their organization possesses a well-documented current enterprise-wide risk assessment, as well as has in place and is administering as necessary to maintain the currency and adequacy of its risk assessment strong practices for conducting documented evaluations of their own HIPAA security, policies, practices, audits and investigations and other procedures necessary to comply with HIPAA, taking into account recent OCR guidance,  its initiation of its Phase II audit program, the insights offered by OCR’s ever growing list of enforcement actions and compliance tools, as well as changes in systems, documentation, software, equipment or other occurrences within the operations of the Covered Entity or business associate’s operations that could impact the currency and adequacy of its risk assessment or otherwise raise compliance risks.

In this respect, Covered Entities and business associates are encouraged to take special note of the advisability of specifically reviewing and updating their HIPAA policies, practices, business associate agreements, training, oversight and documentation to in response to the guidance and insight that OCR provides, including:

Employer and other health plan sponsors, health plan fiduciaries and business associates, and their service providers also generally will want to consider their responsibilities to provide and enforce employer certifications, as well as the fiduciary obligations health plan fiduciaries under the fiduciary responsibility rules of the Employee Retirement Income Security Act (ERISA). Among other things, wrongful disclosure of PHI to a sponsoring employer or others could violate HIPAA or other plan terms.  Furthermore, Department of Labor officials have indicated stated that a fiduciary’s general fiduciary responsibilities can apply to the protection and administration of PHI and other health plan information as well as create a duty by a responsible fiduciary to prudently investigate and take steps to address breaches or other potential concerns that place PHI at risk.  See, HIPAA Settlement Warns Health Plans, Sponsoring Employers & Business Associates To Manage HIPAA Risks.

Furthermore, as breaches of PHI and other violations of HIPAA also frequently give rise to responsibilities or risks under a broad range of other federal and state laws medical and financial privacy and data security, Medicare and other terms of federal program participation, medical credentialing, licensure and ethics, insurance and Employee Retirement Income Security Act fiduciary responsibilities in the case of health plans, contractual,  tort and other exposures, Covered Entities and their business associates also generally are best served to take into account these other responsibilities and exposures in conjunction with the design and administration of their HIPAA compliance and risk management policies and practices.

Covered Entities and their business associates also should seek advice from legal counsel regarding the adequacy of their compliance, investigatory, training, management oversight, training, reporting, documentation, document retention and other processes and procedures that could reduce risks of HIPAA violations and position the organization to effectively and more efficiently respond to a potential breach, audit, investigation or enforcement action and mitigate the costs and potential liability exposures that increasingly attends these events.  In addition, given the typically high financial, operational and legal costs typically incurred to conduct investigations, report and redress breaches, and respond to OCR audits or investigations, much less make any payments and implement any corrective actions required to settle OCR changes, most Covered Entities and their business associations will want to consider the advisability and adequacy of insurance and other sources of funding or indemnification for the often substantial costs that often attend a HIPAA breach, audit or enforcement event. Since HIPAA violations under certain circumstances also can give rise to felony criminal liability, boards of directors and other leaders of Covered Entities and business associates also will want to ensure that their HIPAA compliance policies and practices also are incorporated and monitored by management as part of their organization’s overall Federal Sentencing Guideline Compliance programs and practices.

About The Author

Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of  “Labor & Employment,”“Tax: Erisa & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney and management consultant, author, public policy advocate and lecturer widely known for work, teachings and publications on HIPAA and other privacy and data security concerns earned in connection with her more than 28 years’ of involvement advising and representing business and government clients domestically and internationally about workforce and human resources, employee benefits; health care; insurance and financial; privacy and data security and other performance management, regulatory, internal controls and other compliance, risk management, public policy and operational other key concerns.

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, a Fellow in the American College of Employee Benefit Counsel, past Group Chair and current Defined Contribution Plans Committee Co-Chair, Groups and Substantive Committee and Membership Committee Members, past Welfare Plans Committee Chair and Co-Chair, and former Fiduciary Responsibility Vice Chair of the American Bar Association (ABA) RPTE Section Employee Benefits Group, Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current ABA International Section Life Sciences Committee Vice Chair, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, former ABA Joint Committee on Employee Benefits Council Representative and Marketing Committee Chair and a prolific author and highly popular speaker and consultant, Ms. Stamer helps management manage.

Ms. Stamer’s legal and management consulting work throughout her nearly 30-year career has focused on helping organizations and their management use the law and process to manage people, process, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.

Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce, internal controls and regulatory compliance, change management and other performance and operations management and compliance. She supports her clients both on a real time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

As a core component of her work,  Ms. Stamer has worked extensively throughout her career with health care providers, health plans, health care clearinghouses, their business associates, employers, banks and other financial institutions, their technology and other vendors and service providers, and others on legal and operational risk management and compliance with HIPAA, FACTA, PCI, trade secret, physician and other medical confidentiality and privacy, federal and state data security and data breach and other information privacy and data security rules and concerns; prevention, investigation, response, mitigation and resolution of known or suspected data or privacy breaches or other incidents; defending investigations or other actions by plaintiffs, OCR, FTC, state attorneys’ general and other federal or state agencies; reporting and redressing known or suspected breaches or other violations; business associate and other contracting; insurance or other liability management and allocation; process and product development, contracting, deployment and defense; evaluation, commenting or seeking modification of regulatory guidance, and other regulatory and public policy advocacy; training and discipline; enforcement, and a host of other related concerns for public and private health care providers, health insurers, health plans, technology and other vendors, employers, and others.

Beyond her extensive involvement advising and representing clients on privacy and data security concerns and other health industry matters, Ms. Stamer also has served for several years as a scrivener for the ABA JCEB’s meeting with OCR, the Chair of the Southern California ISSA Health Care Privacy & Security Summit, and an editorial advisory board member, author, program chair or steering committee member, and faculties for a multitude of other programs and publications regarding privacy, data security, technology and other compliance, risk management and operational concerns in the health care, health and other insurance, employee benefits and human resources, retail, financial services and other arenas.

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares shared her thought leadership, experience and advocacy on HIPAA and other concerns by her service in the leadership of a broad range of other professional and civic organization including her involvement as the Vice Chair of the North Texas Healthcare Compliance Association, Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE: Coalition on Patient Empowerment, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; former Board Compliance Chair and Board member of the National Kidney Foundation of North Texas, current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, immediate past RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative and current RPTE Representative to the ABA Health Law Coordinating Council, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.

Ms. Stamer also is a highly popular lecturer, symposia chair and author, who publishes and speaks extensively on health and managed care industry, human resources, employment and other privacy, data security and other technology, regulatory and operational risk management. Examples of her many highly regarded publications on these matters include “Protecting & Using Patient Data In Disease Management: Opportunities, Liabilities And Prescriptions,” “Privacy Invasions of Medical Care-An Emerging Perspective,” “Cybercrime and Identity Theft: Health Information Security: Beyond HIPAA,” as well as thousands of other publications, programs and workshops these and other concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications and speaks and conducts training for a broad range of professional organizations and for clientson the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. For additional information about Ms. Stamer, see CynthiaStamer.com  or contact Ms. Stamer via email here or via telephone to (469) 767-8872.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources at http://www.solutionslawpress.com such as:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating or updating your profile here.

©2016 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™  All other rights reserved.  


ERISA Violations Cost More Now

October 19, 2016

ERISA Civil Penalties For Employers, Fiduciaries & Plan Administrators Rose August 1

Employer and other employee benefit plan sponsors, fiduciaries and administrators required by the Department of Labor Employee Benefit Security Administration (EBSA) to pay a civil monetary penalty for a post-November 2, 2015 violation of the employee benefit related obligations of the  Employee Retirement Income Security Act (ERISA) should expect to pay more if EBSA assesses the penalty after August 1, 2016.

In 2015, Congress passed the Federal Civil Penalties Inflation Adjustment Act Improvements Act, which requires the Department of Labor (DOL) and other agencies adjust their penalties for inflation each year.  In response to this mandate, the DOL has published two interim final rules to adjust its penalties for inflation effective August 1:

Both rules define rules that DOL plans to use to apply the 2015 Inflation Adjustment Act’s formula on how to determine the proper adjustment for each penalty effective August 1, 2016 to civil penalties that DOL can access against employers for violations.

The new method will adjust penalties for inflation, though the amount of the increase is capped at 150 percent of the existing penalty amount. The baseline is the last increase other than for inflation. The following chart shows the new civil penalty amounts assessable by EBSA after August 1, 2016 for post November 2, 2015 ERISA violations.

ERISA Civil Monetary Penalties

Effective 8/16/2016

The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 requires federal agencies to increase the amounts of civil monetary penalties annually for inflation. The new penalties under the Employee Retirement Income Security Act of 1974 (ERISA) shown below took effect August 16, 2016 and apply to a penalty assessed after August 1, 2016 that relates to a violation that occurred after November 2, 2015.

Offending Party Action in Question ERISA Section Penalty

As of August 15, 2016

Penalty Effective August 16, 2016
Employer  

Failure to maintain records or furnish information sufficient to determine benefits

209(b) $11 per employee $28 per employee
Plan administrator  

Failure/refusal to file annual report (Form 5500) with DOL

502(c)(2) $1,100 per day $2,063 per day
Administrator of multiemployer plan  

Failure to certify endangered or critical (funding) status

 

502(c)(2) $1,100 per day $2,063 per day
Single-employer defined benefit plan  

Failure to provide notice of funding-based limit on certain forms of distribution

101(j) and 502(c)(4) $1,000 per day $1,632 per day
Administrator of multiemployer plan  

Failure to provide financial and actuarial reports on written request

101(k) and 502(c)(4) $1,000 per day $1,632 per day
Sponsor/Administrator of multiemployer plan  

Failure to provide timely estimate of withdrawal liability upon request

101(l) and 502(c)(4) $1,000 per day $1,632 per day
Administrator of 401(k) plan with automatic contribution arrangement  

Failure to provide notice to participants of their rights and obligations under the arrangement before the start of the plan year

514(e)(3) and 502(c)(4) $1,000 per day $1,632 per day
Multiple employer welfare arrangement (MEWA)  

Failure/refusal to meet applicable reporting and disclosure requirements

502(c)(5) $1,100 per day $1,502 per day
Plan administrator  

Failure to provide benefit plan information (including SPD) to DOL

502(c)(6) $110 per day; capped at $1,100 per request $147 per day; capped at $1,472 per request
Administrator of defined contribution plan with participant-directed investments  

Failure/refusal to provide participants and beneficiaries with “blackout” notice or notice of right to divest employer securities

502(c)(7) $100 per day per required recipient $131 per day per required recipient
Underfunded multiemployer pension plan  

Failure to timely adopt a funding improvement or rehabilitation plan or to  meet benchmarks by the end of the improvement period

502(c)(8) $1,100 per day $1,296 per day
Employer  

Failure to disclose group health plan benefits to states re Medicaid/CHIP eligible individuals

502(c)(9) $100 per employee per day $110 per employee per day
Employer  

Failure to provide employees with written notice of opportunities for state-provided premium assistance for health coverage

502(c)(9) $100 per employee per day $110 per employee per day
 

Group health plan or plan’s health insurance issuer

 

Failure to follow genetic information protocols

502(c)(10) $100 per participant per day $110 per participant per day
Group health plan or plan’s health insurance issuer  

Failure to follow genetic information protocols, where de minimis failure is not corrected before plan receives notice of violation from DOL

502(c)(10) Minimum penalty is $2,500 Minimum penalty is $2,745
Group health plan or plan’s health insurance issuer  

Failure to follow genetic information protocols, where violation is more than de minimis

502(c)(10) Minimum penalty is $15,000 Minimum penalty is $16,473
Group health plan or plan’s health insurance issuer  

Failure to follow genetic information protocols due to reasonable cause, not willful neglect

502(c)(10) Maximum  penalty is $500,000 Maximum penalty is $549,095
Plan fiduciary Making improper distribution 502(m) $10,000 per improper distribution $15,909 per improper distribution
Group health plan  

Willful failure to provide summary of benefits coverage to participant or beneficiary

715 and new Labor Reg. §2575.2(m) $1,000 per failure $1,087 per failure
 

Sponsor of Cooperative and Small Employer Charity (CSEC) plan

 

Failure to establish or update a funding restoration plan

502(c)(12) $100 per day $100 per day (no change)

The civil penalty increase provides yet another reason for employer and other plan sponsors,. fiduciaries and administrators to strive to prevent ERISA violations.

About The Author

Cynthia Marcotte Stamer is a noted Texas-based management lawyer and consultant, author, lecture and policy advocate, recognized for her nearly 30-years of cutting edge management work as among the “Top Rated Labor & Employment Lawyers in Texas” by LexisNexis® Martindale-Hubbell® and as among the “Best Lawyers In Dallas” for her work in the field of “Tax: Erisa & Employee Benefits” and “Health Care” by D Magazine.

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, a Fellow in the American College of Employee Benefit Counsel, past Chair and current committee Co-Chair of the American Bar Association (ABA) RPTE Section Employee Benefits Group, Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, a former ABA Joint Committee on Employee Benefits Council Representative and , Ms. Stamer helps management manage.

Ms. Stamer’s legal and management consulting work throughout her nearly 30-year career has focused on helping organizations and their management use the law and process to manage people, process, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.

Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce, internal controls and regulatory compliance, change management and other performance and operations management and compliance. She supports her clients both on a real time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

Well known for her extensive work with health care, insurance and other highly regulated entities on corporate compliance, internal controls and risk management, her clients range from highly regulated entities like employers, contractors and their employee benefit plans, their sponsors, management, administrators, insurers, fiduciaries and advisors, technology and data service providers, health care, managed care and insurance, financial services, government contractors and government entities, as well as retail, manufacturing, construction, consulting and a host of other domestic and international businesses of all types and sizes. Common engagements include internal and external workforce hiring, management, training, performance management, compliance and administration, discipline and termination, and other aspects of workforce management including employment and outsourced services contracting and enforcement, sentencing guidelines and other compliance plan, policy and program development, administration, and defense, performance management, wage and hour and other compensation and benefits, reengineering and other change management, internal controls, compliance and risk management, communications and training, worker classification, tax and payroll, investigations, crisis preparedness and response, government relations, safety, government contracting and audits, litigation and other enforcement, and other concerns.

Ms. Stamer uses her deep and highly specialized health, insurance, labor and employment and other knowledge and experience to help employers and other employee benefit plan sponsors; health, pension and other employee benefit plans, their fiduciaries, administrators and service providers, insurers, and others design legally compliant, effective compensation, health and other welfare benefit and insurance, severance, pension and deferred compensation, private exchanges, cafeteria plan and other employee benefit, fringe benefit, salary and hourly compensation, bonus and other incentive compensation and related programs, products and arrangements. She is particularly recognized for her leading edge work, thought leadership and knowledgeable advice and representation on the design, documentation, administration, regulation and defense of a diverse range of self-insured and insured health and welfare benefit plans including private exchange and other health benefit choices, health care reimbursement and other “defined contribution” limited benefit, 24-hour and other occupational and non-occupational injury and accident, expat and medical tourism, onsite medical, wellness and other medical plans and insurance benefit programs as well as a diverse range of other qualified and nonqualified retirement and deferred compensation, severance and other employee benefits and compensation, insurance and savings plans, programs, products, services and activities. As a key element of this work, Ms. Stamer works closely with employer and other plan sponsors, insurance and financial services companies, plan fiduciaries, administrators, and vendors and others to design, administer and defend effective legally defensible employee benefits and compensation practices, programs, products and technology. She also continuously helps employers, insurers, administrative and other service providers, their officers, directors and others to manage fiduciary and other risks of sponsorship or involvement with these and other benefit and compensation arrangements and to defend and mitigate liability and other risks from benefit and liability claims including fiduciary, benefit and other claims, audits, and litigation brought by the Labor Department, IRS, HHS, participants and beneficiaries, service providers, and others. She also assists debtors, creditors, bankruptcy trustees and others assess, manage and resolve labor and employment, employee benefits and insurance, payroll and other compensation related concerns arising from reductions in force or other terminations, mergers, acquisitions, bankruptcies and other business transactions including extensive experience with multiple, high-profile large scale bankruptcies resulting in ERISA, tax, corporate and securities and other litigation or enforcement actions.
Ms. Stamer also is deeply involved in helping to influence the Affordable Care Act and other health care, pension, social security, workforce, insurance and other policies critical to the workforce, benefits, and compensation practices and other key aspects of a broad range of businesses and their operations. She both helps her clients respond to and resolve emerging regulations and laws, government investigations and enforcement actions and helps them shape the rules through dealings with Congress and other legislatures, regulators and government officials domestically and internationally. A former lead consultant to the Government of Bolivia on its Social Security reform law and most recognized for her leadership on U.S. health and pension, wage and hour, tax, education and immigration policy reform, Ms. Stamer works with U.S. and foreign businesses, governments, trade associations, and others on workforce, social security and severance, health care, immigration, privacy and data security, tax, ethics and other laws and regulations. Founder and Executive Director of the Coalition for Responsible Healthcare Policy and its PROJECT COPE: the Coalition on Patient Empowerment and a Fellow in the American Bar Foundation and State Bar of Texas, Ms. Stamer annually leads the Joint Committee on Employee Benefits (JCEB) HHS Office of Civil Rights agency meeting and other JCEB agency meetings. She also works as a policy advisor and advocate to many business, professional and civic organizations.

Author of the thousands of publications and workshops these and other employment, employee benefits, health care, insurance, workforce and other management matters, Ms. Stamer also is a highly sought out speaker and industry thought leader known for empowering audiences and readers. Ms. Stamer’s insights on employee benefits, insurance, health care and workforce matters in Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, Modern Healthcare, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications. Ms. Stamer also regularly serves on the faculty and planning committees for symposia of LexisNexis, the American Bar Association, ALIABA, the Society of Employee Benefits Administrators, the American Law Institute, ISSA, HIMMs, and many other prominent educational and training organizations and conducts training and speaks on these and other management, compliance and public policy concerns.

Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer serves on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and as an editorial advisor and contributing author of many other publications. Her leadership involvements with the American Bar Association (ABA) include year’s serving many years as a Joint Committee on Employee Benefits Council representative; ABA RPTE Section current Practice Management Vice Chair and Substantive Groups & Committees Committee Member, RPTE Employee Benefits & Other Compensation Committee Past Group Chair and Diversity Award Recipient, current Defined Contribution Plans Committee Co-Chair, and past Welfare Benefit Plans Committee Chair Co-Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; International Section Life Sciences Committee Policy Vice Chair; and a speaker, contributing author, comment chair and contributor to numerous Labor, Tax, RPTE, Health Law, TIPS, International and other Section publications, programs and task forces. Other selected service involvements of note include Vice President of the North Texas Healthcare Compliance Professionals Association; past EO Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a former Southwest Benefits Association Board of Directors member, Continuing Education Chair and Treasurer; former Texas Association of Business BACPAC Committee Member, Executive Committee member, Regional Chair and Dallas Chapter Chair; former Society of Human Resources Region 4 Chair and Consultants Forum Board Member and Dallas HR Public Policy Committee Chair; former National Board Member and Dallas Chapter President of Web Network of Benefit Professionals; former Dallas Business League President and others. For additional information about Ms. Stamer, seeCynthiaStamer.com or contact Ms. Stamer via email here or via telephone to (469) 767-8872.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal control and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources at Solutionslawpress.com including:

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If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating or updating your profile here. ©2016 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc. ™. All other rights reserved.