In accordance with the Inflation Adjustment Act, the Department of Health and Human Services (HHS) has updated its regulations to reflect required annual inflation-related increases to civil monetary penalties, including those for certain violations of HIPAA’s “administrative simplification” provisions. The final regulations became effective on November 5, 2019, the date they were published in the Federal Register.

Administrative simplification generally includes HIPAA’s privacy and security requirements, including rules as to how health plan data are exchanged, and the affected penalties are included in the Code of Federal Regulations at 45 C.F.R. § 160.404(b).

Under the new rules, penalties for pre-February 18, 2009 violations of HIPAA’s administrative simplification provisions have increased to $159 per violation, with a $39,936 cap per calendar year.

Penalties for violations occurring on or after February 18, 2009, where it is established that the covered entity or business associate did not know and could not reasonably have known of the violation, are now a minimum of $117 and a maximum of $58,490. If it is established that the violation was due to reasonable cause and not willful neglect, the minimum per violation increases to $1,170, with the maximum remaining at $58,490. If it is established that the violation was due to willful neglect but was corrected during the 30-day period running from the date the entity knew or should have known the violation had occurred, the penalties per violation are a minimum of $11,698 and a maximum of $58,490. If the violation was due to willful neglect and not corrected during the 30-day time period, the penalties per violation are $58,490 (minimum) and $1,754,698 (maximum). For all of these situations, the calendar year cap is $1,754,698.

The annual inflation adjustment for each applicable civil monetary penalty is determined using the percent increase in the Consumer Price Index for all Urban Consumers (CPI–U) for the month of October of the year in which the amount of each civil penalty was most recently established or modified (in this case, 2018). The cost-of-living adjustment multiplier HHS used in calculating the 2019 increases was 1.02522, based on the CPI–U for the month of October 2018.