Employers that sponsor group health plans (medical, dental, vision, HFSA) are used to negotiating detailed administrative services agreements with vendors that provide services to those plans. Many also are familiar with “business associate agreements” required under HIPAA that must be in place with certain vendors, such as third-party claims administrators (TPAs), wellness program vendors, benefits brokers, etc. However, many plan sponsors may not be aware of a contract requirement with respect to the confidentiality of patient records relating to a substance use disorder (SUD).  If applicable, these contract provisions must be in place by February 2, 2020.

Federal regulations (42 C.F.R. Part 2) provide specific protections for SUD patient records. In general, these are records held by certain SUD treatment programs, those that receive federal funding. The arm of the Department of Health and Human Services that regulates SUD programs, Substance Abuse and Mental Health Services Administration (“SAMHSA”), issued final regulations in 2018 concerning the confidentiality of SUD patient records. In a number of respects, these rules strengthen protections already in place under the HIPAA privacy and security rules.

How do the new SUD regulations affect contracts with health plan vendors?

Under Section 2.33 of the regulations, when a patient consents to a disclosure of their SUD patient records for payment and/or health care operations activities, the records may wind up with a “lawful holder” of those records (a plan sponsor, for example), and then on to the lawful holder’s third-party vendors to carry out the payment and/or health care operations on behalf of such lawful holder.  When this happens, lawful holders must have in place a written contract with the third party obligating the third party to be bound by 42 C.F.R. Part 2.

The contract should require the third-party recipients of these records to implement appropriate safeguards to prevent unauthorized uses and disclosures, and to report any unauthorized uses, disclosures, or breaches. The contract also should prohibit the third party from re-disclosing the records unless the disclosure is to a contracted agent of the third party that is helping the third party provide services described in the contract, and any further disclosures are back to the third party or the lawful holder (plan sponsor).

In addition to the contract requirement, lawful holders must provide to such third parties a statement in connection with the disclosure, which may be as simple as “42 CFR Part 2 prohibits unauthorized disclosure of these records.”

What to do next?

Plan sponsors receiving SUD patient records in connection with their group health plan and sharing that information with a third-party service provider, or where the service provider is receiving such information on behalf of the plan sponsor, should review the provisions of their services agreements and, if applicable, business associate agreements. For plan sponsors not currently receiving SUD patient records, it may make sense to update these third-party contracts in the event such records are received. While updating these agreements, it may also be a good time to revisit other provisions to ensure strong contractual protections such as adding specificity on response to data incident, indemnification, limitation of liability, and other contractual protections.

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with…

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Mr. Lazzarotti also is a member of the firm’s Employee Benefits Practice Group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Mr. Lazzarotti counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Mr. Lazzarotti’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Mr. Lazzarotti speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Mr. Lazzarotti served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.