NRPM: Standard Employer Identifier. IMPACT ANALYSIS

06/16/1998

[Please label written and e-mailed comments about this section with the subject: Impact.]

As the effect of any one standard is affected by the implementation of other standards, it can be misleading to discuss the impact of one standard by itself. Therefore, we did an impact analysis on the total effect of all the standards in the proposed rule concerning the national provider identifier (HCFA-0045-P), which can be found at 63 FR 25320.

We intend to publish in each proposed rule an impact analysis that is specific to the standard or standards proposed in that rule, but the impact analysis will assess only the relative cost impact of implementing a given standard. As stated in the general impact analysis in HCFA-0045-P, we do not intend to associate costs and savings to specific standards.

Although we cannot determine the specific economic impact of the standard being proposed in this rule (and individually each standard may not have a significant impact), the overall impact analysis makes clear that, collectively, all the standards will have a significant impact of over $100 million on the economy. Also, while each standard may not have a significant impact on a substantial number of small entities, the combined effects of all the proposed standards may have a significant effect on a substantial number of small entities. Therefore, the following impact analysis should be read in conjunction with the overall impact analysis.

Unfunded Mandates

This proposed rule has been reviewed in accordance with the Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1501 et seq.) and Executive Order 12875. As discussed in the combined impact analysis to which we refer above (see 63 FR 25320), HHS estimates that implementation of the standards will require the expenditure of more than $100 million by the private sector. Therefore, the rule establishes a Federal private sector mandate and is a significant regulatory action within the meaning of section 202 of UMRA (2 U.S.C. 1532). HHS has included this statement to address the anticipated effects of the proposed rules pursuant to section 202.

These standards also apply to State and local governments in their roles as health plans or health care providers. Thus, the proposed rules impose unfunded mandates on these entities. While we do not have sufficient information to provide estimates of these impacts, several State Medicaid agencies have estimated that it would cost $1 million per State or territory to implement all of the HIPAA standards. However, the costs that these standards impose on these entities are well below the UMRA section threshold that will require additional analysis and consultation; the Congressional Budget Office analysis stated that “States are already in the forefront in administering the Medicaid program electronically; the only costs -- which should not be significant -- would involve bringing the software and computer systems for the Medicaid programs into compliance with the new standards.”

The anticipated benefits and costs of this proposed standard, and other issues raised in section 202 of the UMRA, are addressed in the analysis below and in the combined impact analysis. In addition, pursuant to section 205 of the UMRA (2 U.S.C. 1535), having considered a reasonable number of alternatives as outlined in the preamble to this rule and in the following analysis, HHS has concluded that the rule is the most cost-effective alternative for implementation of HHS’s statutory objective of administrative simplification.

Executive Order 12866

In accordance with the provisions of Executive Order 12866, this proposed rule was reviewed by the Office of Management and Budget.

Specific Impact of Employer Identifier

This is the portion of the impact analysis that relates specifically to the standard that is the subject of this regulation -- the employer identifier. This section describes specific impacts that relate to the employer identifier. However, as we indicated in the introduction to this impact analysis, we do not intend to associate costs and savings to specific standards.

1. Affected entities.

a. Health care providers.

Health care providers that conduct electronic transactions with health plans would have to obtain and use the EIN to identify the employer in those electronic transactions that require an employer identifier. In most cases health care providers currently obtain and use the EIN of the employer in those transactions that require an employer identifier. Any negative impact on health care providers generally would be related to the initial implementation period for providers that currently use an identifier other than the EIN to identify the employer in electronic transactions. They would incur implementation costs for converting systems from other employer identifiers to the EIN. Some health care providers would incur those costs directly and others would incur them in the form of fee increases from billing agents and health care clearinghouses.

b. Health care plans.

Health care plans that engage in electronic commerce would have to modify their systems to use the EIN if they do not currently use the EIN to identify the employer in electronic transactions that require an employer identifier. In most cases health care plans currently obtain and use the EIN of the employer in those transactions that require an employer identifier. The conversion for health plans currently using an employer identifier other than the EIN would have a one-time cost impact.

c. Health care clearinghouses.

Health care clearinghouses would have to modify their systems to transmit the EIN if they do not currently use the EIN to identify the employer in electronic transactions that require an employer identifier. In most cases health care clearinghouses currently obtain and use the EIN of the employer in those transactions that require an employer identifier. The conversion for health care clearinghouses currently using an employer identifier other than the EIN would have a one-time cost impact.

d. Employers

Each employer would have to disclose its EIN, when requested, to any entity that conducts standard electronic transactions that require the employer’s identifier. Entities that conduct electronic transactions that require an employer identifier commonly obtain that identifier from the employer as a normal business practice. This practice would not change. Any impact on employers would be the one-time impact to disclose the EIN to entities that have previously used a different identifier for that individual.

2. Effects of Various Options

a. Guiding Principles for Standard Selection

The implementation teams charged with designating standards under the statute have defined, with significant input from the health care industry, a set of common criteria for evaluating potential standards. These criteria are based on direct specifications in the HIPAA, the purpose of the law, and principles that support the regulatory philosophy set forth in Executive Order 12866 of September 30, 1993, and the Paperwork Reduction Act of 1995. In order to be designated as a standard, a proposed standard should:

  • Improve the efficiency and effectiveness of the health care system by leading to cost reductions for or improvements in benefits from electronic HIPAA health care transactions. This principle supports the regulatory goals of cost-effectiveness and avoidance of burden.
  • Meet the needs of the health data standards user community, particularly health care providers, health plans, and health care clearinghouses. This principle supports the regulatory goal of cost-effectiveness.
  • Be consistent and uniform with the other HIPAA standards -- their data element definitions and codes and their privacy and security requirements -- and, secondarily, with other private and public sector health data standards. This principle supports the regulatory goals of consistency and avoidance of incompatibility, and it establishes a performance objective for the standard.
  • Have low additional development and implementation costs relative to the benefits of using the standard. This principle supports the regulatory goals of cost-effectiveness and avoidance of burden.
  • Be supported by an ANSI-accredited standards developing organization or other private or public organization that will ensure continuity and efficient updating of the standard over time. This principle supports the regulatory goal of predictability.
  • Have timely development, testing, implementation, and updating procedures to achieve administrative simplification benefits faster. This principle establishes a performance objective for the standard.
  • Be technologically independent of the computer platforms and transmission protocols used in HIPAA health transactions, except when it is explicitly part of the standard. This principle establishes a performance objective for the standard and supports the regulatory goal of flexibility.
  • Be precise and unambiguous, but as simple as possible. This principle supports the regulatory goals of predictability and simplicity.
  • Keep data collection and paperwork burdens on users as low as is feasible. This principle supports the regulatory goals of cost-effectiveness and avoidance of duplication and burden.
  • Incorporate flexibility to adapt more easily to changes in the health care infrastructure (such as new services, organizations, and provider types) and information technology. This principle supports the regulatory goals of flexibility and encouragement of innovation.

We assessed the various options for an employer identifier against the principles listed above, with the overall goal of achieving the maximum benefit for the least cost. We found that the EIN met all the principles. No other candidate employer identifier is in widespread use. No other candidate met a majority of the principles, especially those principles supporting the regulatory goal of cost-effectiveness. We are assessing the costs and benefits of the EIN, but we did not assess the costs and benefits of other identifier options, because they did not meet the guiding principles.

b. Need to Convert

All health care providers, health plans, and health care clearinghouses that do not currently use the EIN to identify the employer in electronic health transactions that require an employer identifier would have to convert. Because the EIN is currently in widespread use as an employer identifier throughout the industry, adopting the EIN would not require conversion for most health care providers, health plans or health care clearinghouses. The selection of the EIN imposes a far smaller burden on the industry than any nonselected option and presents significant advantages in terms of cost-effectiveness, universality, and flexibility.

c. Complexity of Conversion

The EIN does not contain embedded intelligence. For those providers, health plans, and health care clearinghouses that must convert to use the EIN, the complexity of the conversion would be significantly affected by the degree to which their processing systems currently rely on intelligent employer identifiers. Converting from one unintelligent identifier to another is less complex than modifying software logic to obtain needed information from other data elements. However, the use of an unintelligent identifier like the EIN is required in order to meet the guiding principle of assuring flexibility.

In general, the shorter the identifier, the easier it is to implement. It is more likely that a shorter identifier, such as the EIN, would fit into existing data formats.

The selection of the EIN does not impose a greater burden on the industry in terms of the complexity of conversion than the nonselected options.