When is a PPO not a covered entity?
A question was submitted regarding a Preferred Provider Organization (PPO), which was described as an organization that contracts with health care providers to arrange networks and does not accept insurance risk. The PPO contracts with employee benefit plans (a type of health plan) to provide access to its networks. The PPO has negotiated a discount from the providers for the employee benefit plans. The PPO is not run by an insurer or an HMO.
Is the PPO a health plan and therefore a covered entity under the HIPAA Administrative Simplification rules?
The particular concern involves a PPO that has informed its contracted employee benefit plans that any clearinghouse fees incurred will be passed back through to the employee benefit plan. If the PPO is a covered entity, is it prohibited from passing on these clearinghouse fees to the employee benefit plan? See 45 CFR 162.925(a)(5).
A PPO as described in the first paragraph of the question does not meet the definition of a health plan, because it is neither providing nor paying the cost of medical care. Rather, it is facilitating an arrangement regarding fees between the payers - the employee benefit plans - and the health care providers in the network it set up.
45 CFR 162.925(a)(5) applies to any health plan that operates as a health care clearinghouse or requires another entity to use a health care clearinghouse. This section would not apply to the PPO in the situation described in the second paragraph of the question because the PPO is not a health plan, and does not, as a business associate acting on behalf of a health plan, operate as a health care clearinghouse or require that other entities use a health care clearinghouse. Therefore, the PPO is free to pass clearinghouse fees back to the employee benefit plan.