CMS Proposes Security Incident Reporting Standards for Health Insurance Exchanges

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By Kendra Casey Plank  


Health insurance exchanges would be required to follow specific data security incident response procedures, including informing regulators within an hour of discovery of any actual or attempted unauthorized access to protected databases, under a proposed rule published June 19 by the Centers for Medicare & Medicaid Services (78 Fed. Reg 37,032, 6/19/13).

The proposed rule does not include a risk of harm threshold to limit what kinds of incidents must be reported; nor is the reporting requirement tied to any number of individuals or number of records actually or potentially affected by an intrusion attempt or actual data breach.

Kirk Nahra of Wiley Rein LLP, in Washington, told BNA June 24 that although the reporting time frame is similar to that for other CMS programs, it is “wildly out of line” with other requirements for the insurance marketplaces.

“It is also almost impossible to meet and will require over-reporting of many minor incidents,” Nahra, who is on the advisory board for the Privacy & Security Law Report, said.

CMS will accept comments on the proposed rule until July 19.

Affordable Care Act Implementation

CMS said federally facilitated exchanges (FFEs), state exchanges, and nonexchange entities associated with FFEs and state exchanges should have written policies and procedures for handling and reporting data breaches and breach incidents, including how entities would protect the privacy and security of consumers' personally identifiable information (PII).

FFEs, state exchanges, and nonexchange entities associated with FFEs would be required to report breach incidents directly to the Department of Health and Human Services within one hour of discovering them. Nonexchange entities associated with state exchanges would be required, within the same time frame, to report incidents to their state exchanges.

The health insurance exchange marketplaces were mandated under the Affordable Care Act and are expected to open for enrollment Oct. 1.

Broader Than HIPAA Standards

CMS cautioned it did not rely on Health Insurance Portability and Accountability Act definitions and requirements for data breach notifications because HIPAA rules would not be broad enough to cover the PII, and payment transaction data, that insurance marketplaces (also known as insurance exchanges) will capture and hold.

The proposed rule would require reporting not just of actual breaches but of broadly defined “security incidents.”

Under the proposed rule:  

Incident means the act of violating an explicit or implied security policy, which includes attempts (either failed or successful) to gain unauthorized access to a system or its data, unwanted disruption or denial of service, the unauthorized use of a system for the processing or storage of data; and changes to system hardware, firmware, or software characteristics without the owner's knowledge, instruction, or consent.




CMS proposed to define a breach as “the loss of control, compromise, unauthorized disclosure, unauthorized acquisition, unauthorized access, or any similar term referring to situations where persons other than authorized users and for an other than authorized purpose have access or potential access to personally identifiable information, whether physical or electronic.”

CMS explained that the proposed definition of breach is the same as that used by the Office of Management and Budget in its 2007 memorandum, “Safeguarding and Responding to the Breach of Personally Identifiable Information” (M 07 16), which established governmentwide breach notice reporting requirements for federal departments and agencies (6 PVLR 837, 5/28/07).

The proposed rule states that HHS would have the authority to conduct audits and investigations to oversee the data security and reporting requirements of the proposed rule, as well as the authority to pursue civil, criminal, and administrative proceedings to enforce the proposed rule.

By Kendra Casey Plank  

The proposed rule is available at

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