Are Medical Marijuana Businesses Subject to HIPAA?

by Dickinson Wright
Contact

Dickinson Wright

With medical marijuana legal in an ever-growing number of states, many businesses in the cannabis industry, particularly dispensaries, continue to wrestle with the question of whether they are subject to the Health Insurance and Portability and Accountability Act’s (HIPAA) Privacy and Security Rule requirements. The bad news is that the answer is, it depends. The good news is that the analysis to find out is below.

HIPAA Background

By way of background, HIPAA was the United States’ first major privacy law passed in 1996. Title II of HIPAA sets policies, procedures, and guidelines to maintain patient security and privacy over protected health information (PHI), and puts notification requirements and civil and criminal penalties in place for breaches under its rules.

PHI is health data created, received, stored, or transmitted by HIPAA-covered entities and their business associates in relation to the provision of healthcare, healthcare operations, and payment for healthcare services.  Protected health information is often shortened to PHI, or in the case of electronic health information, ePHI.

The Confusion

The confusion whether medical cannabis businesses are covered under HIPAA appears to stem from two primary sources. First, much of the confusion regarding medical information and HIPAA arises from the fact that most people assume that the mere mention of someone’s medical condition or health information is protected, regardless of who is disclosing it. That is simply not the case. Not all medical information is protected under HIPAA; only PHI is protected. The definition of PHI, however, is not so clear, and there is a lot to unpack in defining PHI, which will be discussed in more detail below.

The second part of the confusion comes from a common misunderstanding that because HIPAA is a federal law and cannabis is still classified federally as a Schedule 1 controlled substance that federal law does not apply. To put that misunderstanding to rest, one need go no further than the fact that the Internal Revenue Service taxes medical and recreational cannabis sales, so cannabis being a Schedule 1 controlled substance has no bearing on the applicability of federal law, including HIPAA.

Is Your Business Covered by HIPAA?

While the legalization of marijuana is fairly new, HIPAA has been around since 1996, and its same standard rules and conditions apply to the expanding legalization of medical marijuana.

As briefly introduced above, the analysis of whether a medical cannabis business is subject to HIPAA comes down to three central questions:

(1)        Is the business a “healthcare provider”?

(2)        Does the business have “PHI”?

(3)        Is the business storing or transmitting PHI with respect to a “covered transaction”?

Step 1: Is the Business a Covered HealthCare Provider?

Health and Human Services (“HHS”), which is the agency that enforces HIPAA, takes the position that a medical marijuana dispensary may be a healthcare provider because a medical “prescription” is necessary to obtain “treatment”. While most state laws avoid using the word “prescription” to describe the process for a patient to obtain medical marijuana, HHS has looked beyond the actual words of the statute. They look to actual practice and have extended their oversight to medical marijuana transactions. As such, it is reasonable to conclude that medical marijuana businesses, particularly dispensaries, will be “healthcare providers” under HIPAA.

Step 2: Does the Business Have PHI?

For health information to be considered to be PHI and protectable under HIPAA, it must:

(1)       be personally identifiable healthcare information;

(2)       relate to the past, present, or future physical or mental health or condition of an individual; the provision of health care to an individual; or the past, present, or future payment for the provision of health care to an individual;

(3)        be created or received by a covered entity; and

(4)       be transmitted or maintained in electronic media or any other form or medium with respect to a covered transaction.

PHI broadly includes all individually identifiable health information, which includes, demographic data, medical histories, test results, insurance information, and other information used to identify a patient or to provide healthcare services or healthcare coverage.

As such, whether a cannabis business has PHI is an individual determination that requires a case-by-case assessment of the information the business has. Dispensaries are one of the most likely cannabis businesses to fall within the definition of having PHI because when someone enters a dispensary to obtain medical marijuana, they typically must present a marijuana card, which usually has the person’s name, contact information, and other information to ensure the person is a properly-registered medical marijuana cardholder. This makes that information “personally identifiable”. The information the dispensary obtains about an individual may also include treatment information and the underlying medical diagnosis triggering the need for the medical marijuana recommendation. As for dispensaries that specifically tailor their dispensations to a patient’s specific condition, they will almost certainly meet the first element of PHI.

Because dispensaries are not one size fits all, they cannot be lumped together without looking first at the actual operation of each dispensary individually. For example, cash-only dispensaries that do not have state reporting requirements will likely not transmit or store PHI and, therefore, will not have to worry about HIPAA. Other dispensaries that may be required by state law to transmit PHI, however, may have to comply with HIPAA if the transaction is covered (see Step 3 below). It is also worth noting that some dispensaries unknowingly trigger HIPAA because they employ point of sale software that transmits and stores PHI in the cloud triggering HIPAA. Other dispensaries that store PHI on a hard drive, mobile drive, or disk that transfer the PHI may also trigger HIPAA.

Step 3: Is the Business Storing or Transmitting PHI With Respect to a Covered Transaction?

Lastly, HIPAA only applies to businesses that transmit or store PHI with respect to a covered transaction. This is where the analysis tends to quickly divide those cannabis business entities that are covered by HIPAA and those that are not. A “covered transaction” includes any of the following:

  • A request for payment;
  • Transmission of encounter information;
  • A request for information to a health plan;
  • A request for the review of health care;
  • A request for information about the status of a health care claim;
  • Transmission from a health plan to the patient, bank, business, etc. about payment or payment processing;
  • Transmission from a health plan with explanation of benefits or remittance.

See 45 C.F.R. Part 162.

Because most cannabis businesses are not yet covered by health insurance plans, many assume this disqualifies them from engaging in covered transactions. That is not necessarily the case as demonstrated by the list above.

Takeaways

  1. Do Not Be Naïve. While the applicability of HIPAA to medical marijuana businesses dispensaries is not cut and dry or 100% clear, the issue should be on everyone in the medical cannabis space’s radar. HHS has a habit of reading or interpreting laws to give itself broad powers, as opposed to interpretations limiting its enforcement. It is probably not wise to assume HHS will take a narrow view of its authority, and it is naïve to think the federal law and the health insurance industries will not soon adapt to apply to medical cannabis, especially since there is a lot of money to be made.
  2. Be Mindful.  Cannabis business owners should be mindful of the PHI they are collecting and how they are storing and transmitting that data. For those businesses that are storing and/or transiting PHI, they should employ HIPAA-compliant technologies, including hosting, cloud-storage, and other platforms to protect against a breach and to properly encrypt and otherwise protect the PHI. To the extent they are transferring PHI, they should require those vendors/entities they are transferring PHI to enter into Business Associate Agreements so that all downstream entities with access to PHI are also properly protecting it under HIPAA’s requirements.
  3. Learn the Rules. Specifically, learn what HIPAA’s Security and Privacy Rules require and start taking measures to be compliant. If PHI is collected or stored via the web, work with a trusted IT team to obtain a Secure Socket Layer (SSL) certificate, which indicates that website traffic is encrypted. Review web hosting options for PHI to ensure the business understands the difference between standard web hosting versus HIPAA-compliant hosting. Ensure PHI is treated with extreme care, that patient consent is obtained prior to collecting and retaining such information, and maintain confidentiality of PHI. As the laws and insurance companies adapt, HIPAA-compliant cannabis businesses will have an edge over their competition and allow themselves to more easily take advantage of health care insurance offerings.
  4. Start Now.  There is nothing prohibiting cannabis businesses from starting now to be HIPAA compliant. And while the PHI a business has may not technically be subject to HIPAA now, a number of state laws have data breach notification requirements that protect medical/biometric information. This means that, while the medical information a cannabis business currently has may not be protected by HIPAA, it may be subject to other state law protections.

For examples, states where medical marijuana is legal and also where medical information is protected by state breach notification statute are: Arizona, Arkansas, California, Colorado, Delaware, Florida, Montana, Nevada, New Hampshire, North Dakota, Oregon, and Rhode Island.

Taking steps to secure individual/patient health and medical information is just good business as it will help prevent against a costly data breach. This is especially true when so many communications are web-driven via services such as Yahoo and Gmail, and via text services such as WhatsApp and Facebook, none of which are encrypted for sensitive data. Additionally, many cloud storage providers are similarly not HIPAA compliant—though DropBox does have a business service that is HIPAA-compliant, which requires the business sign a Business Associate Agreement with DropBox. This elevated security, however, comes at a price and the fact remains that most contemporary apps, data centers, SMS services, and email systems are not encrypted and are easily susceptible to a security incident.

Written by:

Dickinson Wright
Contact
more
less

Dickinson Wright on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.