Proposed National Standard
Employer Identifier Rule
VII. IMPACT ANALYSIS
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.
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