The Health Insurance Portability and Accountability Act of 1996 (HIPAA) was signed by President Clinton on August 21, 1996. The Act is designed to protect health insurance coverage for workers and their families when they change or lose their jobs. In addition, HIPAA delineated a number of provisions under the title of "Administrative Simplification".

HIPAA Administrative Simplification Provisions require the Secretary of HHS, Donna Shelela, to adopt standards for certain electronic health transactions, including claims, enrollment, eligibility, payment, and coordination of benefits. These standards must also address the security of electronic health information systems.

Plans and providers must comply directly, or they may use a healthcare clearinghouse. Certain health plans, in particular, workers compensation, are not covered.

The final rule for electronic transaction standards was released on August 17, 2000. The final rule states that all clearinghouses, health plans (public and private sector), and providers must comply with these standards by October 16, 2002 (2003 for small plans). HIPAA is not an option. It is the law and must be adhered to within this timeframe.