HealthNet and Connecticut settle breach suit

In November of 2009, health insurance provider HealthNet reported a loss of a portable disk drive (which occurred six months prior to HealthNet's report). The disk drive contained compressed, though not encrypted, data, including social security and bank account information, on nearly half a million persons.  This loss outraged the Connecticut Attorney General Richard Blumenthal, eventually leading Connecticut to file suit against the insurer for HIPAA violations and noncompliance with HealthNet's own security policies by failing to encrypt the sensitive data.

However, on July 6, 2010, Blumenthal (who is currently running to replace Chris Dodd (D-CT) in the U.S. Senate) announced that Connecticut has reached a settlement with HealthNet and its parent companies over this breach.  According to Blumenthal, this is the very first time a state Attorney General reached such a settlement for a HIPAA violation. The settlement included:

  • $250,000 fine to be paid to Connecticut;
  • $500,000 contingency fund, to be paid to the state in the event it is determined that someone accessed the protected data on the lost disks; and
  • a "corrective action plan" which is aimed to enhance security of protected data in possession of HealthNet and its parent companies.

It is important to keep in mind that the penalties could have been even higher. Yet regardless of the amount of the fine, this breach cost much more to HealthNet than $250,000.  The costs associated with investigations, breach notification, and possible legal fees almost certainly cost the organization more than the amount of the fine imposed by Connecticut.  Thus, HealthNet's example should serve as a great reminder about the importance of doing everything possible to avoid a breach, and knowing how to handle a breach effectively if one does occur.

"Blumenthal wins $250,000 in Health Net settlement," TheDay.com (July 6, 2010).

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