What is HIPAA 834?

HIPAA 834 refers to the file format of an electronic transaction. Under HIPAA, electronic transactions are communications between two parties that relate to the provision of healthcare. HIPAA 834 is the specific format that employers must use when they electronically communicate employee health insurance benefit enrollment and maintenance data to employee health plans.

What is the HIPAA Electronic Data Interchange (EDI) Rule?

Under the HIPAA electronic data interchange (EDI) rule, electronic communication exchanges are exchanges of data between two entities to carry out financial or administrative activities related to healthcare. A common example of such an exchange is a provider’s sending a claim to, say, a health plan to request payment for medical services. 

The Department of Health and Human Services (HHS) has, over time, adopted standard rules for the electronic exchange of healthcare data between covered entities. HHS has also adopted rules for electronic information exchange of healthcare data between covered entities and business associates. Rules have been adopted for various transactions, including:

◈ Payment and remittance advice 

◈ Claims status 

◈ Eligibility

◈ Coordination of benefits

◈ Claims and encounter information

◈ Enrollment and disenrollment

◈ Referrals and authorizations

◈ Premium payment

Who Uses HIPAA 834?

The HIPAA 834 file format is used for communications between employee benefit plans and insurance plans. These benefit plans include dental, vision, disability, and medical plans. Insurance carriers use the HIPAA 834 format to communicate with employers about health insurance benefit enrollment and maintenance data. Health plans must, under HIPAA, accept and process information communicated to them in the HIPAA 834 format. Other plans (i.e., disability plans) are not required to use this format, although many use it because its automation is a time saver. 

What are the Advantages of HIPAA 834?

Using HIPAA 834 reduces the chance of error that exists when faxes or paper communications are used. Handwriting on a fax can be misinterpreted or misread. In addition, if data is entered manually, it can be entered incorrectly. Use of HIPAA 834 therefore improves accuracy. Another significant advantage of electronic data interchange, including HIPAA 834, is security. The HIPAA EDI rule enables healthcare providers to send claim status requests and obtain information in return, in a secure manner. HIPAA 834 also allows for greater efficiency than paper communications. Prior to the HIPAA EDI Rule, shipping address and billing address errors were common. As a result, payment, treatment, and processing of healthcare claims were all delayed, causing patient dissatisfaction and more work for employers and insurance plans.

What are the Disadvantages of HIPAA 834?

The HIPAA EDI rule allows insurance carriers to create their own guidance for how they use the standard. This means that different insurance companies have different procedures for how to respond to an error in communication, to omission of information, and how to proceed when their computer systems are down. The absence of a single process means that employees who work for insurers that process HIPAA 834 transactions must familiarize themselves with detailed guidance, only to have to learn completely different guidance upon switching employment to another insurance company. Employers, as well, must become familiar with a new guidance scheme whenever they switch or add health insurance carriers.