What Is Compliance? HIPAA vs. SOC 2, Which Is Better?
Table of Contents
What Is Compliance?
Compliance refers to the adherence of an organization, process, or product to specific laws, regulations, and standards. It ensures that entities follow necessary rules to protect consumer interests, maintain data privacy, and mitigate security risks. In the SaaS world, especially where organizations provide cloud-based customer support desks, compliance helps sustain trust and credibility among clients and stakeholders.
HIPAA vs. SOC 2: A Brief Comparison
Two common compliance frameworks that often surface in discussions about data security and privacy are HIPAA (Health Insurance Portability and Accountability Act) and SOC 2 (Service Organization Control 2). While both focus on safeguarding sensitive data, their scopes and objectives differ significantly.
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HIPAA
Enacted in 1996 in the United States, HIPAA focuses on protecting Protected Health Information (PHI). It sets strict guidelines for how healthcare entities—and their business associates—handle patient data, ensuring the confidentiality, integrity, and availability of ePHI (electronic Protected Health Information). -
SOC 2
SOC 2 is an auditing procedure developed by the American Institute of Certified Public Accountants (AICPA) that ensures service providers maintain robust controls around security, availability, processing integrity, confidentiality, and privacy. SOC 2 applies to technology-based service organizations and is not limited to healthcare.
Neither is "better" overall; rather, they serve distinct purposes. HIPAA is mandatory for those handling protected health information in the U.S., while SOC 2 is often considered an industry best-practice—though certain customers may require a SOC 2 report before doing business with a SaaS provider.
Why Is HIPAA Important?
HIPAA plays a critical role in the healthcare industry. Its significance stems from the fact that healthcare providers, insurers, and related service providers collect and process extremely sensitive data, including patient history, billing details, and lab results. A breach can jeopardize patient privacy and expose organizations to severe legal penalties and reputational damage.
By adhering to HIPAA, businesses underscore their commitment to protecting patient health data. Furthermore, HIPAA compliance requirements instill a robust security culture within an organization, ensuring that data handling, access controls, and incident response protocols meet stringent standards.
Key Features of HIPAA Compliance
- Privacy Rule: Regulates how healthcare organizations and business associates handle the use and disclosure of PHI.
- Security Rule: Focuses on the technical and administrative safeguards needed to protect electronic PHI (ePHI).
- Breach Notification Rule: Mandates timely notification to affected individuals and authorities if a data breach involving PHI occurs.
- Enforcement Rule: Establishes potential investigations and penalties for violations, reinforcing the importance of strict compliance.
Who Needs HIPAA Compliance?
Any organization that creates, receives, maintains, or transmits PHI must comply with HIPAA regulations. This includes:
- Healthcare Providers: Hospitals, clinics, psychologists, dentists, chiropractors, nursing homes, and pharmacies.
- Health Plans: Health insurance companies, HMOs, and company health plans.
- Healthcare Clearinghouses: Entities that process nonstandard health information into a standard format.
- Business Associates: Vendors or service providers (e.g., SaaS providers, billing services) that handle PHI on behalf of a covered entity.
Companies offering a cloud-based customer support desk that store or process PHI on behalf of healthcare clients must also sign a Business Associate Agreement (BAA) to be HIPAA-compliant. These agreements clarify each party's responsibilities around protecting patient data.
Conclusion
In summary, compliance is about following the rules and standards that govern the secure handling of sensitive data. HIPAA is mandatory for entities dealing with patient health information, primarily in the U.S. healthcare sector, whereas SOC 2 provides a broader assurance of a service organization's security controls across multiple industries.
For healthcare entities and business associates handling PHI, HIPAA compliance is indispensable. Protecting patient data not only avoids legal and financial repercussions but also builds trust with patients and partners. By understanding the distinctions between HIPAA and SOC 2, organizations can effectively determine which frameworks apply to them and strategically implement controls to safeguard sensitive information.
Frequently Asked Questions
Compliance is the practice of adhering to regulations, laws, or standards to ensure data security, privacy, and overall operational integrity within an organization.
</details>Why is HIPAA mandatory for healthcare?
HIPAA is mandatory because it protects sensitive patient health information (PHI) by setting strict guidelines on privacy, security, and breach notification, ensuring patient trust and legal compliance.
Are HIPAA and SOC 2 the same?
No. HIPAA is a U.S. healthcare regulation aimed at protecting patient data. SOC 2 is an auditing framework for broader security controls applicable to any service organization handling sensitive data.
Who must follow to HIPAA?
HIPAA applies to healthcare providers, health plans, healthcare clearinghouses, and business associates (including certain SaaS or third-party vendors) that handle, process, or store protected health information (PHI).
What are the penalties for HIPAA non-compliance?
Penalties can range from monetary fines in the thousands to millions of dollars per violation, depending on the severity and whether the breach was willful or due to neglect.
Can a SaaS provider become HIPAA-compliant?
Yes. SaaS providers can become HIPAA-compliant by implementing required technical, administrative, and physical safeguards, and entering into Business Associate Agreements (BAAs) with covered entities.
What is a Business Associate Agreement (BAA)?
A BAA is a legal contract between a HIPAA-covered entity and a service provider that handles PHI, outlining each party's responsibilities in safeguarding and managing patient data.
When it comes to data security and privacy frameworks in business, HIPAA and SOC 2 are two of the most prominent standards. While both focus on protecting sensitive information, they serve different purposes, industries, and compliance requirements. For more information on Business Associate Agreements, read our comprehensive BAA Guide.
Compliance Chart: HIPAA vs. SOC 2
Which Framework Does Your Organization Need?
The framework you need depends on your organization's specific circumstances:
- Healthcare Entities: Must comply with HIPAA if they handle PHI
- Service Providers to Healthcare: Need HIPAA compliance when handling PHI and must sign a BAA
- SaaS/Cloud Providers: SOC 2 is beneficial regardless of industry, showcasing security commitment
- Organizations Handling Both PHI and Other Sensitive Data: May need both HIPAA and SOC 2
Organizations working in healthcare may also be interested in another important framework. Compare HIPAA with another framework in our article on HIPAA vs. HITRUST differences.
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