Which entities must comply with HIPAA regulations?

The reason the specified answer is correct lies in the understanding of the definitions and roles outlined by HIPAA regulations. Covered entities include healthcare providers who transmit any health information in electronic form during a transaction, health plans, and healthcare clearinghouses. Business associates are persons or entities that perform functions or activities on behalf of, or provide certain services to, a covered entity that involves the use or disclosure of protected health information (PHI).

The regulation is designed to ensure that both types of entities appropriately safeguard PHI and follow compliance standards related to it. Compliance is not limited to just healthcare providers or insurance companies but extends to any organization that handles or transmits PHI, including third-party vendors that fall under the designation of business associates.

This broad scope of regulation underscores the comprehensive nature of HIPAA, emphasizing protection of patient information across multiple sectors involved in healthcare, rather than restricting compliance to only specific groups such as government agencies, health insurance companies, or specific employer categories.