SOC 29 min read

SOC 2 vs HIPAA: Which Does Your Healthcare SaaS Need?

If you're building software that handles health data, you've likely been asked about both SOC 2 and HIPAA. Understanding the difference is crucial. They serve different purposes and one doesn't replace the other.

Key Takeaways

Point Summary
Different purposes HIPAA is a law for protected health information; SOC 2 is a voluntary security audit
Both often needed Healthcare clients typically require both HIPAA compliance AND SOC 2
HIPAA is mandatory If you handle PHI for covered entities, HIPAA compliance is legally required
SOC 2 builds trust SOC 2 demonstrates security controls to enterprise healthcare customers
No HIPAA certification HIPAA has no official certification. Only SOC 2 provides third-party attestation

Quick Answer: If you handle Protected Health Information (PHI), you must comply with HIPAA. It's the law. SOC 2 is a voluntary audit that proves your security controls work. Most healthcare SaaS companies need both: HIPAA compliance for legal requirements, SOC 2 for enterprise sales.

Comparison at a Glance

Aspect SOC 2 HIPAA
Type Voluntary audit framework Federal law
Governing body AICPA HHS (Department of Health & Human Services)
Applies to Service organizations handling customer data Covered entities and business associates handling PHI
Certification Yes - SOC 2 report from CPA No official certification
Audit frequency Annual (Type II) No required frequency (but recommended annually)
Focus Security, availability, processing integrity, confidentiality, privacy Privacy and security of health information
Penalties None (market-driven) $100-$50,000+ per violation (up to $1.5M annually per category)
Criminal penalties No Yes (up to 10 years imprisonment)
Timeline to achieve 4.5-6 months (Type II) 3-6 months implementation
Cost $10,000-50,000+ Varies widely; often embedded in security program

What is HIPAA?

The Health Insurance Portability and Accountability Act (HIPAA) is a US federal law that protects sensitive patient health information. It applies to:

Covered Entities

Entity Type Examples
Health plans Insurance companies, HMOs, employer health plans
Healthcare providers Doctors, hospitals, clinics, pharmacies
Healthcare clearinghouses Organizations that process health information

Business Associates

Any organization that handles PHI on behalf of a covered entity:

Business Associate Type Examples
SaaS vendors EHR systems, patient portals, scheduling software
IT service providers Cloud hosting, managed services, backup providers
Consultants Billing companies, practice management, legal services
Analytics companies Healthcare analytics, population health tools

Key point: If your software stores, processes, or transmits PHI for healthcare organizations, you're likely a Business Associate and must comply with HIPAA.

What is SOC 2?

SOC 2 (Service Organization Control 2) is a voluntary audit framework developed by the AICPA. It evaluates an organization's controls across five Trust Services Criteria:

Criteria What It Covers
Security Protection against unauthorized access
Availability System uptime and accessibility
Processing Integrity Accurate, timely data processing
Confidentiality Protection of confidential information
Privacy Personal information handling (similar to HIPAA Privacy Rule)

SOC 2 results in a formal report from a licensed CPA firm that customers can review.

Key Differences Explained

1. Legal Requirement vs. Voluntary Standard

Aspect HIPAA SOC 2
Mandatory Yes (if handling PHI) No
Penalties for non-compliance Yes (civil and criminal) None (market consequence only)
Government enforcement HHS Office for Civil Rights (OCR) None

Bottom line: You can choose not to get SOC 2. You cannot choose to ignore HIPAA if you handle PHI.

2. What They Protect

Aspect HIPAA SOC 2
Primary focus Protected Health Information (PHI) All customer data
Data types Health records, billing info, insurance data Any data in scope
Broader scope No Yes

SOC 2 can cover any type of data you handle, while HIPAA specifically focuses on health information.

3. Verification Approach

Aspect HIPAA SOC 2
Certification None exists Yes (SOC 2 report)
Third-party audit Not required Required
Formal report No standard Yes (Type I or Type II)
How compliance is proven Self-attestation, BAAs Independent auditor report

This is critical: There is no such thing as "HIPAA certified." Anyone claiming HIPAA certification is misrepresenting the framework. You can be HIPAA compliant, but there's no official certification body.

4. Audit Requirements

Aspect HIPAA SOC 2
External audit required No Yes
Audit frequency Self-determined Annual (Type II)
Audit scope Risk assessments (164.308(a)(1)) Trust Services Criteria
Auditor requirements None specified Licensed CPA firm

HIPAA Rules Breakdown

HIPAA consists of several rules that organizations must follow:

Privacy Rule

Controls how PHI can be used and disclosed:

Requirement Description
Minimum necessary Use/disclose only minimum PHI needed
Patient rights Access, amendment, accounting of disclosures
Authorizations Written consent for certain uses
Notice of Privacy Practices Inform patients how PHI is used

Security Rule

Technical, physical, and administrative safeguards:

Safeguard Type Examples
Administrative Risk analysis, workforce training, policies
Physical Facility access controls, workstation security
Technical Access controls, encryption, audit controls

Breach Notification Rule

Requirement Timeline
Individual notification Within 60 days of discovery
HHS notification Within 60 days (500+ individuals: immediately)
Media notification Within 60 days (500+ in a state)

Enforcement Rule

Violation Tier Penalty Range
Unknown $100-$50,000 per violation
Reasonable cause $1,000-$50,000 per violation
Willful neglect (corrected) $10,000-$50,000 per violation
Willful neglect (not corrected) $50,000+ per violation
Annual cap per category $1,500,000
Criminal penalties Up to $250,000 and 10 years imprisonment

SOC 2 Trust Services Criteria Mapped to HIPAA

Many SOC 2 controls overlap with HIPAA requirements:

SOC 2 Control Area HIPAA Equivalent
Access controls Technical safeguards (164.312)
Change management Security management process (164.308)
Risk assessment Risk analysis requirement (164.308(a)(1))
Incident response Security incident procedures (164.308(a)(6))
Vendor management Business associate agreements (164.308(b))
Encryption Encryption (addressable, 164.312(a)(2)(iv))
Audit logging Audit controls (164.312(b))
Backup/recovery Contingency plan (164.308(a)(7))
Training Workforce training (164.308(a)(5))

Completing SOC 2 covers approximately 60-70% of HIPAA Security Rule requirements.

When You Need Each

You Need HIPAA Compliance If:

  • You're a covered entity (health plan, provider, clearinghouse)
  • You handle PHI as a Business Associate
  • You sign Business Associate Agreements (BAAs)
  • You store, process, or transmit health information

You Need SOC 2 If:

  • Enterprise healthcare customers require third-party security attestation
  • You want to differentiate from competitors
  • You need to demonstrate security controls to prospects
  • You're pursuing contracts that specify SOC 2 in RFPs

You Likely Need Both If:

  • You're a healthcare SaaS company
  • You sell to hospitals, health systems, or health plans
  • Your customers require both BAAs and security audits
  • You want to win enterprise healthcare deals

Common Questions?

Can SOC 2 replace HIPAA compliance?

No. SOC 2 is a voluntary audit while HIPAA is federal law. You cannot choose SOC 2 instead of HIPAA if you handle PHI. However, SOC 2 can demonstrate that many of your HIPAA security controls are working effectively.

Is there a HIPAA certification?

No. There is no government-recognized HIPAA certification. Organizations claiming to be "HIPAA certified" are using marketing language, not a formal designation. You can be HIPAA compliant, but there's no official certification process.

Do I need a BAA with my SOC 2 auditor?

Generally no, unless you're sharing actual PHI with them during the audit. Most SOC 2 audits don't require access to PHI. They review your controls, not your data.

Which should I get first?

HIPAA first if you're already handling PHI. It's a legal requirement. Then add SOC 2 when customers request it or for enterprise sales. In practice, many organizations implement both simultaneously since controls overlap significantly.

Does SOC 2 Type II satisfy HIPAA audit requirements?

Not directly. HIPAA requires risk assessments (164.308(a)(1)) but doesn't mandate external audits. However, SOC 2 Type II can serve as evidence that your security controls are operating effectively, which supports your HIPAA compliance posture.

Cost Comparison

Cost Element HIPAA SOC 2
Initial assessment $5,000-20,000 $5,000-15,000
Implementation $10,000-50,000+ $10,000-30,000
External audit Optional ($5,000-15,000) Required ($10,000-40,000)
Annual maintenance $5,000-20,000 $15,000-40,000
Penetration testing Recommended Often included
Training Required Required

Key insight: Much of the cost is shared. Security controls, policies, and training apply to both. Getting both frameworks costs less than twice the price of one.

Timeline Comparison

Phase HIPAA SOC 2 Type II
Gap assessment 2-4 weeks 2-4 weeks
Policy development 4-8 weeks 4-6 weeks
Control implementation 4-12 weeks 4-8 weeks
Audit/observation N/A 3-12 months
Final report N/A 2-4 weeks
Total 3-6 months 6-18 months

*Timelines vary based on company size, complexity, and initial security readiness.

The Combined Approach

For healthcare SaaS, we recommend a unified compliance program:

Step Action
1. Foundation Implement security controls that satisfy both frameworks
2. HIPAA policies Create HIPAA-specific policies (Privacy Rule, Breach Notification)
3. SOC 2 scope Define Trust Services Criteria scope
4. Evidence collection Build automated evidence collection for both
5. Simultaneous audit Pursue SOC 2 while maintaining HIPAA compliance
6. Unified maintenance Maintain single control set that satisfies both

The Bastion Advantage

Managing dual HIPAA and SOC 2 compliance is complex. Bastion streamlines the process:

Challenge Bastion Solution
Overlapping controls Unified control framework mapped to both
Evidence collection Automated evidence for HIPAA and SOC 2
Policy management Templates covering both requirements
Vendor management BAA tracking and SOC 2 vendor assessments
Audit readiness Continuous monitoring for compliance gaps

Building healthcare software? Talk to our team → about achieving both HIPAA compliance and SOC 2.

Sources

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