In today’s digital world, protecting sensitive information is not optional— it’s essential. Whether you’re a healthcare provider, insurance company, or business associate handling protected health information (PHI), you’ve probably heard of SOC 2 compliance and wondered how it fits into your overall data security strategy. Some organizations even ask a common question: If I’ve completed a SOC 2 audit, do I still need a Business Associate Agreement (BAA)?
The short answer is yes: you do. While both SOC 2 and HIPAA focus on safeguarding data, they serve different purposes and operate under very different frameworks. Understanding where they overlap, and where they don’t can help you avoid costly compliance mistakes.
Understanding SOC 2 and Its Compliance Requirements
What Is SOC 2?
SOC 2 (System and Organization Controls 2) is an auditing framework developed by the American Institute of CPAs (AICPA). It is a rigorous standard designed to provide assurance to customers and business partners that an organization can be trusted with their sensitive data.
The primary purpose of a SOC 2 audit is to evaluate how an organization manages its customer data based on five key principles, known as the “Trust Service Criteria.” The five Trust Service Criteria are:
- Security: The protection of system resources against unauthorized access. This includes network security, access controls, and measures to prevent abuse.
- Availability: Uptime and performance of the systems, as agreed upon by contract or service level agreement.
- Processing Integrity: Ensures that system processing is complete, valid, accurate, timely, and authorized, meaning data is handled correctly and reliably.
- Confidentiality: The organization’s ability to protect information designated as confidential from unauthorized use or disclosure.
- Privacy: Addresses the organization’s collection, use, retention, disclosure, and disposal of personal information in accordance with its privacy policy and criteria set forth in the AICPA’s Generally Accepted Privacy Principles (GAPP).
A successful SOC 2 report confirms through a 3rd-party, that the organization has established and follows the proper controls to mitigate risks related to these five critical areas, providing a seal of approval for data-sensitive information.
What Is a SOC 2 Audit?
A SOC 2 audit is an independent, objective review of an organization’s internal controls and processes. It assesses whether the organization’s system is suitably designed and operates effectively to meet the criteria outlined in the Trust Service Criteria (TSC).
The audit process involves:
- Documentation Review: The auditor examines the organization’s written policies, procedures, and system documentation.
- Evidence Collection: Evidence is collected, such as system configuration logs, access logs, incident response reports, and training records.
- Interview: Key personnel across different teams (e.g. IT, HR, Security, etc.) are interviewed to confirm that the documented controls are being implemented appropriately.
The outcome of the audit is an attestation report that details the auditor’s findings and opinion on the design and/or implementation effectiveness of the controls.
The level of assurance provided by a SOC 2 audit depends on the type of report issued:
- Type I
- Reviews the design of controls
- Gives a snapshot at a specific point in time
- Confirms that the controls are suitably designed to meet the TSC, but doesn’t verify they were followed over time.
- Type II
- Tests the operating effectiveness of controls
- Over a period of time (typically 3 to 12 months)
- Provides stronger assurance, confirming that controls were not only designed correctly, but also operated effectively and consistently throughout the audit period.
It is crucial to understand that passing a SOC 2 audit does not automatically equate to HIPAA compliance.
- SOC 2 is a flexible auditing framework that focuses on general data security, availability, processing integrity, confidentiality, and privacy for various service organizations.
- HIPAA (Health Insurance Portability and Accountability Act) is a mandatory U.S. federal law that specifically dictates how Protected Health Information (PHI) must be safeguarded.
While the security principles of SOC 2 offer a strong foundation and significant overlap with HIPAA requirements, HIPAA includes additional prescriptive rules (like specific requirements for Business Associate Agreements and Breach Notification Protocols) that are not covered by a SOC 2 audit.
SOC 2 Compliance Requirements
Achieving SOC 2 compliance is voluntary, but for service providers in tech and healthcare sectors, it is often expected. It serves as independent proof that your organization maintains stringent controls to safeguard customer data.
The main SOC 2 compliance requirements involve establishing, documenting and enforcing controls across four core operational areas:
- Documentation: All policies, procedures (e.g. Incident Response, Access Control), and system configurations must be clearly documented.
- Risk Assessments: Regular, formal assessments must be conducted to identify threats to data and systems, followed by documented mitigation measures.
- Employee Training: Employees must receive mandatory security awareness training to ensure they understand their role in protecting data.
- Continuous Monitoring: Controls must be continuously monitored and tested to prove their effectiveness overtime, essential for a Type II report.
It is important to remember what is a SOC 2 audit and what is not. A SOC 2 audit does not make a company HIPAA compliant. While a SOC 2 audit provides a comprehensive security framework, HIPAA is a specific, legal requirement governing PHI.
You can review the foundational guidance on the SOC 2 framework provided by the American Institute of CPAs (AICPA): AICPA SOC 2 Guidance.
SOC 2 vs HIPAA — How They Compare
While both SOC 2 and HIPAA aim to safeguard sensitive data, they originate from different authorities, apply to different organizations, and serve distinct purposes. Understanding their differences is key to achieving a complete security posture.
Purpose and Scope
The central distinction is the data type: SOC 2 applies to general sensitive data (financial data, client lists, etc.), whereas HIPAA is strictly about PHI.
Regulatory Authority and Enforcement
The difference between a legal mandate and an audit framework dictates their enforcement:
- HIPAA is a federal law with mandatory compliance. It is enforced by the U.S. Department of Health and Human Services (HHS) Office for Civil Rights (OCR). Noncompliance can result in significant civil and criminal penalties and public corrective actions. There are also indirect penalties, such as reputation damage and loss of patient/client/employee trust. For more on the law’s structure, see the official guidance: HHS HIPAA Laws and Regulations
- SOC 2 is a voluntary framework. Compliance is attested to by an independent third-party CPA (Certified Public Accountant). The penalty for noncompliance is indirect: primarily loss of business and reputational damage, as customers may refuse to work with noncompliant vendors.
Ultimately, SOC 2 vs HIPAA is not an “either/or” choice. Many companies that handle PHI pursue both to meet their legal obligations (HIPAA), while simultaneously satisfying the security due diligence requirements of clients (SOC 2).
Overlap Between SOC 2 and HIPAA
Despite their different origins, there is considerable overlap in controls, making them complementary.
- Shared Principles: Both frameworks require robust practices in access control (limiting who can see what data), risk management (identifying and mitigating threats), data encryption (protecting data at rest and in transit), and having formalized breach procedures.
- Strengthening Security: Achieving SOC 2 compliance (especially the Security and Privacy criteria) can naturally strengthen HIPAA compliance by enforcing rigorous, well-documented, and tested technical controls that address HIPAA’s Security Rule.
- Substitution Myth: SOC 2 is not a substitute for HIPAA. SOC 2 is flexible; HIPAA’s requirements for elements like the Security Risk Analysis and Business Associate Agreements are fixed legal mandates.
Common Misconceptions
A frequent misconception is that an organization that has a SOC 2 report is fully covered. While a SOC 2 report demonstrates a strong commitment to security and operational effectiveness, it does not ensure all legal HIPAA compliance requirements are met. The SOC 2 audit may not cover every administrative safeguard, specific reporting mandates, or contractual clauses required by HIPAA’s Privacy and Security Rules.
Why a SOC 2 Audit Cannot Replace a Business Associate Agreement
While SOC 2 compliance serves as a strong indicator of an organization’s internal security maturity, it cannot replace the legal requirement of a Business Associate Agreement (BAA) under HIPAA. These two compliance tools serve fundamentally different purposes: one provides assurance, the other enforces legal accountability.
What Is a Business Associate Agreement (BAA)?
A BAA is a legally binding contract that defines how Protected Health Information (PHI) will be managed, protected, and used between a HIPAA Covered Entity (like a hospital or health plan) and a Business Associate (like a cloud service provider or IT vendor) that handles PHI on their behalf.
Under federal law, the BAA is mandatory for any organization that handles PHI. It:
- Outlines Permitted Uses: Specifies the limited ways the Business Associate is allowed to use and disclose PHI.
- Enforces Safeguards: Requires the Business Associate to implement specific safeguards to prevent unauthorized use or disclosure.
- Mandates Reporting: Obligates the Business Associate to report security incidents and breaches to the Covered Entity.
Without a signed BAA in place, an organization cannot legally share PHI with a Business Associate, regardless of the vendor’s security certifications!
SOC 2 Is Not a Legal Substitute
The distinction between SOC 2 vs HIPAA lies in their legal weight:
- SOC 2 compliance focuses on a service organization’s internal controls and whether they are suitably designed and operating effectively (Type I or Type II report). It is an audit framework, not a law. The final report is an auditor’s opinion used to build customer trust.
- A BAA is a federal legal contract required by the HIPAA statute. It enforces shared legal responsibilities between two separate entities.
A SOC 2 report may prove that a Business Associate has robust technical controls like encryption and access management. However, it does not contain the necessary legal language, scope definitions, or breach reporting mandates required by a BAA to satisfy the Office for Civil Rights (OCR) in the event of an audit or breach. Relying solely on a SOC 2 report to satisfy this requirement is a critical compliance gap.
Using Both Together for Stronger Compliance
Organizations that handle PHI gain a significant competitive edge by pursuing both frameworks. Combining HIPAA compliance with SOC 2 compliance achieves some of the highest standards of data protection:
- BAA (HIPAA): Provides the legal foundation of accountability required by federal law.
- SOC 2 Report: Provides security assurance by demonstrating the quality and continuous operation of the technical controls backing the promises made in the BAA.
At Total HIPAA, we help businesses move beyond simple “check-the-box” compliance. We assist in performing comprehensive Risk Assessments, help create legally sound, customized BAAs, and align your internal controls. This approach provides confidence in your security posture and peace of mind in the face of audits.
Want to Learn More?
Stop guessing about your legal risks. Total HIPAA specializes in providing the definitive clarity you need to achieve and maintain true HIPAA compliance—from mandatory Risk Assessments to Annual Training and legally sound Business Associate Agreements (BAAs).
Don’t wait for an audit. Get expert guidance focused specifically on the federal requirements to protect PHI and avoid costly penalties.
