If an association health plan returns subsidy payments to plan sponsors who participate in the plan, and if subsidy payments are based on utilization of participants, is the payment of the subisdy a HIPAA disclosure of PHI if employer can determine which retirees used the prescription drug program?

The law does allow for use of PHI in situations where it is needed. For example, if you are in possession of PHI becuase you conducted an enrollment and it is part of your job, you are ok. If however, you had that information and did not protect it properly, and someone else who had no reason to view the information came into contact with it, then you have a problem.