Is the use of encryption mandatory in the Security Rule?

Answer:

No. The final Security Rule made the use of encryption an addressable implementation specification. See 45 CFR § 164.312(a)(2)(iv) and (e)(2)(ii). The encryption implementation specification is addressable, and must therefore be implemented if, after a risk assessment, the entity has determined that the specification is a reasonable and appropriate safeguard in its risk management of the confidentiality, integrity and availability of e-PHI. If the entity decides that the addressable implementation specification is not reasonable and appropriate, it must document that determination and implement an equivalent alternative measure, presuming that the alternative is reasonable and appropriate. If the standard can otherwise be met, the covered entity may choose to not implement the implementation specification or any equivalent alternative measure and document the rationale for this decision.