States’ Hospital Data for Sale Puts Privacy in Jeopardy

It states that states are exempted from the relevant privacy law.

"The trouble is that state public-health agencies received an exemption from the federal law, formally the Health Insurance Portability and Accountability Act, or HIPAA, enacted in 1996. "

However I can't find anywhere why or what was the thought or legal justification for this, in private companies HIPAA lingo usage is almost a buzzword and everyone is very careful and people down to pharmacy technicians down to software contractors who write software to handle health information are aware of it. Why the change?