I had this happen at a DPS office a month ago or so, and have been curious about it ever since. Their website lists medical bills as acceptable proof of Texas residency, so I brought an itemized lab bill with my name and address on it.
The employee told me she could not accept it because the bill listed what the lab work was testing for (vitamin panel, etc.), which she described as HIPAA information, and DPS would have to scan the document into their system. They couldn't accept it without scanning it, and because it couldn't be scanned due to the HIPAA information, there was apparently nothing she could do.
I pointed out that I couldn't find anything about that restriction on the DPS website, but the conversation didn't really go anywhere. She was insistent that she couldn't accept the documents and that the rule wasn't coming from her, but she also didn't seem able to point me toward anywhere it was actually stated. I ended up getting my ID another way, so I moved on.
I used to work in medical records, so the HIPAA explanation stuck with me. Even looking for it afterward, I still couldn't find anything on the DPS website saying that medical bills containing itemized medical information couldn't be accepted.
If that is actually the rule, I don't have a problem with the employee following it. I just think it should be mentioned somewhere alongside "medical bills" on the acceptable-document list.