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We had this policy at my last job, but not due to HIPAA. Any time "Alexa" came up in conversations, it was very common for peoples' devices to chime in, telling on them.
Granted, we were in tech, so we were very aware that these things aren't recording everything you say and sending the recordings off to motherbrain nor "spying", per se.
I recall them being caught of being in the possession of recordings they shouldn’t have had.
On top of this the option of not sending recordings to the cloud is being removed just now - so they stopped pretending to respect your privacy.
I'd need more (and reliable) information to comment on your first statement.
For your second statement, there were apparently a limited number of devices which could process some commands locally, but most devices never had that capability to begin with. For the ones that could, it sounds like Amazon is deprecating the functionality. Does that sound correct? Either way, that's still a substantially different situation from having a device that's recording everything you say and uploading it to the cloud.
Newsweek has a good overview.