Congress Limits Reach of Red Flag Regulations

Medical professionals, lawyers and similar service professionals should rest easy heading into 2011 knowing that the Red Flag Rules, a set of provisions from the Fair and Accurate Credit Transactions Act of 2003, should no longer capture them in its broad reach. Enforcement of the Red Flag Rules (the “Rules”) has been repeatedly delayed due to its controversy, but its narrower enforcement should now begin in 2011.

The intent of the Rules was to require businesses that routinely deal with consumer credit to put in place policies and safeguards to protect the personal credit information of its customers, including ways to recognize “red flags” indicating identity theft. However, as initially drafted, the Rules caught virtually every service provider in its net by applying to anyone who provides goods or services and allows for deferred payment.

Stuck with that broad language, the FTC released a list of entities to which it believed the Rules applied, including lawyers, doctors, accountants and others. Thereafter, considerable lobbying ensued to prevent the broad application of the Rules. Last week the President signed narrower language that should focus the regulation on its intended subjects of organizations in the lending and credit business.

The revised language clarifies that a person or business does not become a “creditor” within the meaning of the Red Flags Rule by simply advancing funds incidental to providing a service to that person.

 Medicare Payment Cuts Delayed For Another Year

Congress passed a twelve-month reprieve from cuts to the Medicare reimbursement rates for physician services that are written into the payment formula. The automatic pay decrease, most recently amounting to a 25 percent cut, has been pushed back a few months at a time by Congress over the past year. President Obama signed the “doc fix” bill last week.

 Health Reform Law Experiences Setback

On December 13, 2010, a judge of the U.S. District Court for the Eastern District of Virginia ruled that the mandate for U.S. citizens to obtain health insurance coverage was unconstitutional. Beginning in 2014, the Patient Protection and Affordable Care Act imposes fines on individuals who have not obtained minimum levels of health insurance coverage, unless specifically exempted. The judge determined Congress did not have the constitutional authority to pass that law.

Numerous similar lawsuits have been brought in other jurisdictions, two of which were previously resolved in favor of the U.S. government. Given the significant window of time between now and the provision’s enforcement date, the immediate impact of the ruling is relatively minimal. In the meantime, it is expected that at least one of the lawsuits challenging the Health Reform Law will find its way up to the U.S. Supreme Court.