Health Law

Updated - President Signs Act Exempting Physicians From Red Flag Rules

By William Maruca

Update: President Obama signed S. 3987 as Public Law No: 111-319 [Text, PDF] on December 18, 2010.

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Physicians will no longer be defined as "creditors" under the controversial "Red Flag Rules," when clarifying provisions are signed into law as expected.  The House of Representatives has unanimously passed S. 3987, the "Red Flag Program Clarification Act of 2010" which was previously approved by the Senate.  The bill now goes to President Obama for his signature.  

The brief bill redefines "creditor" to exclude service providers that advance funds on behalf of a person for expenses incidental to a service they provide to that person. The Red Flag Rule was designed to require creditors such as banks, credit card companies and other lenders, to implement various safeguards to protect their clients from identity theft.  

The original statute defined "creditor" broadly, and the FTC initially interpreted it to apply to physicians and other professionals who bill their clients for services, believing that they were obligated to do so by the statutory language. After being bombarded with complaints, FTC chairman Jon Liebowitz assured physicians that his agency was pushing Congress to work quickly to fix the Red Flag Rule that he said had "unintentionally swept up countless small businesses – including every doctor, dentist, lawyer, gardener, plumber, and housekeeper who bill customers on a monthly basis."

The effective date of the Red Flag rules has been postponed several times, most recently in June, and will take effect for other creditors on January 1, 2011.  The American Bar Association and other professional societies had sued the FTC earlier this year and the federal agency had agreed to delay enforcement for attorneys, physicians and accountants until the appeal of that ruling was heard - it remains pending but will be rendered moot by this legislation 

Full post as published by HIPAA Health Law & Technology on December 08, 2010 (boomark / email).