FTC delays Red Flags Rule enforcement until August 1

by Legal and Regulatory Affairs Staff

April 30, 2009 — The Federal Trade Commission (FTC) just announced that it will delay enforcement of the Red Flags Rule (Rule) for three months until August 1, 2009 in order to give creditors and practitioners additional time to develop written identity theft programs. The FTC also announced that the agency will soon release a "template" to help entities that have a low risk of identity theft-such as practitioners who know their clients personally-comply with the Rule. The FTC did not describe the template further.

The FTC decided to push back the enforcement date in light of ongoing debate as to whether the Rule was written too broadly. FTC Chairman Jon Leibowitz indicated that delaying enforcement will allow associations to develop guidance for their members and provide "low-risk entities an opportunity to use the template in developing their programs." The APA Practice Organization will keep you informed as the FTC makes available additional guidance and information about the Rule and how it applies to psychologists.

The March 24, 2009 issue of our PracticeUpdate e-newsletter included guidance for psychologists about how to comply with the Rule. The article stimulated questions from psychologists about how the Rule affects practitioners involved with insurance company billing — specifically, balance billing for out-of-network services.

Practitioners who provide services and then bill patients later would be considered "creditors" under the Rules. Psychologists who are out-of-network with the patient's health insurance are generally allowed to "balance bill" or charge their patient later for the difference between the psychologist's rate and what the patient's explanation of benefits (EOB) indicates that the insurance will pay — typically a percentage of what the insurer identifies as the usual, customary and reasonable rate (UCR).

A practitioner sometimes does not know the co-pay amount or the UCR until he or she receives the EOB. In a balance billing situation, the practitioner will often collect a co-pay at the time of the visit, bill the insurer, and upon receiving the patient's EOB will bill the patient for whatever the insurer doesn't pay. In that way, the practitioner is billing the patient at a later date after the services have been rendered, and thereby becomes a "creditor" under the Rules.

By contrast, practitioners who are in-network usually are contractually obligated to accept the insurer's payment as payment in full and are prohibited from subsequently "balance billing" the patient. In those situations, there is no later billing that could make a practitioner a "creditor." Simply submitting a bill to the insurance company will not do so.

For more information, contact the Legal and Regulatory Affairs Department by e-mail or (202) 336-5886.

Please Note: Legal issues are complex and highly fact-specific and require legal expertise that cannot be provided by any single article. In addition, laws change over time and vary by jurisdiction. The information in this article should not be used as a substitute for obtaining personal legal advice and consultation prior to making decisions regarding individual circumstances.

UPDATED July 31, 2009