On November 30, 2010, the Senate passed the Red Flag Program Clarification Act of 2010 (the “Act”). The Act’s passage is being viewed as the first step in exempting healthcare providers from the Red Flags Rule requiring creditors to adopt identity theft detection policies. By way of background, the Red Flags Rule was initially scheduled to go into effect on November 1, 2008, but has been subject to multiple delays resulting from industry complaints and lobbying, particularly from the American Medical Association. The Red Flags Rule is currently set to go into effect on January 1, 2011.
Pursuant to the Act, the term “creditor” for purposes of application of the Red Flags Rule
“does not include a creditor ... that advances funds on behalf of a person for expenses incidental to a service provided by the creditor to that person.” (emphasis added)
By exempting service providers from the definition of a creditor, the Senate appears to be exempting physicians from application of the Red Flags Rule.
Passage of the Act may not, however, actually result in the exemption of physicians from the Red Flags Rule. The Act gives authority to the Federal Trade Commission (“FTC”) and other relevant governmental agencies to designate creditors subject to the Red Flags Rule where the creditor “offers or maintains accounts that are subject to a reasonably foreseeable risk of identity theft.” In prior communications, the FTC has noted that it believes medical identity theft poses a growing and especially dangerous risk. As a result of this belief, the FTC may choose to designate healthcare providers as creditors for purposes of application Red Flags Rule regardless of the Act’s passage.
A companion bill, HR 6420, has been referred to committee in the House. It is unclear when the House will take up the measure.
Houston Harbaugh will continue to monitor this area and will keep you informed of any developments. If you have questions about the Red Flags Rule or would like assistance in your efforts to address medical identity theft, please contact your Houston Harbaugh attorney.