Weekly Recap of Health Care Reform – Red Flag Rules in New Jersey

The highly charged health care reform debate continues to get extensive news coverage, and Members of Congress are clearly feeling the heat. Senate Finance Committee Ranking Member Senator Charles Grassley (R-IA) took the unusual step of issuing a statement last week to reassure voters that a Finance Committee bill will not have end-of-life provisions — one of the more controversial topics at town hall meetings this summer.

A Finance Committee bill has yet to emerge, as Committee members search for an approach that can net bipartisan support. But Grassley provided a small glimpse of the Committee’s thinking when he disclosed that the panel “dropped end-of-life provisions from consideration entirely because of the way they could be misinterpreted and implemented incorrectly.” Distancing himself and the Finance Committee from the House bill, Grassley went on to say House legislation is “poorly cobbled together” and could invite unintended consequences.

If your company is a medical provider, health care insurance payor, or you need to gather insights on the coming changes in electronic health care, HIPAA, and ARRA related health care developments, Contact us to schedule a discussion with one of our industry experts.


Congress is in recess, so there were no federal reports for the week of August 17th.


NEW JERSEY: New law means that New Jersey providers will be subject to Red Flag Rules.

  • Newly enacted legislation requires installment payment for maternity services, and it mandates the Department of Banking & Insurance to promulgate a payment schedule for provider services rendered in advance of child delivery. Through the New Jersey Association of Health Plans, several carriers will meet with stakeholders to assist the department in implementing this statute.
  • Effective August 1, 2009, every health care organization and practice must review its billing and payment procedures to determine if it’s covered by the Red Flags Rule. Whether the law applies to you isn’t based on your status as a health care provider, but rather on whether your activities fall within the law’s definition of two key terms: “creditor” and “covered account.”
  • As many as nine million Americans have their identities stolen each year. The crime takes many forms. But when identity theft involves health care, the consequences can be particularly severe.
  • Medical identity theft happens when a person seeks health care using someone else’s name or insurance information. A survey conducted by the Federal Trade Commission (FTC) found that close to 5% of identity theft victims have experienced some form of medical identity theft.
  • Victims may find their benefits exhausted or face potentially life-threatening consequences due to inaccuracies in their medical records. The cost to health care providers — left with unpaid bills racked up by scam artists — can be staggering, too.
  • The Red Flags Rule, a law the FTC began enforcement on August 1, 2009, requires certain businesses and organizations — including many doctors’ offices, hospitals, and other health care providers — to develop a written program to spot the warning signs — or “red flags”
  • Also enacted into law was an autism coverage mandate. Under the new statute, insurance carriers must extend coverage for medically necessary treatment including speech, occupational, and behavioral therapy. The coverage benefit is capped at $36,000 annually. Also, the state Supreme Court has denied an appeal for stay of approved rider filings by the Small Employer Health Benefits board.
  • A coalition of health care providers, primarily ambulatory surgery centers, sought to delay implementation of an approved rider filed by Horizon Blue Cross Blue Shield of NJ, which limits out-of-network ASC benefits at $2,000. The newly appointed Commissioner of Banking & Insurance denied the providers’ appeal for stay. The coalition’s emergency request for delay was denied by the Appellate Division and finally the Supreme Court upheld the denial.

NORTH CAROLINA: The Governor has signed the proposed budget with no premium tax increase to insurers, thanks to the input industry leaders, business leaders and trade groups. Previous budget proposals included increases from 1.9 to 2.25 percent, effective January 2011.

PENNSYLVANIA: Governor Ed Rendell signed a budget bill after exercising his line item veto to strike most appropriations other than those necessary to pay state employees. The bill, introduced by Senate Appropriations Committee Chairman Jake Corman (R-Centre), was passed without amendment so that it could go to the Governor. The 2 percent managed care organization tax remains the big open issue for the budget. Moving the current MA MCO assessment under the sales and use tax is supported by some, but the administration is pushing the added 2 percent tax on all managed care premiums.

Michael F. Arrigo

Michael Arrigo, an expert witness, and healthcare executive, brings four decades of experience in the software, financial services, and healthcare industries. In 2000, Mr. Arrigo founded No World Borders, a healthcare data, regulations, and economics firm with clients in the pharmaceutical, medical device, hospital, surgical center, physician group, diagnostic imaging, genetic testing, health I.T., and health insurance markets. His expertise spans the federal health programs Medicare and Medicaid and private insurance. He advises Medicare Advantage Organizations that provide health insurance under Part C of the Medicare Act. Mr. Arrigo serves as an expert witness regarding medical coding and billing, fraud damages, and electronic health record software for the U.S. Department of Justice. He has valued well over $1 billion in medical billings in personal injury liens, malpractice, and insurance fraud cases. The U.S. Court of Appeals considered Mr. Arrigo's opinion regarding loss amounts, vacating, and remanding sentencing in a fraud case. Mr. Arrigo provides expertise in the Medicare Secondary Payer Act, Medicare LCDs, anti-trust litigation, medical intellectual property and trade secrets, HIPAA privacy, health care electronic claim data Standards, physician compensation, Anti-Kickback Statute, Stark law, the Affordable Care Act, False Claims Act, and the ARRA HITECH Act. Arrigo advises investors on merger and acquisition (M&A) diligence in the healthcare industry on transactions cumulatively valued at over $1 billion. Mr. Arrigo spent over ten years in Silicon Valley software firms in roles from Product Manager to CEO. He was product manager for a leading-edge database technology joint venture that became commercialized as Microsoft SQL Server, Vice President of Marketing for a software company when it grew from under $2 million in revenue to a $50 million acquisition by a company now merged into Cincom Systems, hired by private equity investors to serve as Vice President of Marketing for a secure email software company until its acquisition and multi $million investor exit by a company now merged into Axway Software S.A. (Euronext: AXW.PA), and CEO of one of the first cloud-based billing software companies, licensing its technology to Citrix Systems (NASDAQ: CTXS). Later, before entering the healthcare industry, he joined Fortune 500 company Fidelity National Financial (NYSE: FNF) as a Vice President, overseeing eCommerce solutions for the mortgage banking industry. While serving as a Vice President at Fortune 500 company First American Financial (NYSE: FAF), he oversaw eCommerce and regulatory compliance technology initiatives for the top ten mortgage banks and led the Sarbanes Oxley Act Section 302 internal controls I.T. audit for the company, supporting Section 404 of the Sarbanes Oxley Act. Mr. Arrigo earned his Bachelor of Science in Business Administration from the University of Southern California. Before that, he studied computer science, statistics, and economics at the University of California, Irvine. His post-graduate studies include biomedical ethics at Harvard Medical School, biomedical informatics at Stanford Medical School, blockchain and crypto-economics at the Massachusetts Institute of Technology, and training as a Certified Professional Medical Auditor (CPMA). Mr. Arrigo is qualified to serve as a director due to his experience in healthcare data, regulations, and economics, his leadership roles in software and financial services public companies, and his healthcare M&A diligence and public company regulatory experience. Mr. Arrigo is quoted in The Wall Street Journal, Fortune Magazine, Kaiser Health News, Consumer Affairs, National Public Radio (NPR), NBC News Houston, USA Today / Milwaukee Journal Sentinel, Medical Economics, Capitol ForumThe Daily Beast, the Lund Report, Inside Higher Ed, New England Psychologist, and other press and media outlets. He authored a peer-reviewed article regarding clinical documentation quality to support accurate medical coding, billing, and good patient care, published by Healthcare Financial Management Association (HFMA) and published in Healthcare I.T. News. Mr. Arrigo serves as a member of the board of directors of a publicly traded company in the healthcare and data analytics industry, where his duties include: member, audit committee; chair, compensation committee; member, special committee.

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