DOL Employer Insurance Notification – $100 per day fine appears to be a myth!


How many people remember when the PPACA (Health Reform Law) was being debated in congress that the then speaker of the house said:

 “we have to pass the bill so that you can find out what is in it.”

Well, it appears that, long after the bill was passed and became law, we are still trying to figure out what is in it!

Today the Department of Labor (DOL) has announced that there will be no penalty of $100.00 per day for employers who fail to provide notification to its employees of health insurance options. The last week it was widely speculated, and accepted that employer’s who were not in compliance could be subject to that fine. The DOL’s website released the following information under a FAQ section on their website:

Q: Can an employer be fined for failing to provide employees with notice about the Affordable Care Act’s new Health Insurance Marketplace?

A: No. If your company is covered by the Fair Labor Standards Act, it should provide a written notice to its employees about the Health Insurance Marketplace by October 1, 2013, but there is no fine or penalty under the law for failing to provide the notice.

You can reach this FAQ by clicking HERE



A little known requirement of the PPACA (health care reform law) is that it places a duty on Employers (with 1 (or more) employee & $500,000 (or more) in annual gross revenue) to provide every employee notice of the Health Insurance Coverage Options including Notice of the employees opportunity to find insurance in the state/federal marketplace(formerly Exchange).  The Dept of Labor issues a Guidance in May prior to the postponement of the employer mandate – but it is apparent they are not postponing this notice duty. 

 So, what happens if you fail to provide this notice?

The rule’s stated penalty is a continuing fine of $100.00 per day!

The Guidance provides a sample Word form to use for the notice.  We recommend using this form because if it is fully completed, you will be assured compliance with the requirement.   The Notice must be mailed to the employee for receipt not later than 10/1/2013 or electronically sent  if the email complies with DOL’s safe harbor for electronic disclosure. 

(Suggestion: If you choose the email option you should probably be sure to use a “READ Receipt” function). 

Links to the sample form and the safe harbor are included in the DOL Technical Release 2013-02 which can be found at:



Also, this notice requirement includes an employer duty to provide any and all new hires the same notice at the time of hiring.



HIPAA Risk Analysis Tool

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Paying Your Marketers Properly – Revisiting the Rabbit Hole … Part 2: Health Care Laws – Anti-kickback: Employees

© 2013 Paul Hirsch

A brief note to the Readers: First, I would like to thank all of the people who have taken time to comment on this article series, and those who have taken time to email me expressing interest in this subject. I know it has been longer than I ever anticipated, but FINALLY I am posting the next part of this “series.” I appreciate everyone’s patience, we are a small office (3 people), and when we had 4 different cases in various phases of litigation simultaneous blog posting and website updates took a far backseat!

marketingPart 2: Health Care Laws – Anti-kickback: Employees

We (here at the firm) have almost always approached the issue of paying marketers form the standpoint of: “in most situations the best approach will be to treat them as an employee, rather than as an independent contractor.” Our original article articulated this in a very basic manner.

So why is this the best approach?

Please note that the term “best” is subjective, this might not be the best approach in certain instances, but we believe that more often than not it will be the simplest approach and minimize an employer’s exposure to liability.

Understanding the “why” necessarily requires looking into the history behind the federal Anti-kickback laws, the impact they had on the healthcare industry, and how the law (and accompanying regulations) adapted through the years.

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  •  The Back Story: Some readers might wonder why this is even a discussion. For those readers, and for those who have not thought about the Anti-kickback laws in some time, here is a greatly condensed explanation:

ALL healthcare providers who participate in the Medicare, Medicaid, or any other healthcare program that is funded by federal dollars are subject to the federal anti-kickback laws. In 1972 Congress responded to abusive practices by healthcare providers participating in the federal healthcare programs by enacting a law which is commonly known as the anti-kickback statute. Initially, this law simply prohibited soliciting or offering a “kick-back, bribe, or rebate.” Each violation of this law was punished as a misdemeanor, a relatively minor offense.

In 1977 Congress elevated the possible punishment for violations of the statute to a felony, and they expanded the scope of what actions were prohibited. Congress realized that the implications of continuing abusive practices of the publicly funded healthcare programs must be stopped in order to ensure effective delivery of healthcare to a growing population of participants. They expanded the reach of this statute by making its punishments apply to “any remuneration.”

In 1977 the statute essentially said the following:


◊   offers to pay, pays, receives, or asks for;
◊   ANY remuneration (including any kick-back, bribe or rebate)
◊   directly or indirectly; overtly or covertly; in cash or in any other form;
◊   in return / exchange for furnishing, purchasing, leasing, arranging for, or referral related to;
  ANY healthcare item or service which might be paid for partially or fully by the federal government
  … can be found guilty of a felony punishable by a fine of $25,000, 5 years in prison, or both for each violation.

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At this point, the anti-kickback statute substantially became what it is still today, and because it is SO broadly worded, it applies to an overwhelming variety of healthcare related transactions. Congress realized this when they implemented it in 1977. Congress sought to ensure that otherwise legitimate transactions would receive an ‘exception’ by  stating that this statue would not apply to a few specific transactions.

Even though this 1977 revision included specific protections for “any amount paid by an employer to an employee (who has a bona fide employment relationship with such employer) for employment in the provision of covered items or services.” This and a few other exceptions were included in the text of the statute to help ensure that the statue was only applicable against the abusive practices it was aimed at stopping.

Only 3 years passed before Congress recognized that their revised language was so broad that it was causing a large amount of uncertainty in the healthcare industry. Healthcare providers were unsure of what transactions or relationships were a violation of the statue. Congress responded by revising the statute in 1980, inserting a “mens rea” requirement (a requirement present in most criminal statutes which means only people who have the specified level of intent may be found guilty of violating the statue). The law now requires that violations be “knowing and willful” in order to be punishable.

Congress took the time to specify that it was “concerned that criminal penalties may be imposed under current law to an individual whose conduct, while improper, was inadvertent.” Also, the 1980 changes are “to assure that only persons who knowingly and willfully engage in the proscribed conduct are to be subject to criminal sanctions.”

Best Intentions Road 240 x 160As is often the case, Congress’s best intention-ed actions did not provide the desired results (we all know what road was paved by best intentions).
By 1987 the complaints of over breadth of the wording in the statute and rising concerns about fraud and abuse in the federal healthcare industry rose to the point that Congress had to act. Congress’ response was to issue a comprehensive set of amendments to the federal healthcare system and the anti-kickback statute.

These amendments added that violators of the anti-kickback statute could also be subject to exclusion from participation in the healthcare programs if they were convicted of a criminal offense in connection with healthcare items or services. Simultaneously, Congress allowed the Department of Health and Human Services (HHS) to issue guidance and rules concerning healthcare transactions and relationships. This delegation of power is a notable point in the HHS’s history, because Congress instructed the HHS to issue “safe harbors” for certain transactions, financial relationships, and interactions. HHS was empowered to “promulgate regulations specifying payment practices that will not be subject to criminal prosecution” or otherwise be the “basis for exclusion from participation” in the federal healthcare programs.

The OIG chose to issue their guidance on the anti-kickback safe harbors through its OIG department. The OIG issued its first “Final Rule” listing certain safe harbors in 1991. Since then, these “safe harbors” have become some of the most essential guidelines for healthcare providers whenever financial transactions are concerned. Since their inception and presently these safe harbors can be found at § 1001.952 in the Code of Federal Regulations (C.F.R.).

  • The Current Rule:Please follow the Arrows

Big or small, non-profit or for profit, privately owned or publicly traded, ALL healthcare providers who participate in Medicare, Medicaid, or any other federal healthcare program MUST abide by the safe harbors in order to successfully ensure compliance with the applicable laws and regulations.

Many states have implemented their own anti-kickback laws and almost all of them have modeled their state laws off of the federal statute. Some states not only model their prohibitions after the federal law, they even adopt the federal simply by mere reference to them.

The previous description and brief history of the anti-kickback statute provides a solid frame of reference to begin looking in detail at these safe harbors, including the “Employee” safe harbor, which is in essential parts as follows:

C.F.R. § 1001.952 (“Exceptions”): “The following payment practices shall not be treated as a criminal offense … and shall not serve as the basis for an exclusion

C.F.R. § 1001.952(i) (Employees): Prohibited “remuneration” does not include any amount paid by an employer to an employee, who has a bona fide employment relationship with the employer, for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs. For purposes of… this section, the term employee [shall be defined by the IRS’ definition].

  •  Employee vs. Independent Contractor ( a Marketer as an Employee – examined)

 Now, we can finally gain some ‘traction’ understanding why marketers should be paid as employees rather than as independent contractors, beginning with an analysis of the employee safe harbor.

At the outset, the safe harbor clearly protects payments from an employer to an employee… then it goes on to specify “for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs.” …

for employment in the furnishing of”: This language is simply unclear. What is employment “in the furnishing of…”?

    • INTERPRETATION A: What is the simple answer? What is most obvious?

Couldn’t this phrase “in the furnishing of…” simply apply to the actual delivery of healthcare? Wouldn’t it be a very simple and obvious explanation to say: “this safe harbor clearly protects payments made by a healthcare company to a therapist (or nurse, aide, etc.)? Yes, the safe harbor would clearly apply to this “furnishing of” healthcare items or services.

If you are a healthcare provider entity participating in Medicare/Medicaid your business is to provide healthcare items or services and obviously payments made to employees who actually provide the hands on care should be exempt from prosecution. We would generally say OF COURSE! This particular application is not a hotly contested issue, because the answer is quite obvious.


What if we try to apply the logic from Interpretation A to a common marketer scenario? Now we are asking to apply that same wording, which so obviously applies to say… a nurse, to a person who is not licensed to provide medical services, and also whose services can NOT be paid in whole or in part by the federal healthcare program!

Now the issue can become so much more uncertain and less obvious. However, to many employers who are healthcare providers the answer should still be fairly evident…

If your business revolves around and essentially IS the provision of healthcare items or service (which may in part or in whole be paid by a federal healthcare program) how can you exist if you don’t have clients? Isn’t finding clients a necessary and integral part of furnishing those services? If clients, potential clients, or referral sources do not know that your business exists then how could you possibly ever furnish any item or services?

Of course, to a healthcare provider this seems axiomatic and the answer is obvious. Healthcare, like any other business must be marketed in order to furnish whatever items or services it offers! Therefore, employing a marketer to properly market your business is employment “in the furnishing of…”

  • OIG “GUIDANCE”… How does the OIG help “guide” the industry with regards to this issue? DO they support our general conclusions in Interpretation B?

OIG HHS badge The OIG has numerous ways of providing guidance: official ‘Advisory Opinions,’ comments posted in the Federal Register, special advisory bulletins, and their ‘Fraud and Abuse Alerts.’ All of these things are sources of explanation and guidance for healthcare providers about the safe harbors. They are extremely significant. Both state and federal courts frequently turn to these sources in order to apply or interpret what the various safe harbors mean.

Unfortunately, there is relatively little that is commonly known about specific guidance explaining how the employee safe harbor should be applied. In fact, the best piece of information is frequently overlooked. Some courts have picked up on it and seemingly understood its implications, others have chosen to bypass it for reasons unknown… what is it?

The proposed exception for employees permitted an employer to pay an employee in whatever manner he or she chose for having that employee assist in the solicitation of program business.…

To anyone looking at the anti-kickback employee safe harbor, as it might apply to paying marketers, this simple sentence should be a profound clarification!
Because, it justifies what should otherwise be obvious… that employing a marketer IS employment “in the furnishing of” applicable healthcare items or services! Thus, this is the most important sentence to explain why paying your marketer properly starts with paying them as an employee.


The explanation continues: Employee vs. Independent Contractor… Contd. (Independent Contractor as a Marketer – examined) & Employee vs. Independent Contractor… Contd. (“Bona Fide” – Who is an Employee?)

Photo Credits:

photo credit: <a href=””>bookgrl</a> via <a href=””>photopin</a> <a href=””>cc</a
photo credit: <a href=””>bloomsberries</a> via <a href=””>photopin</a> <a href=””>cc</a>
photo credit: <a href=””>96dpi</a> via <a href=””>photopin</a> <a href=””>cc</a>


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As a quick followup note to our earlier post about the new HIPAA final rule there is a significant, but easily overlooked, timeline for implementation of Business Associate Agreements (BAA’s)!

If you implement (draft and signed between the parties) a Business Associate Agreement BEFORE FRIDAY JANUARY 25, 2013  you will have 1 Extra Year to fully comply with various portions of the new business associate rules!

The new rule places a deadline of SEPTEMBER 23 2013 for covered entities and Business Associates to be compliant with various portions of the new requirements!!!

HOWEVER, if covered entities implement a basic form of Business Associate Agreement (BAA) by or before JANUARY 25 2013, those “basic” agreements will be considered as a sufficient step towards compliance to extend the time when the full weight of the new rules will be in effect!!!

Instead of mandatory full compliance with all the new rule requirements BY 09-23-2013 — a full year “grace period” will granted, delaying such full compliance until September 23, 2014!!!

As long as those “basic” Agreements which were in place by or before 01-25-2013 the reprieve from full compliance with the new rules will stay in place AS LONG AS the BAA’s are not changed or renewed before the end of the extended “grace period.”

If you don’t have a “basic” HIPAA-compliant agreement in place with your Business Associate by 01-25-2013, the full weight of the new rules will be in effect, and force your compliance on 09-23-2013.

This extension IS CRITICAL – to many organizations who are short on staff, time and money – an extra year to put policies and procedures in place is INVALUABLE!!!

Because we truly care about our clients and the industry we are posting BOTH:
1 – The “basic” model of BAA posted by CMS/HHS several years ago;


2– Our own BAA, which we have used for years – this form is comprehensive and generally applies between a Covered Entity and a Business Associate – but – if needed it could be easily modified to apply between BA’s and their Subcontractors (modifications are up to the end users!)

Exclamation     Because we have never posted one of our “forms” we feel that we must explain the following: This form is given free of charge and IN NO
WAY WHATSOEVER  implies or should be considered as legal advice – or the establishment of legal representation period – it
is subject to all limitations below!

Read Below Before Downloading!

No warranties of any form or sort – express or implied  – are given with this form – this means IN NO manner, variation, or theory is any sort of guarantee or warranty included with this form whatsoever!

By downloading either form mentioned here the person or entity downloading this form IS AGREEING ALL of the Following:

The form is in no way guaranteed for accuracy, content, suitability, or even usefulness –

YOU AGREE also that you are downloading it at your own risk, and the result will be as if you had picked this up off of a street corner where someone left it –

You Agree Pearson & Bernard PSC – nor any of its partners or associates are in any way responsible for your use of either document; that Pearson & Bernard PSC cannot and will not ever be responsible for how you use either document – and that neither is legal advice or in any way legal representation!

1.  To download a Microsoft Word Document version of CMS “example” click –> CMS SAMPLE Business Associate Contracts
(this was copied and pasted from CMS website into a blank word document)

2.  To download a Microsoft Word Document example version of “our” (this Firm’s) BAA click –> Blank Example BAA


NEW HIPAA / HITECH Rules for Business Associates and Subcontractors

HHS Building 320x213

On January 17, 2013 the Dept. of Health and Human services (HHS) released a new final rule which made significant changes in various parts of the HIPAA/HITECH rules. As most readers know the pressures of protecting patients’ “protected health information” (PHI) are continually escalating. In some respects the new rule relieves the Covered Entities from some of those pressure.

How? By expanding the rule to make Business Associates, and their “sub-contractors” directly liable for ensuring the proper measures of security are in place to protect PHI. Naturally, the 563 page final rule has numerous topics and issues for the entire industry. But, in the short-term we need to call attention to the fact that essentially Business Associates must get assurances from their subcontractors! What assurances? Basically, assurances that the subcontractors (those who have “access” to PHI held by the Business Associate) will comply with the regulations and rules surrounding the use/disclosure/transmittal of PHI.

How about an example to clarify this:

A law firm (lets call them Firm) is a business associate of a covered entity (lets call them Agency).

So Firm and Agency have a business associate agreement (BAA) in place, and they have had it in place for years, because both Firm and Agency are doing their best to be compliant.

Prior to this new final rule, Firm had a responsibility to Agency to safeguard Agency’s PHI through the various requirements of the BAA. There was no “rule” requiring Firm to set up subsequent BAA’s with its subcontractors.

Now the new final rule requires Firm to set up BAA’s with its subcontractors.

Which subcontractors does Firm need to do this with?

Simply put, anyone  the Firm has hired as subcontractor if that subcontractor has access to PHI kept by the Firm. The new rule has published various comments about how expansive this requirement is, but boiled down to the bare essence of the matter, if the subcontractor has access to PHI there needs to be a BAA in place between Firm and subcontractor.

A prime example would be the Firm’s IT contractor. If Firm has hired someone (not an “in-house” employee) to manage its server and the Firm’s server has PHI, then the IT contractor access to PHI (assuming Firm has stored some PHI from Agency on its server).

Hopefully that plain “bare-essentials” example helped clarify this issue.

Quite notably, a short part of the new rule echos what is written above, it states:

“The Department also believes that the privacy and security protections for an
individual’s personal health information and associated liability for noncompliance with
the Rules should not lapse beyond any particular business associate that is a
subcontractor. Thus, under the final rule, covered entities must ensure that they obtain
satisfactory assurances required by the Rules from their business associates, and business
associates must do the same with regard to subcontractors, and so on, no matter how far
“down the chain” the information flows.”

This new final rule will become effective on March 26, 2013. Covered entities and business associates must comply with the rules by September 23, 2013. We will continue to review and examine the 563-page final rule we will continue to post relevant updates accordingly.

For anyone interested the  pdf document of the new final rule can be accessed by clicking here.

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