4 Tips for Working with a Resource Constrained Internal Revenue Service


Federal tax professionals working to resolve issues with the IRS can attest to the multifaceted impacts of the agency’s resource constraints on taxpayer service. The signs are evident, for example, in the long wait times for calls to be answered, tax return processing delays, and increased instances of penalties being assessed against compliant taxpayers. Perhaps most frustratingly, IRS examinations that could have been resolved cooperatively with an adequately staffed agency have become unnecessarily prolonged and, in some cases, contentious.

The optimists among us see that the process of reform to address these issues has begun with a slow refunding of the IRS. However, it could take years of IRS hiring and training for the organization to manage the full scope of its responsibilities. What do we do while we wait?

The following are some suggested best practices for dealing with the IRS in the current environment.

  1. Closely monitor your IRS accounts

The IRS’s most recent filing season was challenging. Even some taxpayers that electronically filed have since discovered that their returns were improperly recorded in the IRS’s system, resulting in incorrect taxable income or net operating loss carryforwards.

IRS input errors can have significant negative consequences for compliant taxpayers. For taxpayers that remitted the proper amount of income tax (i.e., the income tax liability reported on their return), an IRS input error that results in a higher recorded income tax liability could lead to the improper assessment of late payment penalties. Worse yet, if the IRS input error results in a lower recorded income tax liability, the IRS may refund a taxpayer’s “excess” payment. If the taxpayer inadvertently accepts the refund (by, for example, depositing the refund check), the IRS will assess underpayment interest from the day it sent the refund until the day the taxpayer pays it back.

IRS input errors can also negatively impact taxpayers that overpaid their current year tax liability and elected to have the excess amount credited to the subsequent tax year. If the input error increases the taxpayer’s current year tax liability, the IRS will credit a lower amount, potentially triggering penalties for late payment in the subsequent year.

The errors that begin with an IRS input mistake and end with penalty and interest assessments can be caught early by taxpayers that actively monitor their IRS accounts. Specifically, taxpayers that establish access to the IRS’s eServices via the IRS website are able to track most activity on their tax accounts, confirm the IRS has accurately recorded their tax filings and ensure the IRS has not sent any erroneous refund checks. Tax advisors can also easily monitor their clients’ tax accounts with a properly executed Form 2848, Power of Attorney.

  1. Monitor the status of your IRS correspondence

It generally takes months for the IRS to respond to taxpayer correspondence. The IRS is similarly slow in processing amended tax returns, including amended returns that report a claim for refund. Due to the processing delays, the National Taxpayer Advocate’s office recently announced it had “made the difficult decision to suspend accepting cases where the sole issue involves the processing of amended returns until the IRS is able to work through its backlog.”[1]

The IRS is also having difficulty keeping track of or is simply unable to answer, many taxpayer communications. [2] As a general rule, if the IRS has not responded to a taxpayer within eight to ten weeks of initial contact, it is important for the taxpayer to follow up with a phone call to the IRS to determine whether the IRS is taking steps to resolve the taxpayer’s issue. IRS call center representatives can often see notes on the taxpayer’s account that clarify what (if any) action the IRS has taken.

Although taxpayers may attempt this follow-up call to the IRS themselves, their tax advisors will likely have more efficient lines of communication via the IRS’s Practitioner Priority Service hotline, which is only available to appointed taxpayer representatives.


  1. Avoid paper communication with the IRS whenever possible

The IRS’s ongoing battle with its paper backlog has been front-page news since the onset of the pandemic. However, despite its efforts to hire and retain employees, the IRS continues to struggle — now promising in a highly optimistic announcement that the backlog will be clear “by the end of calendar year 2022.” [3]

Although no form of IRS communication may be quick or easy right now, the IRS is generally processing electronic communications, such as electronic filings and faxes, much more quickly than paper communications. Therefore, taxpayers should consider electronic methods of communicating with the IRS whenever possible. If the IRS offers electronic filing of any tax form, whether through a third-party IRS-authorized e-file provider or via a simple fax submission, taxpayers should consider taking advantage of these simple, electronic transmissions. Not only is the IRS processing electronically filed tax forms more quickly than paper filings, it is also typically making fewer mistakes when inputting electronic returns in its systems, thus mitigating the risk of erroneous civil penalties and interest.

In addition, taxpayers that retain and carefully store their IRS transmission receipts are much better prepared to show proof of filing, for example, if the IRS’s records do not show the taxpayer’s communication was received.


  1. Document and retain every important IRS communication

The IRS processing centers are not the only area of the agency currently struggling with customer service. Unfortunately, some IRS examination teams appear not to be performing the same comprehensive reviews that used to allow cases to close without the IRS Office of Appeals or tax litigation, which may lead to unnecessary assessments. Examination teams may also be slow to make progress on taxpayers’ cases, then request months-long statute extensions so they have sufficient time to finish their work. These types of examination strategies are also tied to IRS resource constraints – namely, insufficient resources to keep the IRS examination train rolling along efficiently.

Taxpayers can mitigate these types of examination experiences by being proactive and documenting every important communication with the IRS. Every response to an IRS inquiry and communication with an IRS examiner should be clearly dated, printed to PDF, and saved in a safe file. In addition, every important conversation with an IRS examiner should be documented via email—e.g., “Dear IRS Agent, please confirm my understanding of the following discussion we had today ….” It is very important to clearly record and save all important interactions with the IRS, as the simplest of IRS examinations can turn quickly when dealing with the agency’s resource constraints. A taxpayer’s documentation of common understandings and examination delays is now critical to establishing a thorough defense if the case must go to Appeals or litigation.

[1] Collins, E. (2021, November 21). IRS Delays in Processing Amended Tax Returns Are Impacting TAS’s Ability to Assist Taxpayers. National Taxpayer Advocate Blog

[2] Velarde, A. (2022, February 7). Ex-Official Confirms IRS Ignores Some Reasonable Cause Statements. Tax Notes. Doc 2022-4055.

[3] Curry, J. (2022, March 21). Rettig Makes a Big Backlog Pledge, Defends Audit Priorities. Tax Notes. Doc 2022-8773.

Contact one of our experts for more help.


Whistleblower Office Has Paid Awards Totaling Nearly $1.1 Billion

In a report to Congress, the IRS’s Whistleblower Office said that in 2021 the agency collected more than $245 million from noncompliant taxpayers as a result of whistleblowers’ tips. The IRS made 179 awards totaling more than $36 million to the whistleblowers. Since the whistleblower program began in 2007, the number and amounts of awards paid annually have varied significantly, “especially when a small number of high-dollar claims are resolved in a single year,” according to the report. Over its 15-year history, the Whistleblower Office has paid awards totaling nearly $1.1 billion and collected $6.4 billion from noncompliant taxpayers. Read the report:


You Can Help Fight IRS Impersonator Scams.

You can help fight IRS impersonator scams.

The Treasury Inspector General for Tax Administration (TIGTA) is alerting taxpayers about scammers claiming to be from the IRS. These criminals tell victims they owe unpaid taxes and threaten them with arrest or other consequences if the victims don’t send money. Scammers may also ask for personal information, which may then be used to commit identity theft. By March 31, 2022, victims had lost $85 million to these scams, which TIGTA reports have claimed victims in every state. The best advice is “just hang up.” You can learn more and also report information about IRS impersonator scams here: 

Contact us for more questions about IRS impersonator scams.


Bank Wire: CFPB Updated its Exam Manual to Reflect its Anti-discrimination Stance

CFPB expands its authority to punish banks for discrimination

In a March 16 announcement, the Consumer Financial Protection Bureau (CFPB) announced that it will expand its antidiscrimination efforts to situations in which fair lending laws may not apply. Examples include servicing, collections, consumer reporting, payments, remittances and deposits.

Fair lending laws, such as the Equal Credit Opportunity Act (ECOA), target discrimination in the extension of credit. But discrimination in other consumer finance areas also may trigger liability under the Consumer Financial Protection Act (CFPA), which prohibits unfair, deceptive, and abusive acts or practices. For example, the announcement explains, denying access to a checking account on the basis of race could be an unfair practice even if ECOA doesn’t apply. Discrimination can violate the CFPA regardless of whether it’s intentional.

The CFPB updated its exam manual to reflect its antidiscrimination stance, noting that discrimination may be deemed unfair if it “[causes] substantial harm to consumers that they cannot reasonably avoid, where that harm is not outweighed by countervailing benefits to consumers or competition.” Examiners will require banks and other supervised companies to “show their processes for assessing risks and discriminatory outcomes, including documentation of customer demographics and the impact of products and fees on different demographic groups.”

FinCEN’s Rapid Response Program for cyber-enabled financial crime

In a recent fact sheet, the Financial Crimes Enforcement Network (FinCEN) highlighted its Rapid Response Program (RRP). This program helps victims and their financial institutions recover funds stolen as the result of certain cyber-enabled financial crime schemes, including business email compromise. RRP is a partnership among FinCEN, U.S. law enforcement and foreign partner agencies. It facilitates recovery of stolen funds through rapidly sharing financial intelligence and collaborating with foreign partner agencies to block fraudulent transactions, freeze funds, and stop and recall payments.

To date, the RRP has been used in approximately 70 foreign jurisdictions to recover more than $1.1 billion. The fact sheet provides guidance on how to activate the RRP. This guidance includes a flow chart that outlines the complaint process, as well as instructions on filing suspicious activity reports in connection with activities targeted by an RRP complaint.

FDIC imposes notice requirement for banks involved in crypto activities

In a recent financial institutions letter (FIL), the FDIC required FDIC-supervised institutions to notify the FDIC if they plan to engage in or are currently engaged in any activities involving or related to crypto assets. Unlike a similar policy announced earlier by the Office of the Comptroller of the Currency (OCC), the FDIC policy doesn’t require institutions to obtain specific approval of such activities.

Click here to contact one of our experts.

© 2022


Is Cryptocurrency the Future of Banking?

Is cryptocurrency the future of banking?

For community banks, cryptocurrency may not be quite ready for prime time, but it’s definitely headed in that direction. The popularity of bitcoin, ether and other cryptocurrencies has exploded in recent years.

Recent stats

According to a recent poll by NBC News, 21% of American adults have invested in, traded or used cryptocurrency. And the numbers are even higher for younger people: Half of men between 18 and 49, and 42% of all people between 18 and 34, have dabbled in it. According to the White House, the market capitalization of digital assets, which includes cryptocurrency, recently topped $3 trillion, up from only $14 billion five years ago.

The benefits of cryptocurrency include “better transaction speeds, lower costs, privacy, security and an opportunity to provide underbanked communities with financial services,” according to NBC News. At the same time, an absence of federal oversight “leaves consumers open to scams and dangerous price volatility,” many lawmakers warn. However, that may change in the near future.

Executive order on digital assets

On March 9, 2022, President Biden signed an executive order discussing the administration’s strategies for “addressing the risks and harnessing the potential benefits of digital assets and their underlying technology.” The order outlines six objectives:

  1. Consumer and investor protection. The Department of Treasury and other agencies are directed to develop policy recommendations to protect consumers, investors and businesses as the digital asset sector grows and changes financial markets.
  2. Financial stability. The Financial Stability Oversight Council is tasked with identifying and mitigating systemic financial risks posed by digital assets and developing appropriate policy recommendations.
  3. Illicit finance. U.S. government agencies are directed to coordinate their efforts, and work with our international allies and partners, to mitigate the illicit finance and national security risks posed by digital assets.
  4. U.S. leadership and competitiveness. The Commerce Department is called on to establish a framework to promote U.S. leadership in technology and economic competitiveness in the global financial system.
  5. Financial inclusion. The U.S. approach to digital asset innovation should be informed by the critical need for safe, affordable and accessible financial services.
  6. Responsible innovation. The U.S. government must promote responsible digital asset development that prioritizes privacy and security, while combating illicit exploitation and reducing negative climate impacts.

The order also prioritizes research and development of a potential U.S. Central Bank Digital Currency (CBDC) if it’s in the national interest.

What’s next?

The executive order has no immediate effect on community banks. But it signals support of “technological advances that promote responsible development and use of digital assets” and the potential benefits of a CBDC. So, the order may help banks and consumers become more comfortable with cryptocurrency, spurring further growth.

As cryptocurrency becomes more widely accepted, pressure will increase on banks to offer crypto investing or trading services. According to a recent survey by Paxos, a leading blockchain platform, 62% of current cryptocurrency holders would take advantage of crypto investment functionality if their banks offered it. To stay competitive, community banks should familiarize themselves with cryptocurrency and other digital assets, as well as explore potential product and service offerings. They should also monitor developments in the cryptocurrency industry and the government’s regulation of it in the future.

Click here to contact one of our experts.

© 2022


Under Stress

Conduct stress testing to stay competitive

Very few people saw the COVID-19 pandemic coming — nevertheless, it had a significant impact on businesses, including banking. In the ensuing volatile business environment, community banks need to ensure they’re prepared for unexpected challenges by using all the tools at their disposal to help them stay profitable. One such tool is stress testing, which can be done at either the enterprise or individual loan level.

Stress testing enables banks to simulate specific “disaster” scenarios and evaluate the bank’s (or loan’s) potential for withstanding them in terms of earnings, capital adequacy and other financial metrics. It can provide valuable information about potential risks that community banks can use to stay afloat through inevitable economic ups and downs.

Set up the scenario

Stress testing generally involves scenario analysis. This consists of applying historical or hypothetical scenarios to predict the financial impact of various events, such as a severe recession, loss of a major client or a localized economic downturn. Tools for performing such tests can range from simple spreadsheet programs to sophisticated computer models.

The Office of the Comptroller of the Currency (OCC) considers “some form of stress testing or sensitivity analysis of loan portfolios on at least an annual basis to be a key part of sound risk management for community banks.” But its guidance doesn’t prescribe any particular methods of stress testing. It describes two basic approaches to stress testing: “bottom up” and “top down.” A bottom-up approach generally involves conducting stress tests at the individual loan level and aggregating the results. In contrast, a top-down approach applies estimated stress loss rates under various scenarios to pools of loans with similar risk characteristics.

The guidance outlines four methods to consider:

  1. Transaction-level stress testing. This estimates potential losses at the loan level by assessing the impact of changing economic conditions on a borrower’s ability to service debt.
  2. Portfolio-level stress testing. This method helps identify current and emerging loan portfolio risks and vulnerabilities (and their potential impact on earnings and capital). It assesses the impact of changing economic conditions on borrower performance, identifies credit concentrations and gauges the resulting change in overall portfolio credit quality.
  3. Enterprise-wide stress testing. This considers various types of risk — such as credit risk within loan and security portfolios, counterparty credit risk, interest rate risk, and liquidity risk — and their interrelated effects on the overall financial impact under a given economic scenario.
  4. Reverse stress testing. This approach assumes a specific adverse outcome, such as credit losses severe enough to result in failure to meet regulatory capital ratios. It then works backward to deduce the types of events that could produce such an outcome.

The right approach and method for a particular bank depends on its portfolio risk and complexity, as well as its resources. Even a simple stress-testing approach can produce positive results.

Gather information

A bottom-up approach at the transaction level may offer a significant advantage: In addition to assessing the potential impact of various scenarios on a bank’s earnings and capital, the OCC says it can help the bank “gauge a borrower’s vulnerability to default and loss, foster early problem loan identification and strategic decision making, and strengthen strategic decisions about key loans.”

For example, when evaluating a loan application, consider gathering information on the various risks the borrower faces. Examples include operational, financial, compliance, strategic and reputational risks. This information can be used to run stress tests that measure the potential impact of various risk-related scenarios on the borrower’s ability to pay. An added benefit of this process is that, by discussing identified risks and stress test results with borrowers, you can help them understand their risks and develop strategies for managing and mitigating them. For instance, they might tighten internal controls, develop business continuity / disaster recovery plans or purchase insurance.

Get to the heart of the matter

Risk management is at the heart of loan management. Stress testing can play a key role in helping community banks manage risk by enabling them to more fully envision and respond to potential loan portfolio problems.

Click here to contact one of our experts.

© 2022


Keeping up with the CECL standard

It’s been about six years since the Financial Accounting Standards Board (FASB) unveiled its current expected credit loss (CECL) model for estimating credit losses.

After several deferrals, the new model is finally set to take effect in 2023 for nonpublic entities, including most community banks. (Technically, these nonpublic banks must adopt the new model for fiscal years beginning after December 15, 2022, or 2023 for calendar-year banks.)

By now, all banks are familiar with the CECL model, and most have taken concrete steps toward adopting it. If your bank is behind schedule in its transition efforts, kick those efforts into high gear. Time is running out, and the FASB has indicated that no further deferrals are expected. (See “FASB: No more CECL delays” below.)

New model in a nutshell

Under pre-CECL rules, banks generally measure credit impairment based on incurred losses. Under the CECL model, they’ll apply a forward-looking approach, recognizing an immediate allowance for all expected credit losses over an asset’s life. The FASB adopted the new guidance based on its view that the incurred-loss model, which delays recognition of credit losses until they become probable, provides information that’s “too little, too late.” The CECL model addresses this weakness by requiring banks to record credit losses that are expected but do not yet meet the “probable” threshold.

The CECL model’s requirements are complex. But many banks are expected to substantially increase loan loss reserves, which may have a negative impact on earnings and regulatory capital. The consequences for your bank depend on its circumstances. However, with some preparation, you can anticipate the impact on financial performance and take steps to prepare for it.

Selecting a methodology

Most banks have already identified the methodologies they’ll use to estimate credit losses. If you haven’t, time is of the essence: You must have the systems and processes in place to collect and analyze the data your methodology requires. Plus, it’s helpful to do some trial runs to test the methodology before the implementation date.

The CECL model provides banks with the flexibility to use their judgment in selecting methodologies for estimating credit losses that are both appropriate and practical. And the federal banking agencies have said that they don’t expect smaller, less complex institutions to implement complex modeling techniques. Rather, the CECL model will be scalable to institutions of all sizes, and regulators anticipate that many banks will be able to satisfy its requirements by building on existing systems and methods.

Many community banks have opted for one of these two popular methods:

The weighted average remaining maturity (WARM) method. Briefly, under the WARM method, a bank estimates the allowance for credit losses by applying an average annual loss rate to the projected paydowns of loans. One reason for this method’s popularity is that it’s viewed as the closest thing to traditional methods of accounting for loan and lease losses (ALLL), so the required data tends to be more readily available.

The Federal Reserve’s Scaled CECL Allowance for Losses Estimator (SCALE) method.  This is a spreadsheet-based tool that, according to the Fed, “draws on publicly available regulatory and industry data to aid community banks with assets of less than $1 billion in calculating their CECL allowances.”

The right method depends on several factors, including your bank’s complexity, available data, and resources. Depending on your circumstances, you may want to consider more sophisticated methodologies, such as discounted cash flow techniques.

Parallel testing is critical

One reason your bank needs to select a CECL methodology as early as possible is to give management time to do some parallel runs to validate the methodology before you “go live.” This means running your CECL model (or even multiple CECL models) at the same time as your existing ALLL model and comparing the results. Parallel runs provide several important benefits, including helping you spot errors and make appropriate adjustments to your new model’s variables. They also offer you a sneak preview of the CECL model’s impact on your bank.

If you have the luxury of running multiple models parallel to your existing ALLL model, you can evaluate a range of potential CECL loss estimates and evaluate which provides the most appropriate reserve. Or you might even consider selecting different models for different portfolio segments, if appropriate.

Stay in control

As the transition to the CECL standard approaches, it’s also important to evaluate — and, if necessary, update — your policies, procedures, systems, and internal controls to ensure that your credit losses will be properly calculated and documented. Ideally, they’ll be in place early enough to be operated as part of the parallel runs described above.

Sidebar: FASB: No more CECL delays

In light of previous deferrals of the CECL standard’s effective date for nonpublic entities, as well as the disruption and economic uncertainty caused by the COVID-19 pandemic, many community banks hoped that another reprieve was in the works. But in February 2022, the FASB voted not to defer the effective date any further.

Despite the implementation challenges faced by smaller banks, the FASB decided that simplifications had been made to the CECL model that eased the impact on smaller institutions. It also emphasized the importance of applying a unified standard across all financial institutions.

Click here to contact one of our experts.

© 2022


IRS Increases Mileage Rate for the Rest of 2022

On June 9, 2022, the IRS announced that they are increasing the optional standard mileage rate for the rest of 2022. Effective July 1, 2022, the standard mileage rate for business travel will increase 4 cents from 58.5 to 62.5 cents per mile. The rate for deductible medical and moving rates will also increase 4 cents from 18 to 22 cents. The IRS also provided legal guidance for the changes in Announcement 2022 – 13.

The IRS usually updates the mileage rate once a year in the fall for the next calendar year but is making this special midyear increase in response to recent gas price increases. IRS Commissioner Chuck Rettig said, “ We are aware a number of unusual factors have come into play involving fuel costs, and we are taking this special step to help taxpayers, businesses, and others who use this rate.” According to the IRS, fuel costs are influential to the mileage figure, but other items such as depreciation, insurance, and other fixed and variable costs factor into the calculation as well.

The optional standard mileage rate is used to calculate the deductible costs of operating an automobile for business use in lieu of tracking actual costs. The rate is also used by the federal government and many businesses as the standard rate to reimburse their employees for mileage. Visit the IRS website for more information:

Contact one of our experts if you have any questions about the standard mileage rate.


Find Hidden Treasure in Financial Statement Footnotes

Dig deeper!

Numbers tell only part of the story. Comprehensive footnote disclosures, which are found at the end of reviewed and audited financial statements, provide valuable insight into a company’s operations. Unfortunately, most people don’t take the time to read footnotes in full, causing them to overlook key details. Here are some examples of hidden risk factors that may be unearthed by reading footnote disclosures.

Related-party transactions:  Companies may give preferential treatment to, or receive it from, related parties. Footnotes are supposed to disclose related parties with whom the company conducts business. For example, say a tool and die shop rents space from the owner’s parents at a below-market rate, saving roughly $120,000 each year. Because the shop doesn’t disclose that this favorable related-party deal exists, the business appears more profitable on the face of its income statement than it really is. If the owner’s parents unexpectedly die — and the owner’s brother, who inherits the real estate, raises the rent to the current market rate — the business could fall on hard times, and the stakeholders could be blindsided by the undisclosed related-party risk.

Accounting changes: Footnotes disclose the nature and justification for a change in accounting principle, as well as that change’s effect on the financial statements. Valid reasons exist to change an accounting method, such as a regulatory mandate. But dishonest managers can use accounting changes in, say, depreciation or inventory reporting methods to manipulate financial results. Unreported and contingent liabilities A company’s balance sheet might not reflect all future obligations. Detailed footnotes may reveal, for example, a potentially damaging lawsuit, an IRS inquiry or an environmental claim. Footnotes also spell out the details of loan terms, warranties, contingent liabilities and leases.

Significant events Outside: Stakeholders appreciate a forewarning of impending problems, such as the recent loss of a major customer or stricter regulations in effect for the coming year. Footnotes disclose significant events that could materially impact future earnings or impair business value. Transparency is key in today’s uncertain marketplace, it’s common for investors, lenders and other stakeholders to ask questions about your disclosures and request supporting documentation to help them make better-informed decisions. We can help you draft clear, concise footnotes and address stakeholder concerns.

On the flip side, we can also discuss concerns that arise when reviewing disclosures made by publicly traded competitors and potential M&A targets. Contact one of our experts to discuss more details on your financial statement footnotes. © 2022


How COVID-19 Changed The Health Insurance Industry


By early 2022, the Centers for Disease Control and Prevention (CDC) had tracked more than 75 million cases of COVID-19 in the U.S., and some models suggest the total number of infections is much higher. The scale of the pandemic has had a significant impact on the health insurance sector. Health insurers are responsible for covering certain forms of COVID-19 testing, which sees shifting demand depending on community spread and new variants of the virus. Many individuals have also avoided routine health checkups and elective procedures during the pandemic, which can affect revenues and long-term outcomes. More broadly, pandemic-related disruptions are shaping carriers’ coverage models, considerations and priorities in ways that will last for years to come.

Unemployment and loss of health insurance

In the pandemic’s early months, public health precautions also had significant economic consequences. The crisis necessitated shutdowns of restaurants, office buildings, gyms, sports and entertainment venues and other businesses. Unemployment in the U.S. rose sharply from 3.5% in January 2020 to 14.7% in April, and more than 20 million people lost their jobs in April alone.

Because employment is the primary source of health insurance coverage for Americans, the record-setting jobs losses took an even greater toll. Even though many unemployed people gained coverage through Medicaid and Marketplace plans, nearly 3 million people still lost health insurance during the spring and summer of 2020.

Legislative changes

In addition to existing health insurance options, the government has taken steps to provide a safety net and combat the rapid decline of employer-based coverage rates. The Families First Coronavirus Response Act prohibited states from terminating Medicaid coverage during the pandemic, and the Affordable Care Act had expanded Medicaid coverage to all low-income adults in many states. However, the number of people who lost health insurance coverage due to unemployment was higher in states that had not expanded Medicaid.

The Biden Administration also passed the No Surprises Act, which took effect January 1, 2022, and protects insured patients from receiving unexpected bills for healthcare they’ve received from out-of-network hospitals, doctors or providers they did not select. As an example, research shows roughly one in five emergency room visits result in surprise bills due to patients inadvertently receiving out-of-network care.

The No Surprises Act also includes the following provisions:

  • It requires private health plans to cover out-of-network claims and apply in-network cost sharing. The law applies to both job-based and non-group plans.
  • It prohibits doctors, hospitals and other covered providers from billing patients more than the in-network cost sharing amount for surprise medical bills.

Providers are obligated to make policyholders aware of those protections, and both providers and health plans are responsible for identifying bills that are protected under the Act.

Changes in consumer behavior

Behavioral shifts also changed how people receive healthcare. When people are in a position to choose, more have sought medical treatment at urgent care centers than ever before. In 2020, urgent care centers saw visits increase 58% with record-high patient volumes during the second half of the year. First-time visitors accounted for nearly half of the 28 million patients who used urgent care.

That spike in activity was driven by high demand for COVID-19 testing, but urgent care centers also offer patients greater convenience. Overall, urgent care providers have higher rates of technology adoption compared to the primary care sector. The growing reliance on urgent care also helps reduce emergency room visits, which helps conserve hospital resources and results in lower costs for carriers and patients alike.



COVID-19 has led to widespread changes for health insurance, and many of those changes could last beyond the pandemic. In particular, insurers should assess the impact in five areas:

Shifting insurance models

Whether they embraced a remote or hybrid work environment or had to think of creative ways to attract and retain talent during a labor shortage, the pandemic prompted many companies to reevaluate longstanding practices. As a result, more companies are moving away from traditional insurance models. To offer workers more flexibility in coverage options, organizations are increasingly turning to health reimbursement arrangements (HRAs) and self-insurance options.

Insurance as incentive

U.S. companies are also exploring plans that incentivize getting the COVID-19 vaccine. Some companies have begun charging unvaccinated employees more for health insurance to cover the increased risk of hospitalization with COVID-19. While only 1% of companies surveyed had taken this measure as of September 2021, 13% reported considering it and larger companies comprised one-fifth of that group.

Coverage of telehealth services

The pandemic drastically accelerated the adoption of telemedicine, and health insurance companies met increased demand by offering more coverage for telehealth services. Johns Hopkins researchers found a more than 50-fold increase in telehealth use among privately insured people of working age during the early months of the pandemic. Between March and June 2020, telehealth consults comprised nearly 24% of outpatient consults compared to 0.3% during the same period in 2019. The growth of telehealth is projected to continue even after COVID-19 shifts to endemic status, and one market research firm forecasts a sevenfold growth in the telehealth market by 2025.

Considerations for “long haulers”

For some, the impact of a COVID-19 infection can linger long after symptoms dissipate. Studies estimate that approximately 14% of COVID-19 survivors between the ages of 18 and 65 develop new symptoms and receive new diagnoses up to six months after their initial bout with the virus. Those who’ve received such diagnoses are thought to be suffering from “long COVID.” Everything from fatigue to brain fog to cardiac complications have been identified as symptoms of long-haul COVID. Insurers could see an uptick in appeals as those denied coverage for respiratory therapy and other rehabilitative treatments may appeal insurers’ decisions. The emergence and proliferation of COVID long haulers may cause carriers to reevaluate their definition of “medical necessity.”

A growing emphasis on mental health

Physical issues are not the only long-term impact of COVID-19 that insurance carriers should consider. Isolation, fears of contracting the virus and economic uncertainty have contributed to a growing mental health crisis. Approximately four in 10 U.S. adults have reported symptoms of anxiety or depressive disorder, up from one in ten adults who reported these symptoms from January to June 2019. Moving forward, health insurance carriers will likely have to reassess coverage for mental health services.


Health insurers continue to adjust to pandemic-era health and labor trends, as well as the challenges posed by long COVID and mental health issues. Carriers are offering employers alternate models and offering policyholders greater access to telehealth and mental health services, in addition to expanding coverage for treatment options. Insurers that take a forward-looking approach to dealing with the lasting impacts of the pandemic will be positioned to grow and capture emerging opportunities in a competitive landscape.

If you have any further questions about how your health insurance could affect your 2022 tax return please contact your ATA representative.

Written by Peter Popo, Imran Makda and Scott Cederburg. Copyright © 2022 BDO USA, LLP. All rights reserved.