Author: Alexis Long

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: https://bit.ly/39Bb1Wr

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.

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© 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: https://www.irs.gov/newsroom/irs-increases-mileage-rate-for-remainder-of-2022

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

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.

 

LASTING SHIFTS IN HEALTH INSURANCE

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.

MOVING FORWARD

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. www.bdo.com