How and Where Can Plan Sponsors Identify ‘Gag Clauses’ in Contracts?

Q: How do you know if there are “gag” clauses in a contract and which contracts would they be in?

Jamie Greenleaf, co-founder, Fiduciary in a Box; Julie Selesnick, founder and principal attorney, Health Plan Legal Counsel and of counsel, Berger Montague; Rory Akers, vice president, senior ERISA compliance attorney, Lockton Companies; and Alden Bianchi, of counsel, McDermott Will & Shulte, answer below:

A: The “gag clause prohibition” rules bar group health plans and carriers that issue group health insurance from entering into an agreement with a health care provider; network or association of providers; third-party administrator; or other service provider offering access to a network of providers that would directly or indirectly restrict the plan or carrier from:

• Making provider-specific cost or quality-of-care information or data available to active or eligible participants; beneficiaries and enrollees of the plan or coverage; plan sponsors; or referring providers;
• Electronically accessing de-identified claims and encounter information or data for each participant, beneficiary or enrollee in the plan or coverage consistent with applicable privacy regulations, upon request; or
• Sharing such information or data described above—or directing such data be shared—with a business associate, consistent with applicable privacy regulations.

Plans and issuers must annually submit an attestation of compliance with these requirements to the government. (For a comprehensive explanation of the gag clause rules, please see, FAQS About the Affordable Care Act and the Consolidated Appropriations Act, 2021.)  

The gag-clause prohibition and the attestation requirement apply to fully insured and self-funded group health plans (including grandfathered plans, church plans and nonfederal governmental plans), individual health insurance policies and student health insurance coverage. The rules do not apply to excepted benefits that include some voluntary products (e.g., fixed-indemnity or disease-specific coverage) or other account-based plans (e.g., health flexible spending arrangements). In practice, gag clauses are most often encountered in agreements with third-party administrators and pharmacy benefit managers.

The prohibition applies not only to contracts between a plan and a service provider. The requirement also extends to so-called “downstream agreements,” such as a network agreement between a TPA and a health care provider. Thus, plan contracts with TPAs, PBMs and other service providers should require that all sub-vendor contracts not restrict the plan from obtaining or sharing information or data in a manner contrary to the gag clause requirements. Separately and notably, the gag clause requirement does not give an employer the right to obtain its claims data.

Examples of gag clauses include a requirement in a PBM contract that prevents the disclosure of lower-priced alternative prescription medications. Such a requirement would constitute a gag clause, since it could prohibit disclosure of pricing information or disclosure of the fact that a medication may be cheaper without insurance. A gag clause would also include a provision in a provider contract with a plan that maintains the confidentiality of negotiated rates or quality metrics. A set of tri-agency FAQs at the Gag Clause subhead provides further examples.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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