What is a gag clause, and why are they prohibited by the CAA?

A gag clause is a contractual provision that restricts or prevents certain parties from disclosing specific information. In the context of health benefit plans, plan sponsors are prohibited from entering into or renewing any contract with a carrier, network, Third Party Administrator (TPA), Pharmacy Benefit Manager (PBM) or other organization that offers access to a network of providers, if that contract contains language that would restrict the plan's access to (or use of) cost or quality of care data.

These so called "gag clauses" can prevent plan sponsors from fulfilling their fiduciary duties. The aim of gag clauses is to maintain confidentiality around pricing arrangements and prevent the disclosure of potentially unfavorable terms.

The Consolidated Appropriations Act (CAA) addresses the issue of gag clauses in the healthcare industry. The CAA prohibits gag clauses in contracts between health benefits plans and vendors like PBMs and health insurance carriers. The prohibition is designed to promote transparency and empower patients, employers, and plan sponsors to have access to essential pricing and cost information. By eliminating gag clauses, the CAA intends to create a more open and informed healthcare landscape, where parties involved in health benefit plans can make educated decisions based on clear and complete information.

Overall, the prohibition of gag clauses by the CAA aims to improve transparency, enhance cost predictability, and empower those involved in health benefit plans to make more informed decisions. This measure contributes to a fairer and more equitable healthcare system by eliminating practices that obscure pricing and potentially hinder the ability to make well-informed choices about healthcare services and costs.

For support in managing your fiduciary responsibilities, visit Fiduciary In A Box.

© 2023 Fiduciary In A Box, Inc. All rights reserved.