A gag clause is a contractual provision that restricts an individual or entity from sharing specific information, often related to pricing, quality of care, or service terms in healthcare or employment settings. In the context of employer-sponsored health plans, gag clauses typically prevent plan sponsors or participants from accessing cost or quality information about healthcare providers.
As part of healthcare transparency efforts, gag clauses in health plan contracts are now prohibited under the Consolidated Appropriations Act (CAA) of 2021.
What Does the Gag Clause Prohibition Mean for Employers?
Under the CAA, employers who sponsor group health plans are prohibited from entering into agreements with insurers, third-party administrators (TPAs), or other service providers that contain gag clauses which:
- Restrict the plan from sharing cost or quality-of-care information with plan participants or referring providers.
- Prevent access to de-identified claims data, which is necessary for evaluating provider performance.
- Limit the plan’s ability to share data with business associates or other entities for plan operations.
This rule ensures that employers and employees have greater transparency into the cost and quality of healthcare services.
What Is the Gag Clause Attestation?
To enforce the gag clause prohibition, plan sponsors are required to submit a Gag Clause Prohibition Compliance Attestation to the Centers for Medicare & Medicaid Services (CMS).
This attestation:
- Confirms that the plan is not subject to gag clauses in its contracts.
- Must be submitted annually, with the first attestation due by December 31, 2023, covering the prior year.
- This applies to fully insured and self-funded health plans, including ERISA-covered plans, non-federal government plans, and church plans.
Who Is Responsible for Compliance?
- Fully insured plans: The insurance carrier is primarily responsible for submitting the attestation.
- Self-funded or level-funded plans: The plan sponsor (usually the employer) is responsible for the attestation, though they may delegate the process to a TPA or advisor.
Regardless of delegation, the legal responsibility ultimately rests with the plan sponsor.
What Are the Risks of Non-Compliance?
Failure to comply with gag clause prohibition or to submit the required attestation may result in:
- Civil monetary penalties under the Internal Revenue Code and ERISA.
- Increased scrutiny from the Department of Labor or other regulatory bodies.
- Potential lawsuits or audits if employees or regulators believe plan information is being improperly withheld.
What Should Employers Do to Ensure Compliance?
To comply with gag clause rules, employers should:
- Review all contracts with TPAs, insurers, and vendors to ensure there are no gag clause provisions.
- Amend contracts where necessary to remove or avoid restrictive language.
- Coordinate with legal counsel or benefit consultants to prepare and submit the required CMS attestation.
- Stay updated on annual deadlines and ensure timely filing each year.
Gag clause prohibitions aim to promote greater transparency and accountability in healthcare benefits. Employers must take active steps to review, document, and confirm compliance with these regulations to avoid penalties and ensure employees have access to essential information about their healthcare options.
By staying compliant and informed, employers strengthen trust with their workforce and support smarter healthcare decision-making.
