Unveiling Fiduciary Responsibilities: A Look at Gag Clauses and the CAA


In the world of healthcare and employee benefits, fiduciary responsibilities play a critical role in safeguarding the interests of both employers and employees. However, the presence of gag clauses in contracts between health plan sponsors, employers, and healthcare providers has often been a hindrance to transparency and accountability.

What is a gag clause? A gag clause is a provision in a health plan legal agreement (ASO, TPA, PBM, Network) that restricts access to data and sharing of unit cost and provider quality information. Gag clauses prohibit specific analysis among data sets. These clauses do not include the words ‘gag clause’ and are interwoven in the legal agreements Health Plan Sponsors sign with third parties who administer elements of their health plan.

In 2021, there was a game-changing provision within the Consolidated Appropriations Act of 2021, Section 201, which aimed to remove these restrictions and increase transparency. The Consolidated Appropriations Act of 2021, signed into law on December 27, 2020, contains a significant provision in Section 201 titled “INCREASING TRANSPARENCY BY REMOVING GAG CLAUSES ON PRICE AND QUALITY INFORMATION.” This provision specifically addresses the issue of gag clauses in healthcare contracts.

Section 201 of the act prohibits health plan sponsors (employers) from entering into agreements with healthcare providers, third-party administrators, and other service providers, which would directly or indirectly restrict the plan sponsor from accessing, owning, and benchmarking certain cost and quality health plan data. In essence, it removes the barriers that have prevented employers from making fully informed decisions about their employee healthcare plans. The resulting lack of transparency has been fertile ground for excess cost layers and bloated unit costs which make healthcare cost more and inflate faster.

Employers now have greater transparency and control over their healthcare plans, which enables them to:

  1. Make Informed Decisions: Employers can now access essential data about the cost and quality of healthcare services, allowing them to make more informed decisions that benefit both their bottom line and their employees’ well-being.
  2. Ensure Accountability: The act encourages accountability by reducing the ability of healthcare providers and third-party administrators to hide critical cost and quality information.
  3. Promote Employee Well-Being: With better insights into healthcare costs and quality, employers can design plans that prioritize their employees’ health and financial security.

Fiduciary responsibilities play a crucial role in ensuring that employers act in the best interests of their employees when it comes to healthcare benefits. It empowers employers to fulfill their fiduciary duties by providing them with the tools they need to make informed decisions that benefit both their bottom line and their employees’ health and well-being.

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