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Time’s Up! It’s Gag Clause Attestation Season

By: Andrew Silverio, Esq.

As the year wraps up and plans and TPAs around the country are scrambling to handle renewals, another challenge looms large in 2023 – the first annual gag clause attestation.  As a reminder, the Consolidated Appropriations Act, 2021 (CAA) prohibits plans from entering into any contracts with providers and certain other entities that contain “gag clauses” – and requires them to attest annually that their contracts are free of them. The first attestation is due at the end of 2023, and it will cover the period of December 27, 2021 through December 31, 2023. The goal of the legislation is transparency, but it has glaring holes – contracts can’t prohibit plans from sharing certain information with other entities, but nothing requires them to be granted access to this information in the first place.

While payers have technically been on notice of this requirement since the CAA passed, we all know how things get put off, and we saw a furious uptick of questions and activity surrounding this requirement in the second half of 2023. Unfortunately, it’s because of the nature of how the industry and its contracts have developed over the years that it’s more likely to find gag clauses than not to – especially in network and pharmacy benefit agreements.  Unfortunately, many plans have been put in an unfortunate position by many big players – we won’t name names – who have simply issued broad statements that their contracts do not contain gag clauses (statements that are often proven false with a simple review of the actual agreements) and refused to entertain changes or even sometimes let plans review the contracts directly.  Plans in this situation face a difficult choice: submit an attestation knowing that these representations are questionable at best and that the compliance obligation ultimately falls on them, or fail to submit the attestation, risking whatever enforcement action might follow.  It’s not entirely clear how enforcement will play out, but penalties for failure to attest could come in the form of the $100 per day excise tax under ERISA or excise tax via the IRS.

Given the widespread confusion, disagreement, and outright disregard of this requirement, it’s also not clear how much effort will go into enforcement and auditing plans for compliance.  We’ve been approached by countless clients inquiring about whispers and rumors of an enforcement delay.  Everyone has heard from someone who heard from someone that enforcement will be delayed - however we’ve seen no indication from any official source that any relief is coming.  At this point it’s safe to say relief in the form of delays or waivers, if it happens at all, won’t be coming in 2023.  So at this point, all plans can do is the best they can to get their existing agreements in order, submit the required attestation, and be on the lookout for gag clauses in any new contracts moving forward.

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