Speaker 1: 0:00

What is the gag clause attestation requirement, why is it important and what do you need to know to help your clients? We'll find out on this episode of Shift Shapers.

Speaker 2: 0:12

Change either energizes or paralyzes. The choice is yours. This is the Shift Shapers podcast, bringing the employee benefits industry interviews with individuals and companies who are shaping the industry shifts. And now here's your host, david Saltzman.

Speaker 1: 0:34

And to help us answer that question, we have invited Jennifer Berman JD, who is the CEO of our podcast sponsor, mzq Consulting. Welcome, jennifer.

Speaker 3: 0:43

Hi, thanks for having me.

Speaker 1: 0:45

Our pleasure, let's level set. What in the name of God is a gag clause?

Speaker 3: 0:50

A gag clause is a restriction in a contract that restricts an ability for a plan sponsor or a participant in that plan to get access to information or data underlying that plan. So really sort of that underlying analytical data about the plan.

Speaker 1: 1:07

Why does that matter?

Speaker 3: 1:09

Well, it matters because plan sponsors, participants, want to understand and be able to really get all of that great information as we're designing plans and figuring out where to go next in plan design or administration. And if we don't have access to cost and quality information, ultimately we can't effectively administer a plan.

Speaker 1: 1:36

So did this come out of the whole effort to be more transparent?

Speaker 3: 1:40

That's exactly where it came from. So the restriction on GAD clauses is in the Consolidated Appropriations Act of 2021.

Speaker 1: 1:47

Okay, and what are the requirements? What does an employer or a plan have to do?

Speaker 3: 1:54

So a plan sponsor has to make sure that there are no gag clauses in any of their contracts with their third-party administrator or any provider networks that it has a contract with, both direct and indirect contracts, and then, in addition to making sure that the gag clauses aren't there, they have to attest annually to CNS that those gag clauses are not in place.

Speaker 1: 2:19

That sounds like a lot of work. Do they have to pour over each one of their contracts with their various providers to make sure those clauses aren't there?

Speaker 3: 2:28

Well, they have to make sure that those clauses aren't there.

Speaker 3: 2:32

So, technically speaking, as a fiduciary, they do need to understand and know that the clauses are not in place and they have to tell CMS that they aren't there. So there's a few different ways to know that they're not there. Maybe the contracting party, the entity with which they've contracted, you know, attests to them or certifies to them that the clause isn't there and they choose to rely on that and going to CMS. That being said, I've personally read hundreds of these contracts and oftentimes, when we get to it, you know, there's a very technical definition of what a gag clause is and many times I've found that, even though maybe an administrator or an entity subject to this rule says that there is no gag clause, I find that there really is one and that may be because it's the plan sponsor. Really that's subject to the rule, but when they're relying on a third party that's not subject to the rules to say no, we don't have one. You know, the interpretations can be different and you know, maybe there is one there.

Speaker 1: 3:38

Haven't these clauses been illegal for a while now?

Speaker 3: 3:45

Yeah, I mean technically, that requirement went in place with the Consolidated Appropriations Act, which was passed at the end of 2020. So it's late 2024 as we're having this conversation.

Speaker 1: 3:53

And there are still contracts that have those clauses in them.

Speaker 3: 3:58

Many, and you know, while we're talking about the fact that there are you know that gag clauses are technically illegal plan sponsors who are seeking this information to understand all of this underlying data about their plans, are still coming across third-party vendors and providers who are still restricting their access to that data and saying it's based on contractual terms. Every day.

Speaker 1: 4:26

Were they just being mean and hateful by restricting these actions, or was there something in it for them by saying, hey, there's stuff in the contract that you can't talk about?

Speaker 3: 4:34

Oh well, I mean, that's certainly up to interpretation and whether people are mean and hateful is a subjective qualification, right?

Speaker 3: 4:44

But you know, certainly, if we look at historically, I think that many networks certainly thought of their negotiated rates with providers, for example, as proprietary information. And now you know, since we have transparency rules around, you know, disclosing, for example, all of those negotiated rates and machine readable files, those things are starting to change. But nature and ownership of our planned data and how to use that planned data is certainly a hotly negotiated and discussed subject within the industry. And who has access to that and who really owns that data and I mean there's value in that data? It's incontrovertible that there who really owns that data, and I mean there's value in that data, it's incontrovertible that there's value in that data. And ultimately, you know, I think that the idea that that is the plan's data is incontrovertible. But who has access to that data, how to use that data, those are all still very open questions and there is, of course, a long history of the entities that are creating and maintaining that data doing their very best to maintain that data and to restrict access to it.

Speaker 1: 6:02

That's interesting. One of the reasons that plans want access to that information is so that they can make intelligent decisions about how to redesign their plans going forward or for next year or whatever. What do they do in the absence of that stuff? I mean, does it get to the point where they have to sue people to get that information?

Speaker 3: 6:21

I mean, certainly there have been lawsuits about it and you know we've seen some where plan fiduciaries have gone so far as to sue their service providers for it. Certainly, in light of these you know restrictions on gag clauses, that should not be the case. But you know, obviously it's gotten so far and to the point that Congress has put in place a law that says you're not even allowed to contractually restrict access to this, and gone even further as, to say, plan sponsors have to go and tell CMS that they don't have these in place. So it is. I mean, it is a wild world out there and very, very fraught with noncompliance.

Speaker 1: 7:08

So let's go back a couple of moments. You said that once the plan or the employer has this information documented, they have to report it to CMS. Do they just like mail them a report, or is it more involved than that?

Speaker 3: 7:21

It's a little bit more involved than that. There is a CMS online system and they have to go into that system it's called the HIOS system and they have to affirmatively file with CMS that those gag clauses are not there.

Speaker 1: 7:33

Is it hard to get onto that system or to get certified to drop things on that system?

Speaker 3: 7:38

It's not impossible, but I wouldn't call it super easy, but it's not super hard either.

Speaker 1: 7:46

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Speaker 3: 9:14

As is so often the case with these rules, it's not clear what the penalties are, so we haven't seen active enforcement just yet. But the attestation rule is new. Attestation rule is new, so we could theoretically see penalties based on sort of where it's, where it is in the code, of up to $100 per day or potentially $100 per person per day. You know, I haven't seen that, I'm not sure that we will see that, but if you trace through sort of where this law exists and how it's codified, that could be.

Speaker 1: 9:55

Yeah, it's dicey, I guess. Like so many other things, it's clearly unclear.

Speaker 3: 10:00

Indeed.

Speaker 1: 10:01

So how often do employers and plans have to give the government this information?

Speaker 3: 10:08

The attestation requirement is an annual requirement.

Speaker 1: 10:12

Any old time during the year, just by the end of the year, or Annually by December 31st. Interesting. So what more do advisors need to know? If I were an advisor and I was going to go talk to my clients about this, what would that conversation sound like, without getting to avoid the legalistic stuff that you know so well?

Speaker 3: 10:31

Yeah, are the service providers filing on behalf of your client's plans or not? This is one of these things where, in the case of a fully insured plan, the insurance carrier can file on behalf of the plan sponsor. So check and see if the fully insured carrier is doing it on their behalf behalf. In the case of a self-funded plan, that it is still permissible for the filing to be done by the third-party administrator. However, the third-party administrator doesn't necessarily have access to, or isn't necessarily a party to, all of those contracts that could be subject to it. And what we're seeing in most cases in the self-insured context is the TPAs are saying you know, maybe we'll do it, but often they're saying you know that they're not going to, or that they're going to look for a client to opt into or opt out of the program. So for most fully insured plans it's just being automatically taken care of by the carrier.

Speaker 3: 11:41

But in the self-funded world it's absolutely something that advisors are going to need to check with whatever third party administrator is involved to see. You know, is this something that you're working on on behalf of the plan PBMs? Maybe you know other third parties. Is there a reason why the plan might have to also file on their own behalf, and is the plan going to need to do this? Now? In the case of a self-funded plan, even if a TPA is helping, the plan sponsor still maintains the liability there. So, no matter what, those self-insured plan sponsors have liability and need to make sure it's being done correctly.

Speaker 1: 12:18

For our listeners who are in fully insured plans. When the plan does that, do they notify the employer so that they know it's been done and it's been filed?

Speaker 3: 12:29

Unclear. I mean theoretically, one would hope, because it is technically joint liability. So both the carrier and the plan sponsor have liability there, and so it's something the plan sponsor should check on. But you know whether how good that carrier is at the communication could differ from carrier to carrier. So it's something to ask.

Speaker 1: 12:51

So, again, if I'm an agent and I'm going to see a client who's self-insured, is a conversation as simple as here's. This form that needs to get completed and you can read about what it's about.

Speaker 3: 13:03

No, no, because that self-insured plan sponsor needs to make sure they have no gag clauses in place. You can't just fill out a form that says you have no gag clauses. You have to actually know that you have no gag clauses and then, once you verify that you have none, the filing has to be done, and that is through the online HIO system.

Speaker 1: 13:19

Interesting as we wrap up, you know, are any last things that folks need to know about both advisors to advise their clients or clients especially in the, in the self-insured universe.

Speaker 3: 13:32

I think you know, I think that I'm acutely aware of somebody who's been in this employer plan space for a long time that the pile or the checklist, as it were, it's getting long, and that is true, but this one is one that really probably has inherent value to the employer plan sponsor as well, right, so, knowing that there is no gag clause, and there's value to that. So, while it's frustrating and it's annoying, and it's definitely one more thing for a plan sponsor to have to do from a compliance perspective, not having gag clauses and having access to that data is extraordinarily valuable from a plan administration and plan stewardship perspective. So it's all about how you look at it.

Speaker 1: 14:20

If, during the course of the year, a plan is having trouble getting cost or quality data, is that an indicator that there may very well be a gag clause floating around someplace? Or should they just start saying I'm working with a TPA that maybe isn't on the ball?

Speaker 3: 14:35

Both.

Speaker 1: 14:35

Okay, it's something to look out for for sure. Well, and that's a great place to end our conversation. Jennifer Berman, CEO of MZQ Consulting. Jen, thanks for sharing your wisdom with us.

Speaker 2: 14:47

Thank you for having me Shout out to the crew at Grand River Agency for their awesome post-production. This Shift Shapers podcast is copyrighted content and may not be reproduced in whole or in part without the express written permission of ShipChapers Solutions LLC. Copyright 2024.