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The ERISA Edit: "Gag Clause" Guidance Arrives, Plus a New DOL Secretary Nominee

Employee Benefits Alert

Guidance Issued on No Surprises Act "Gag Clauses"

On February 23, 2023, the Departments of Labor, Health and Human Services, and Treasury issued FAQs Part 57 implementing the No Surprises Act's (NSA) prohibition on gag clauses on price and quality in provider agreements. The Internal Revenue Code, ERISA, and Public Health Service Act prohibit group health plans and issuers offering group health insurance from entering into agreements with providers, third-party administrators (TPA), or other service providers that include language that would constitute a "gag clause," specifically: 

  1. Restrictions on the disclosure of provider-specific cost or quality of care information or data to referring providers, the plan sponsor, participants, beneficiaries, or enrollees, or individuals eligible to become participants, beneficiaries, or enrollees of the plan or coverage
  2. Restrictions on electronic access to de-identified claims and encounter information or data for each participant, beneficiary, or enrollee upon request and consistent with the privacy regulations promulgated pursuant to the Health Information Portability and Accountability Act (HIPAA), the Genetic Information Nondiscrimination Act (GINA), and the Americans with Disabilities Act (ADA)
  3. Restrictions on sharing information or data described in (1) and (2), or directing that such information or data be shared, with a business associate, as defined in 45 CFR 160.103, consistent with applicable privacy regulations

Under the NSA, plans and issuers must annually submit to the Departments an attestation that the plan or issuer is in compliance with the gag clause prohibition ("Gag Clause Prohibition Compliance Attestation"). There is a website set up for submitting these attestations. 

Now that plan sponsors and fiduciaries have access to broader cost and quality of care information, participants and beneficiaries will be looking at how it is being used to control costs and improve coverage. Several lawsuits have recently been filed citing breaches of fiduciary duties to monitor quality and cost of services in health plans. 

Julie Su Nominated for Top Labor Post

President Biden nominated Julie Su to replace Labor Secretary Marty Walsh, who is planning to leave his post in mid-March. Su currently serves as Deputy Secretary of Labor and has already been through the Senate's vetting and confirmation process, which typically bodes well for a nominee. Su's nomination will be considered by the Senate Health, Education, Labor and Pensions (HELP) Committee. Su, a former Labor Secretary for the State of California, has been a staunch workers' rights and civil rights advocate her entire career.

A Case We're Watching

We're watching an appeal from the District Court for the Southern District of Texas, where the appellate court must decide whether the ERISA "parties in interest" definition covers entities that contract for services with an ERISA plan but do not have a pre-existing relationship with the plan. D.L. Markham v. Variable Annuity Life, (No. 22-20540, 5th Cir.). The district court held that it did not, and that because the defendant was not yet "providing services to the plan" at the time of the contract containing the challenged surrender-charge provision, the defendant was not a party in interest and the transaction did not violate ERISA's prohibited transaction rules. If left to stand, the district court's holding could categorically exempt initial service contracts from ERISA's prohibited transaction provisions. The Department of Labor recently filed an amicus curiae brief urging the Court of Appeals for the Fifth Circuit to reverse the lower court on this issue of first impression.

IRS Issues Proposed Rule Addressing Forfeitures

On February 24, the IRS issued proposed regulations that instruct on the use of forfeitures in retirement plans and impose a deadline for the use of such amounts in defined contribution plans. Click here for Miller & Chevalier's DC Tax Flash to learn more about this proposal.

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