Favored Nation Clause Law and Legal Definition

A most-favored nation clause is a contract provision often used in the context of payments for medical care. In health law, the clauses are sometimes called "equal rate" or "comparable rate" provisions because they require doctors to let plans match, not beat, any lower reimbursement rate from another insurer. These clauses typically require a provider to give the payor the lowest rate that it gave to any other comparable payor. Payors tend to argue that these clauses are a legitimate and reasonable way to control rising health care costs and their impact on premiums. Providers and other opponents argue that they are anticompetitive and lead to informal provider collusion to create a price “floor” in a local market.