Most health insurance companies require prior authorization for expensive healthcare – whether it is a medication, a treatment, a diagnostic test or imaging, and so on. The prior authorization process is projected to cost $35 billion of United State’s healthcare administrative spending. Unfortunately, too often these authorizations slow medically necessary care. This page explains prior authorization and provides tips to speed up the process. We also reveal how our federal and state governments are weighing in on the process. In addition, states and CMS are making changes to this process that often delays medically necessary care.
What is Prior Authorization?
Prior authorization (PA) means a health insurance company (or health plan) requires its approval prior to a doctor or facility providing a healthcare treatment, surgery, medication, and so on. Prior authorization is sometimes called prior approval or preauthorization. In essence, the health insurer determines if the healthcare is medically necessary. Of course, medical necessity is determined in-house by each insurer. In house decisions means that the exact same medical care may be considered medically necessary by some insurance companies and not medically necessary or “investigational” / “experimental” by other insurers.
Who Requests Prior Authorization?
If your medical provider is in network with your insurance company, then your provider typically requests prior authorization. If your provider is out-of-network, then oftentimes you request PA.
How Long Does My Insurer Have to Make a Prior Authorization Decision?
The federal government regulates ERISA plans and states regulate non-ERISA plans. If your employer provides your health insurance, then it is likely ERISA. Of course some employer plans are non-ERISA like those you purchase directly, those from government organizations and religious institutions, and a few others.
ERISA plans have up to 15 days from the time that your health insurance company receives your claim to make a determination. In some cases, they can delay their decision, but if they do, then they must notify you about the reason for the delay.
States regulate non-ERISA plans. States like California have both a Department of Insurance (DOI) and a Department of Managed Healthcare (DMHC). These state departments establish timeframes for health insurance company prior authorization response times. The DMHC states that your health plan or medical group must approve or deny your prior approval within 3-5 days. In California, insurance companies have a duty of good faith and fair dealing. They also have a duty to fairly and quickly manage claims. If they don’t, they have committed bad faith.
Your insurance company likely spells out its response timeline in your Evidence of Coverage document.
How Can I Speed Up Prior Authorization?
Much of the prior authorization process is out of your control. That said, if your situation is life threatening, you can usually request an expedited prior authorization decision. Also, you can speak with your physician as well as your insurance company to verify that your request includes all necessary codes and information. If something is missing, you can help facilitate getting what is needed. Another route includes paying for the treatment or medication up front and requesting reimbursement afterwards. This path can be expensive and risky if you aren’t confident you’ll receive authorization.
How Do Insurance Companies Determine What Is Medically Necessary?
Insurers have internal pharmacists, for example, who evaluate FDA-approved drugs. They then create medical and pharmacy policies. Once developed, they take their policies to outside doctors who then agree or disagree. Because sometimes insurers give incentives to these external doctors or pharmacists in the form of future work or financial benefits, at times the external providers approve very restrictive medical or pharmacy policies.
Does Prior Authorization Delay Medical Care?
94% of physicians surveyed by the American Medical Association (AMA) said that prior authorization delays access to necessary care. And 33% of physicians surveyed claimed that PA has led to a serious adverse event for a patient in their care.
Necessary authorizations slow medical care and create issues for both patients and providers. The president of the American Medical Association at the time of the survey, Jack Resneck, Jr., MD, claimed that prior authorizations were a “burdensome, administrative nightmare.” The survey found that, on average, doctors and their staff spend two days completing PAs and 35% of doctors have staff who exclusively work on PAs. And the same survey found that 58% of doctors with employed patients said the process impacted their patients’ work performance.
Why is Prior Authorization Problematic?
Prior authorization is a method insurance companies use to control healthcare spending. In fact, they too often deny expensive treatments, surgeries or medications and tell a policyholder to follow “step therapy” or “fail first” policies. These policies often approve less expensive healthcare instead of doctor-prescribed healthcare. An example is a doctor-prescribed back surgery. Rather than approving an SI joint fusion, an insurer may tell the patient to try physical therapy first. If physical therapy fails, then the insurer might instruct the patient to try steroid injections or corticosteroids. Typically, a patient must remain on each step therapy option for 60-90 days. If that fails, then the patient moves to the next option. In the meantime, each option delays and disrupts patient care, and the patient’s symptoms may get progressively worse. And sometimes, unfortunately, resulting patient health issues are irreversible.
Another issue is that, in terms of medications, insurance companies give PA for a specific drug, at a specific dosage, for a set period of time. In the past few years, many drugs have been in short supply. One example is a growth hormone for children called “Norditropin.” Growth hormones are prescribed for hormone deficiency, short stature stemming from genetic conditions, and Prader-Willi syndrome, and others. Not only has Norditropin been in short supply, but its maker Novo Nordisk was discontinuing one of the drug’s pen sizes. As such, patients have waited weeks and even months to get prior authorizations for the medication at different doses. And sometimes, they’ve needed to switch to alternate growth hormones.
An April 2024, a ProPublica article revealed that at Cigna, nurses made initial claim decisions and denial recommendations needed to be reviewed by medical directors. According to the article, Cigna medical directors were evaluated on their efficiency of making decisions, sometimes having less than five minutes to decide a complex medical claim.
How Do I know If My Health Insurance Company Requires Prior Authorization?
Look at your specific health insurance plan. You likely signed a contract for this coverage. Two helpful documents that explain your coverage and requirements include the Evidence of Coverage and the Summary of Benefits. For a medication, you might look at your plan’s formulary. Additionally, you can call your insurance company and ask directly.
Oftentimes, your physician knows when your insurance company requires a prior authorization, and his/her office contacts your insurance company for approval.
A general rule of thumb is that you often need prior authorization for treatments, diagnostic imaging and tests like MRIs and genetic tests, surgeries, expensive medication, infusion therapies, durable medical equipment like wheelchairs, hospital admissions that aren’t emergencies, skilled nursing facilities and rehabilitation centers, certain home health care, visiting an out-of-network doctor, getting a second opinion from a physician, and more.
How do I know When I Receive a Prior Authorization Determination?
Oftentimes states require health insurance companies to put your approval or denial decision in writing. Certain facilities like some imaging centers and hospitals require written approval to proceed. In some cases, your physician’s office will call you. We recommend getting your approval in writing prior to proceeding with specific healthcare.
Do Some Insurance Companies Automate the Prior Authorization Process?
On October 21, 2024, Blue Shield of California announced a new initiative to process prior authorizations in real-time. Projected to launch in early 2025, Blue Shield is building a PA platform that will operate with doctor systems and electronic health records to collect clinical data and streamline over twenty different systems. Blue Shield’s goal is to reduce prior authorization decisions from days to nearly “real-time.” In September 2024, Aetna announced plans to automate about thirty percent of utilization management requests by the end of 2024.
What Can I Do If My Health Insurance Company Denies My Prior Authorization?
State rules dictate your next step. Rules also depend on if you have an ERISA plan or a non-ERISA plan. In California, you can appeal internally with your insurance company. If your insurer doesn’t reverse its denial, then you can also file an external appeal. With an ERISA plan, you must exhaust all your appeals (typically an internal and an external appeal). On the other hand, with a non-ERISA plan, you have flexibility. You typically appeal internally with your health insurance company first. Then, if your health insurer upholds its denial, you can file an external appeal or take legal action. We recommend speaking with an experienced health insurance denial attorney to help explain the best path to take in your specific circumstance.
In California, the Department of Managed Healthcare (DMHC) handles external appeals, also known as “Independent Medical Reviews.” In most cases, the DMHC requires you to file a grievance with your insurer prior to the IMR process. However, exceptions to grievances include having an immediate threat to your health and when your claim is denied as not medically necessary or experimental/investigational.
Do Medicare and Medicare Advantage Plans Require Prior Authorization?
Traditional fee-for-service Medicare plans usually don’t require prior authorization, but there are exceptions for three types of services — outpatient (typically dermatology), durable medical equipment (DME), and non-emergency ambulance services. For these services, a “Medicare Administrative Contractor” (MAC) evaluates and decides on your request. Approval rates for these services are 78.6% for outpatient services, 66.9% for DME, and 63.2% for non-emergency ambulance services. Medicare has ten business days to respond to your initial request and twenty business days to respond to your resubmitted request. For expedited requests, Medicare has 2 business days to get back to you.
Medicare Advantage and Part D plans, on the other hand, often require prior authorization. Services that typically require PA include Part B medications, DME, skilled nursing facilities, physical and mental inpatient hospital stays, home health services, and diagnostic laboratory work and tests. Emergency services do not require PAs.
The U.S. Senate Permanent Subcommittee on Investigations published a report on October 17, 2024 that found Medicare Advantage plans from the three biggest MA insurance companies Humana, UnitedHealthcare and CVS that insure almost sixty percent of all MA participants had denied prior authorization requests for post-acute care at a higher rate than their overall PA denial rates from 2019 to 2022. The report showed UnitedHealthcare’s MA prior authorization denial rate for post-actute care went from 10.9 percent in 2020 to 22.7 percent in 2022. Automating much of the process, UnitedHealthcare’s PA denial rate for skilled nursing facilities in 2019 was nine times lower than its denial rate in 2022. CVS also incorporated AI and had a similar denial rate for post-acute care during this period. However, CVS post-acute care services requiring a prior authorization increased 57.5 percent in this time frame. And Humana’s prior authorization denial rate for long-term acute care hospitals increased by 54 percent from 2020 to 2022.
The process to appeal Medicare and Medicare Advantage claim denials follows a different process than commercial health insurance appeals. Medicare and MA plans have 5 levels of appeals. Learn more about this process here.
How Often Do Medicare Advantage Plans Deny Medically Necessary Healthcare?
Unfortunately, Medicare Advantage health insurance denials are not insignificant. An OIG report found that 13% of MA denials actually met traditional fee-for-service Medicare rules. So why did MA plans deny these claims? Because the MA plans applied non-Medicare criteria, asked for unnecessary documentation, and made processing errors. Only 1% of MA policyholders appeal their denials, yet MA plans reverse as much as 75% of their denials.
Future Medicare and Medicare Advantage Plan Prior Authorization Changes
In January 2024, CMS issued a revised Interoperability and Prior Authorization Rule for health insurance companies that participate in Medicaid, Medicare Advantage, Medicaid Managed Care Plans, CHIP fee-for-service plans, Affordable Care Act exchange plans, CHIP managed care bodies, and some others. Beginning on January 1, 2026, these insurance company plans must reply to a standard prior authorization (PA) request in 7 calendar days and to an expedited PA request in 72 hours. They must also assign a specific reason for denying a PA claim (to help resubmissions or appeals) and report PA metrics publicly. They must also create and keep a specific application program interface (API) to enhance electronic exchange of healthcare information and streamline the process.
The new rule is projected to save $15 billion over a decade.
The new Prior Authorization Rule will be helpful. However, it doesn’t cover everything. It does not cover people insured by their employers (approximately 158 million Americans) nor prescription drugs.
Are States Reforming Prior Authorization Laws?
Many states have previous or current legislation that streamlines the prior authorization process. Nine states including Rhode Island, Tennessee, New Jersey, Arkansas, Texas, Washington state, West Virginia, Louisiana, Montana, and Washington D.C. passed reforms in 2023.
State legislatures have introduced over 90 bills across thirty states in 2024. Most legislation involves ideas from the American Medical Association’s model legislation that includes reforms like the following:
- Reducing health insurance plans’ response time
- Forbidding retroactive denials when care was preauthorized
- Guaranteeing that only qualified physicians can deny care
- Requiring health insurance plans to make their prior authorization determinations public
- For patients with chronic health conditions, requiring that approved prior authorizations are valid for the entire length of the treatment
- Ensuring approved authorizations remain valid for 12 months even if the dosage changes
- Demanding that new health insurance plans honor past health insurance plan approvals for at least 90 days
Another strategy for state legislation is mandating that PA are based on peer-reviewed clinical data.
Of course automating the entire process can reduce a lot of time.
Do State Prior Authorization Laws Apply To All Health Insurance Plans?
State laws do not apply to self-funded employer plans, and 65% of employees at large companies get their insurance from self-funded plans. State laws also don’t impact federal plans such as Medicaid.
The Law Offices of Scott Glovsky
California-based Law Offices of Scott Glovsky has been fighting for insurance policyholders for over 25 years. Scott Glovsky is recognized as one of the most experienced, well-respected, and compassionate insurance attorneys in the country. We’ve aided many policyholders to get the care they desperately need and are paying for. Our case results have impacted millions of California insurance policyholders by forcing insurance companies to alter their behavior – including how they review requests for medically necessary care.