Definition of Pre-Approval in Health Insurance

Without Pre-Approval, Your Insurer May Not Provide Coverage

Doctor helping patient
Doctor helping patient. Adam Berry/Stringer/Getty Images

Pre-approval happens when your health insurance company agrees that a medical service you're going to have is necessary and covered under the terms of your policy.

Pre-approval, which can also be called prior authorization, preauthorization, or precertification, doesn't mean that your insurer is guaranteeing they'll pay for the service—a claim still has to be submitted after the service is provided, and claims are not guaranteed to be paid.

But if your insurer requires pre-approval for certain services and you have one of those services without getting pre-approval, your insurer can deny the claim because of the lack of pre-approval—even if they would otherwise have covered the cost.

This means that you or your doctor must contact your insurer to obtain their approval prior to receiving care. Pre-approval rules vary from one health insurer to another, but in general, the more expensive the service, the more likely it is that the insurer will require pre-approval. So things like surgery or hospital visits are more likely to need pre-approval than a simple office visit. But if you are in doubt, it's best to contact your insurance company in advance of obtaining any type of health care.

If you're receiving care from an in-network physician or facility, they will usually be able to complete the pre-approval process on your behalf. But if you're going outside your plan's network (and assuming your plan does cover some of the cost of out-of-network care), you may have to organize the pre-approval process yourself. In either situation, it's best to double-check with your insurance plan prior to receiving care, to make sure that everything related to your pre-approval has been completed as required, since you're the one who would ultimately be stuck with the bill if a claim is rejected based on pre-approval not having been obtained.

Also Known As: Precertification or prior authorization.

There are several reasons that a health insurance provider would require pre-approval. They want to ensure that: 

1. The service or drug you’re requesting is truly medically necessary.

2. The service or drug follows up-to-date recommendations for the medical problem you’re dealing with.

3. The drug is the most economical treatment option available for your condition. For example, Drug C (cheap) and Drug E (expensive) both treat your condition. If your doctor prescribes Drug E, your health plan may want to know why Drug C won’t work just as well. If you can show that Drug E is a better option, it may be pre-authorized. If there’s no medical reason why Drug E was chosen over the cheaper Drug C, your health plan may refuse to authorize Drug E, or may require that you try Drug C first and see if it works. If it doesn't, they would then consider approving Drug E. This try-the-cheaper-drug-first approach is known as step therapy.

4. The service isn’t being duplicated. This is a concern when multiple specialists are involved in your care. For example, your lung doctor may order a chest CT scan, not realizing that, just two weeks ago, you had a chest CT ordered by your cancer doctor. In this case, your insurer won’t pre-authorize the second scan until it makes sure that your lung doctor has seen the scan you had two weeks ago and believes an additional scan is necessary.

5. An ongoing or recurrent service is actually helping you. For example, if you’ve been having physical therapy for three months and you’re requesting authorization for another three months, is the physical therapy actually helping? If you’re making slow, measurable progress, the additional three months may well be pre-authorized. If you’re not making any progress at all, or if the PT is actually making you feel worse, your health plan might not authorize any further PT sessions until it speaks with your physician to better understand why he or she thinks another three months of PT will help you.

Pre-Approval and Consumer Protections

Pre-approval is an important part of cost control, and is used by most health insurers, including public programs like Medicaid and Medicare. But there are regulations in place to ensure that health plans address pre-approval requests in a timely manner. Under federal rules (which apply to all non-grandfathered plans), health plans must make pre-approval decisions within 15 days for non-urgent care, and within 72 hours for procedures or services that are considered urgent.

And many states have even stronger consumer protections regarding pre-approval rules for health plans. As an example, Kentucky enacted legislation in 2019 that requires insurers to respond to pre-approval requests within 24 hours for urgent medical needs, and within five days for non-urgent situations.

But the American Medical Association has long noted that pre-approval requirements are "burdensome and barriers to the delivery of necessary patient care." In 2018, the AMA joined with several other organizations, including America's Health Insurance Plans (AHIP), to publish a consensus statement regarding reforms to the prior authorization system. But a survey of physicians conducted in late 2018 found that most of the provisions in the consensus statement had not yet been implemented on a widespread basis at that point.

This is clearly an issue that the AMA and its physician members are working to address, and there are concerns that pre-approval requirements are burdensome to patients and physicians, cause disruption in patient care, and aren't always clear-cut (the majority of physicians reported that it was "difficult to determine" whether a given treatment needed prior authorization).

But on the other hand, health insurers must have mechanisms to keep spending in check, and eliminating pre-approval requirements altogether could potentially result in run-away costs, particularly for services like imaging and specialty drugs. Stakeholders are working to find a solid middle ground that puts patient care first, but for the time being, pre-approval is very much a part of the US health insurance system.

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Article Sources
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  1. U.S. Centers for Medicare & Medicaid Services. Step therapy.

  2. Centers for Medicare and Medicaid Services. CY 2020 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Final Rule (CMS-1717-FC). Published November 1, 2019.

  3. Centers for Medicare and Medicaid Services. Internal Claims and Appeals and the External Review Process Overview. Published April 2018.

  4. American Medical Association. Issue Spotlight. Physicians score a win in bid to fix prior authorization. Published April 4, 2019.

  5. American Medical Association. Measuring progress in improving prior authorization. Published March 2019.