Prior Authorization

Insurance companies use prior authorization to keep health care costs in check

A doctor fills out a prescription.
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Prior authorization is a requirement that your physician obtains approval from your health care provider before prescribing a specific medication for you or to performing a particular operation. Without this prior approval, your health insurance provider may not pay for your medication or operation, leaving you with the bill instead.

Why Do Health Insurers Require Prior Authorization?

There are several reasons that a health insurance provider requires prior authorization. Your health insurance company uses a prior authorization requirement as a way of keeping health care costs in check. It wants to make sure that:

  • The service or drug you’re requesting is truly medically necessary.
  • The service or drug follows up-to-date recommendations for the medical problem you’re dealing with.
  • 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.
  • 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.
  • 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.

In effect, a pre-authorization requirement is a way of rationing health care. Your health plan is rationing paid access to expensive drugs and services, making sure the only people who get these drugs or services are the people for whom the drug or service is appropriate. The idea is to ensure that health care is cost-effective, safe, necessary, and appropriate for each patient.

But prior authorization requirements are also controversial, as they can often lead to treatment delays and can be an obstacle between patients and the care they need. Particularly for patients with ongoing, complex conditions that require extensive treatment and/or high-cost medications, continual prior authorization requirements can hinder the patient's progress and place additional administrative burdens on physicians and their staff.

The ACA (Obamacare) and Prior Authorization

The Affordable Care Act, signed into law in 2010, mostly allows insurers to continue to use prior authorization as a way to control costs and ensure that patients are receiving effective treatment.

But it prohibits non-grandfathered health plans from requiring prior authorization to see an OB-GYN and allows patients to pick their own primary care physician (including pediatricians or OB-GYNs). It also prohibits health plans from requiring prior authorization for emergency care at an out-of-network hospital.

The ACA also grants enrollees in non-grandfathered health plans access to an internal and external appeals process. Insurers have 15 days (or less, at state discretion) to respond to a non-urgent prior authorization request. If the insurer denies the request, the patient (usually working together with their doctor) can submit an appeal, and the insurer has 30 days to address the appeal.

Many states have also imposed their own laws that limit the length of time insurers have to complete prior authorization reviews. And some states have electronic prior authorization requirements for medications, intended to make the process faster and more efficient. But state health insurance regulations don't apply to self-insured employer-sponsored plans, as those are regulated at the federal level under ERISA instead.

In addition, the Mental Health Parity and Addiction Equity Act of 2008 prohibits health plans from disproportionately applying prior authorization requirements to mental health care, compared with their requirements for medical/surgical benefits.

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