Prior authorization, a tool long used to control spending and promote cost-effective care, is in the spotlight as advocates and policymakers call for closer scrutiny of its use across all forms of health coverage.
What is Prior Authorization?
Prior authorization is a process in which health insurers require patients to obtain approval of a health care service or medication before the care is provided. The standards for this review are often developed by the plans themselves, based on medical guidelines, cost, utilization, and other information. The process also varies by insurer but involves submission of administrative and clinical information by the treating physician, and sometimes the patient. In a 2021 American Medical Association survey, most physicians (88%) characterized administrative burdens from this process as high or extremely high. Doctors also indicated that prior authorization often delays care patients receive and results in negative clinical outcomes. The authors of an independent study published in 2019 wrote that the research to date on prior authorization has not provided sufficient evidence to make any conclusions about its health impacts or net economic impact.
How Often is Prior Authorization Used and What is its Impact?
In recent years, there has been little information about how often prior authorization is used, for what treatments authorization is denied, or how it affects patient care and costs. A KFF report released in 2021 found that most (99%) Medicare Advantage enrollees were in plans that required prior authorization for some services. In addition, 84% of Medicare Advantage enrollees were in plans that applied prior authorization to a mental health service. A recent report from the U.S. Department of Health and Human Services’ Office of the Inspector General found 13% of prior authorization denials by Medicare Advantage plans were for benefits that should otherwise have been covered under Medicare. The OIG cited use of clinical guidelines not contained in Medicare coverage rules as one reason for the improper denials, as well as managed care plans requesting additional unnecessary documentation.
What’s Happening Now?
Health plans have come under scrutiny for using their own clinical criteria for prior authorization of medical services. California, for example, has banned commercial insurers from using their own clinical criteria for medical necessity decisions and requires them to instead use criteria that are consistent with generally accepted standards of care and are developed by a nonprofit association for the relevant clinical specialty. Concern over the use and impact of prior authorization by health plans has prompted regulators to consider various measures to regulate the practice or make it more transparent.
Clinical coverage criteria. The use of health plans’ own criteria for medical necessity decisions has been criticized. For example, California prohibits commercial insurers from using their own clinical criteria to make coverage decisions; they must use criteria that are consistent with generally accepted standards of care and developed by a nonprofit association for the relevant clinical specialty. Although state laws like this do not apply to self-insured employer-sponsored plans, they are worth considering as part of an overall strategy to improve coverage decisions at the state level.
Use in behavioral health. The Mental Health Parity and Addiction Equity Act requires that health insurance plans provide mental and behavioral health care services on the same level as physical health care services. Plans must provide a comparative analysis that includes the rationale and evidence for applying prior authorization, as well as all other nonquantitative coverage limits. While compliance with this requirement has been slow according to a recent federal agency report to Congress, enforcement at the federal and state level has increasingly required plans to eliminate prior authorization for specific behavioral health treatments due to alleged parity violations.
Transparency Increasing transparency about how the prior authorization process works is also gaining some momentum. H.R. 3173, with 306 cosponsors, would require Medicare Advantage insurers to report to HHS on the types of treatment that requires prior authorization, the percentage of prior authorization claims approved, denied, and appealed. Similarly, some states have required this type of data reporting as part of their mental health parity implementation, while some regulators urge more reliance on data reporting for MHPAEA compliance. Such transparency data proposals are similar to current law requirements under the Affordable Care Act for private plans to report to data on claims payment practices and denials. While this federal law applies to all commercial insurers and employer-sponsored plans, to date it is largely un-implemented, with only limited reporting required of non-group plans sold through HealthCare.gov.
Setting standards for prior authorization. Other current law standards regulating prior authorization are limited.
The Affordable Care Act bans the use of prior authorization for emergency care.
Some states have passed laws to ban prior authorization for certain behavioral health care. For example, New York bans the use of prior authorization during the first days of an inpatient admission for a mental health condition for children. Michigan recently passed a law requiring use of standardized prior authorization methods and new transparency reporting. Several states have adopted or are considering “gold card” laws that would require health plans to waive prior authorization for services ordered by providers with a track record of prior authorization approval.
Administrative reforms. CMS finalized a regulation to streamline the prior authorization process for Medicaid and private health plans offered on HealthCare.gov through changes that included new electronic standards. The agency later withdrew the rule, but similar regulations may be forthcoming from HHS. H.R. 3173 requires CMS to implement an electronic prior authorization program for Medicare Advantage plans with capacity to make real-time decisions and has been supported by the insurance industry. Debate over further standards to limit the use or regulate prior authorization may well involve tradeoffs between claims spending versus access to care for patients and administrative burden for providers. Promoting transparency of this process and how it works in practice could help inform what those tradeoffs might entail.
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