Prior authorization is a process used by some health insurance companies in the United States to determine if they will cover a prescribed procedure, service, or medication. The process is intended to act as a safety and cost savings measure, although it has received criticism from physicians for being costly and time consuming.
Prior authorization is a check run by some insurance companies or third party payers before they will agree to cover certain prescribed medications or medical procedures. There are a number of reasons that insurance providers require prior authorization, including age, medical necessity, the availability of a generic alternative, or checking for drug interactions. A failed authorization can result in a requested service being denied, or an insurance company requiring the patient to go through a separate process known as "step therapy" or "fail first". Step therapy dictates that a patient must first see unsuccessful results from a medication or service preferred by the insurance provider, typically considered either more cost effective or safer, before the insurance company will cover a different service.
After a physician orders a medical service for a patient, the physician's staff will contact the patient's insurer to determine if they require a prior authorization check to be run. If so, a manual process is initiated. The process to obtain prior authorization varies from insurer to insurer, but typically involves the completion and faxing of a prior authorization form. At this point, the medical service may be approved, rejected, or additional information may be requested. If a service is rejected, the physician may file an appeal based on the provider's medical review process. In some cases, an insurer may take up to 30 days to approve a request.
Purpose and costs
Insurers have stated that the purpose of prior authorization checks is to provide cost savings to consumers by preventing unnecessary procedures as well as the prescribing of expensive brand name drugs when an appropriate generic is available. In addition, a prior authorization for a new prescription may help prevent potentially dangerous drug interactions. A 2009 report from the Medical Board of Georgia showed that as many as 800 medical services require prior authorizations. According to Medical Economics, physicians have expressed frustration with the current prior authorization process with regards to time spent interacting with insurance providers and the costs incurred based on that time. A 2009 study published in Health Affairs reported that primary care physicians spent 1.1 hours per week fulfilling prior authorizations, nursing staff spent 13.1 hours per week, and clerical staff spent 5.6 hours. A study in the Journal of the American Board of Family Medicine found that the annual cost per physician to conduct prior authorizations was between $2,161 and $3,430. The cost to health plans has been reported at between $10 and $25 per request. It is estimated that current prior authorization practices cost the US healthcare system between $23 and $31 billion annually.
Legislative and technological developments
There have been a number of legislative and technological developments which attempt to make the prior authorization process more efficient.
In 2011, the American Medical Association made recommendations that a uniform prior authorization form should be adopted along with real-time electronic processing. The organization described a next generation prior authorization process which would involve a physician ordering a medical service, their staff completing a standardized request form, and an electronic submission process that would give same-day approval or denial of the request. The reasoning behind a denial would be clearly stated, allowing physicians to easily submit an appeal.
In February 2012, The Maryland Health Care Commission presented a plan to the state legislature, which outlined a standardized, electronic filing system for prior authorization requests. In response to a 2012 bill concerning the e-filing of prescriptions, the Kansas Board of Pharmacies advocated for an electronic prior authorization process, which would generate immediate approval for prescriptions. In 2013, the Arizona House of Representatives formed a committee to research the prior authorization process and make recommendations. Also, by 2013 a Washington State Senate proposal was submitted, which would require the state Insurance Commissioner to develop a standardized prior authorization form.
As of May 2013, the National Council for Prescription Drug Programs had adopted a standardized process for the exchange of electronic prior authorizations. The American Medical Association found that the average annual savings per physician from using an electronic prior authorization process to be approximately $1,742. Additionally, a case study conducted by Prime Therapeutics, a pharmacy benefit manager, demonstrated a 90% reduction in payer response time through electronic prior authorization systems compared with the manual prior authorization process.
- Study on Electronic Transmission of Prior Authorization and Step Therapy Protocols (Report). Kansas Board of Pharmacies. January 2013. http://www.rxobserver.com/wp-content/uploads/2013/01/2013-epa-Study-Report1.pdf. Retrieved 15 May 2014.
- Thomas Reinke (December 2012). "Prior Authorization for Safety, Not Just for Economy". Managed Care Magazine. Retrieved 20 May 2014.
- Brian Albright (1 January 2010). "Parity Rules: Worth the Wait? Delayed Release of Parity Implementation Rules Keeps Everyone". Behavioral Healthcare. Retrieved 20 May 2014.
- American Medical Association (June 2011). Standardization of prior authorization process for medical services white paper (Report). http://sppan.aapainmanage.org/assets/standardization-prior-auth-whitepaper.pdf. Retrieved 15 May 2014.
- Douglas Moeller (1 August 2009). "Manage medical advances with automated prior authorization". Managed Healthcare Executive. Retrieved 30 May 2014.
- Valerie Bauman (8 February 2013). "Proposal seeks to streamline health-insurance paperwork logjam". Puget Sound Business Journal. Retrieved 30 May 2014.
- Michelle Saxton (25 August 2005). "Medicaid to require prior OK for outpatient surgeries". The Charleston Gazette. Retrieved 30 May 2014.
- Ken Terry (19 October 2007). "Prior Authorization Made Easier". Medical Economics. Retrieved 30 May 2014.
- Medical Association of Georgia (January 2009). A Study of Prior Authorization/Precertification of Physician Services (Report). The Exchange Atlanta. http://www.mag.org/sites/default/files/downloads/MAG%20Prior%20Authorization%20Study.pdf. Retrieved 15 May 2014.
- Jeffrey Bendix (10 October 2013). "Curing the prior authorization headache". Medical Economics. Retrieved 22 May 2014.
- What Does It Cost Physician Practices To Interact With Health Insurance Plans? (Report). Health Affairs. May 2009. http://content.healthaffairs.org/content/28/4/w533.full. Retrieved 15 May 2014.
- The Impact of Prior Authorization Requirements on Primary Care Physicians' Offices: Report of Two Parallel Network Studies (Report). Journal of the American Board of Family Medicine. 22 August 2012. http://www.jabfm.org/content/26/1/93.full. Retrieved 15 May 2014.
- Gene Ransom (9 February 2012). "Insurance 'prior authorization' wastes time, money". The Baltimore Sun. Retrieved 22 May 2014.
- Todd Levine (7 February 2014). "In Arizona, getting patient therapies approved is an out-of-date proposition". Arizona Capitol Times. The Dolan Company. Retrieved 22 May 2014.
- Arizona State Legislator (28 March 2013). "Bill Text: AZ HB2400". House Bill 2400. LegiScan. Retrieved 22 May 2014.
- Jennifer Webb (1 July 2013). "Real time prior auth standards approved". Managed Healthcare Executive. Advanstar Communications, Inc. Retrieved 29 May 2014.
- "Electronic Prior Authorization Toolkit". ama-assn.org. American Medical Association. Retrieved 29 May 2014.
- News Editor at Clinical Trials Week (6 January 2014). "Prime Therapeutics Electronic Prior Authorization Program Provides Efficiencies for Health Care Professionals and Their Patients". Clinical Trials Week. Retrieved 29 May 2014.