Prior authorization is a
utilization management
Utilization management (UM) or utilization review is the use of managed care techniques such as prior authorization that allow payers, particularly health insurance companies, to manage the cost of health care benefits by assessing its appropriaten ...
process used by some
health insurance
Health insurance or medical insurance (also known as medical aid in South Africa) is a type of insurance that covers the whole or a part of the risk of a person incurring medical expenses. As with other types of insurance, risk is shared among ma ...
companies in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
to determine if they will cover a prescribed procedure, service, or medication. The process is intended to act as a safety and cost-saving measure although it has received criticism from physicians for being costly and time-consuming.
Overview
Prior authorization is a check run by some
insurance companies
Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
or
third-party payers in the United States 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
Generic or generics may refer to:
In business
* Generic term, a common name used for a range or class of similar things not protected by trademark
* Generic brand, a brand for a product that does not have an associated brand or trademark, other ...
alternative, or checking for
drug interaction
Drug interactions occur when a drug's mechanism of action is disturbed by the concomitant administration of substances such as foods, beverages, or other drugs. The cause is often the inhibition of the specific receptors available to the drug, ...
s.
[ A failed authorization can result in a requested service being denied or in an insurance company requiring the patient to go through a separate process known as "]step therapy
Step therapy, also called step protocol or a fail first requirement, is a managed care approach to prescription. It is a type of prior authorization requirement that is intended to control the costs and risks posed by prescription drugs. The pract ...
" 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.[ ]
Process
After a request comes in from a qualified provider, the request will go through the prior authorization process. The process to obtain prior authorization varies from insurer to insurer but typically involves the completion and faxing of a prior authorization form; according to a 2018 report, 88% are either partially or entirely manual.
At this point, the medical service may be approved or rejected, or additional information may be requested. If a service is rejected, the healthcare provider 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
The ''Journal of the American Board of Family Medicine'' is the official publication of the American Board of Family Medicine. It was formerly published as ''The Journal of the American Board of Family Practice'' by the Board of the Massachusetts ...
'' 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 that attempt to make the prior authorization process more efficient.
In 2011, the American Medical Association
The American Medical Association (AMA) is a professional association and lobbying group of physicians and medical students. Founded in 1847, it is headquartered in Chicago, Illinois. Membership was approximately 240,000 in 2016.
The AMA's sta ...
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
The Arizona State House of Representatives is the lower house of the Arizona Legislature, the state legislature of the U.S. state of Arizona. The upper house is the Senate. The House convenes in the legislative chambers at the Arizona State C ...
formed a committee to research th
prior authorization
process and make recommendations. Also, by 2013 a Washington State Senate
The Washington State Senate is the upper house of the Washington State Legislature. The body consists of 49 members, each representing a district with a population of nearly 160,000. The State Senate meets at the Legislative Building in Olympi ...
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
In the United States, a pharmacy benefit manager (PBM) is a third-party administrator of prescription drug programs for commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Progra ...
, demonstrated a 90% reduction in payer response time through electronic prior authorization systems compared with the manual prior authorization process.
In 2019, a consensus statement from several healthcare organizations supported standardizing the process.
References
{{reflist, 2
Health insurance in the United States
Healthcare in the United States
Managed care