Health plans must stop prior authorizations and quit putting consumers at risk

Prior authorizations (PA) is a bad health insurance business practice that puts the health of its consumers at risk—a practice most consumers in the US have experienced. Health plans require healthcare providers (HCPs), patients, or other providers to obtain approval in advance from a health plan before a specific service is delivered to the patient, to qualify for payment coverage. This is a practice unique to health insurance, not one used by other types of insurers for home, auto, etc.

PAs emerged with the advent of Medicare and Medicaid in the 1960s to ensure that hospital admissions were medically necessary. The Centers for Medicare and Medicaid Services (CMS), as a function of optimizing healthcare resources and preventing fraud, waste, and abuse, created processes such as utilization review and PA for Medicare and Medicaid programs. Health plans adopted and expanded them for commercial plans. In the process, they have added real costs to the healthcare system as shown in Exhibit 1.

Exhibit 1: PA is an onerous process for everyone in the ecosystem, and one that adds material costs

Source: HFS Research 2023, American Medical Association

PA reflects the knee-jerk reaction that insurers have when it comes time to cover benefits

In general, people seek care when they need it, and HCPs react by requesting appropriate tests and prescribing treatments. There are certainly exceptions, however, the exceptions should not drive onerous processes with the intent of reducing access to healthcare, while not compromising on the financial outcomes for the health plans.

PAs are against the spirit of the contract that health consumers have with their plan sponsors (health insurers, employers, and the government for Medicare). The purpose of insurance is to render aid during a crisis, not erect barriers, or cause delay to such aid. PAs do that by forcing HCPs to request clinical approval before rendering such care, delaying care that might exacerbate their medical risk.

Exhibit 2: PAs cause delays and even drive patients to abandon care.

Source: HFS Research 2023, American Medical Association

Insurers are financially healthy when members are healthy. The delay PAs cause by having to wait on health plans to approve requested treatments could make patients sicker (Exhibit 2) by delaying care or even abandoning their care.

Ironically, patients that delay or abandon care cost health plans more in the long term as their eventual treatment is very likely more expensive. Despite that realization, health plans choose a business process that has no perceivable health or financial value to both them and the patients.

A case in point is when, in 2021, Medicare Advantage plans made 35 million PA determinations. Of those 35 million PAs, 2 million, or about 5.7% were initially denied. While some 10% of the denials were appealed and 83% of those appealed were approved. At the end of the cycle, about 95% of all PAs were approved as shown in Exhibit 3. The question then is if there is such a high rate of approval, why go through a charade that adds zero value?

Exhibit 3: 95% of all Medicare PAs in 2021 were approved, so why bother with PAs?

Source: HFS Research 2023, Kaiser Family Foundation

It is time to abandon a useless business process and reorient our resources to deliver value

We need to take a whole-of-a-society approach to addressing the malignancy of PA. We make three simple but impactful recommendations.

• Health plans, stop the practice: Health plans must reconsider PAs. There is ample evidence that shows that PAs do not optimize healthcare resources as the initial purpose had intended. It exacerbates the pressure on the limited healthcare resources by orienting them towards administrative tasks rather than care delivery.
• Employers, don’t allow PA for your employees: US employers underwrite the medical risk of over 85 million of their employees. They have enormous control over how care is delivered. They must choose to reject the need for PAs, saving time, money, and accelerating care for their employees. This will help employers reduce their healthcare costs while improving the experience for their employees.
• Congress, take action: We the people must call, email, and use social media channels to get our elected representatives to ban the practice of PA.

We recognize an entrenched process like PA is not easy to get rid of. However, the only real support it has is that of the inertia of the status quo. If we shine enough light on it, there is a chance of positive action.

The Bottom Line: PA does no good to anybody, so why do we do it?

There is no evidence to suggest that PA does any good to reduce fraud, waste, and abuse or optimize the utilization of healthcare resources. However, there is ample evidence of its impact on health as a function of delayed or abandoned care. So, if we were to rid ourselves of PA, the only ones that would miss it are those providing PA administrative services.