Prior Authorization & Your Health Insurer

Once upon a time, the way health insurance worked was this: Patients with insurance were seen by their doctors, received prescriptions for medications, and got the surgeries and other procedures their doctors believed were justified. Under these "indemnity plans," after the fact, invoices were submitted to health insurance companies, and -- by and large -- the invoices were paid. Not necessarily in full -- there were deductibles that needed to be met each year and reductions in "reimbursement" for the patient's co-pay or co-insurance obligation. But coverage was seldom an issue. Insurance companies conducted retroactive reviews to determine that the service or item was "medically necessary and appropriate," but most claims for payment were approved most of the time.

Until they weren't.

As new technologies and high-priced drugs and devices drove up the cost of health care, insurers looked for ways to control the amounts they paid out in claims. Under the broad banner of "managed care," insurers instituted various reforms that fundamentally changed the delivery of health care goods and services. 

One reform was to create panels or networks of approved providers, in exchange for which the insurance companies demanded deep discounts in physicians' fees and hospitals' charges. Patients who received their care -- even emergency care -- from providers who were "out of network" typically received no coverage for that care or reduced coverage, putting more of the cost of care on patients (i.e., the insurers' customers). 

Another reform was the integration of health insurance and healthcare provider. The purest form of this were the HMOs. Some provided health care services to their insureds; others contracted with providers to diagnose and treat their insureds. In both instances, a single entity was financially (and legally and ethically) obligated to write health insurance policies and provide care (either directly or indirectly) to their insureds.

A third reform relates to the title of this post: prior authorization, to which I would add concurrent authorization. "Prior authorization" gives the insurance company up-front veto power over referrals to specialists or for hospitalizations, for prescriptions for drugs and devices,  and for procedures (diagnostic (CT scans, e.g.) or treatment (including surgeries). "Concurrent authorization" gives insurance companies the same type of veto power throughout a course of treatment. This might be denial of a request for an MRI to see whether or how much a disease has progressed or denial of a request for an additional number of days of hospitalization to deal with post-procedure complications. And "retroactive review" -- which, under indemnity plans, were relatively benign efforts to determine medical appropriateness and necessity -- became a more rigorous process of "retroactive authorization."

Although managed care was originally justified as a necessary form of cost control, including screening insurance claims for those that were not for medically necessary appropriate care, managed care itself evolved into something that was increasingly regarded as abusive. The pattern of denying coverage for unarguably necessary and appropriate care produced a backlash over the past two decades, including legislative and regulatory reforms at the federal and state level to address the worst features of managed care.

A recent opinion video on the New York Times website (Mar. 14, 2024; subject to paywall) provides excellent evidence that insurance companies continue to use prior and concurrent authorizations to to delay or avoid altogether their contractual obligation to pay for care that is necessary and appropriate. (I can provide free access to eights readers of this post; if you want access, just let me know at tmayo@smu.edu.)

A handful of states have passed "gold card" laws that are intended to allow physicians who have successfully received prior authorizations to bypass that process altogether. According to the Texas Medical Association, two years after passage of the state's "gold card" law, "the Texas Department of Insurance (TDI) reports that only 3% of physicians and health care professionals have received gold cards because of the current eligibility threshold, which requires physicians to submit a minimum of five eligible prior authorization requests for a given health care service or medication within the six-month review period."

A federal version of the gold card law -- H.R. 4968, "Getting Over Lengthy Delays in Care As Required by Doctors Act of 2023" (or the "GOLD CARD Act of 2023") -- was referred last July 23 to the Subcommittee on Health of the House Ways and Means Committee, where it remains to this day. Even if it becomes law, exempts physicians from prior authorization requirements only under Medicare Advantage plans with respect to specific items and services if at least 90% of the physician's requests for such items and services were approved during the previous plan year. Outside of Medicare, patients and their providers would not be helped by the GOLD CARD Act.