Introduction:

Prior authorization is the crucial step in obtaining approval from your health insurance plan for a specific medical service, product, or medication. It comes before actually receiving the service, product, or medication. If you don't take this action when it is required, your insurance may not cover your costs. Insurance companies commonly do this to manage expenses.  This is especially true for high-cost products, medications, or services. The primary goal of prior authorization is to evaluate the proposed healthcare service, medication, or product.  It will assess medical necessity, appropriateness, and cost-effectiveness.

Health Plans:

Managed care plans, like Medicare Advantage (MA) and Qualified Health Plans (QHP) under the Affordable Care Act (ACA) usually enforce these requirements. They often enforce the requirements for medical services, durable medical equipment (DME), or prescription drugs. However, the use of prior approval has caused controversy.  There are complaints from doctors and patients about unnecessary delays and disruptions in healthcare service delivery.

The Evolution:

In response to these concerns, The Centers for Medicare and Medicaid Services (CMS) issued a Final Rule on January 17, 2024. The rule compels federally funded plans to expedite decisions. They must process urgent requests within 3 days (72 hours) and standard requests within 7 calendar days.

To make the process faster, these organizations must also implement a Prior Authorization API for electronic data exchanges. Importantly, the rule requires organizations to provide specific reasons whenever they deny a request. These reasons should give the requester enough information to respond and submit any necessary details for approval.

The new rules will take effect in 2026, while the implementation of the Prior Authorization API is scheduled for 2027.