Step Therapy and Prior Authorization are two procedures that health insurance companies have been allowed to introduce to try to limit their exposure to medical claims. Some insurers are increasing requirements for prior authorization, and that could be a major issue for you as a patient.
Prior authorization requires the patient or doctor to apply to the insurer for prior approval before undertaking a specific medical procedure or use of a specific medication. The application goes to the insurer and is reviewed by someone to see if the request is medically appropriate and insistent with the insurer’s guidelines for care.
The person doing the review for the insurer may or may not be a medical professional. The reviewer has no intimate knowledge of the patient or the condition being treated but is expected to second guess the doctor’s recommended course of treatment.
How could that possible go wrong?
- Denials to prior authorizations or delays in correcting initial denials can lead to substantial delays in treatment. The time lag can lead to complications for the patient, including required hospitalization that could otherwise have been avoided. With aggressive diseases, the delay could lead to death.
- 73% of denials are overturned on appeal. Most of the remainder are attributed to physicians not wanting to spend the time to fight the initial denial. Overall, this strongly suggests that the review process used by health insurers is flawed and not particularly accurate.
- Prior authorizations take the physician away from the practice of medicine for an average of 6 hours per patient. (3)
- Denials are often based on non-medical issues such as incorrectly completed paperwork.(4) In fact, a major criticism of the prior authorization process is that it is excessively complicated and not at all transparent.(5)
It’s not clear that prior authorization has any benefit for patients or, given the rate of reversals, for reducing the cost of medical care. The authorization process can allow insurers to postpone expenses from one quarter to the next, giving an artificial boost to apparent profitability and stock price.
There are lawsuits against insurers in several states now alleging that delays in the prior authorization process have led to injury and deaths of patients.
- The American Medical Association has engaged a law firm for a suit to curtain the practice of requiring prior authorization.(1)
- In 2017, a medical services company was fined $54 million for conducting fraudulent prior authorization reviews.(2)
- In a New York case, the delay due to prior authorization required a cancer patient to have a leg amputated — which doctors say could have been avoided with prompt treatment.(6) The insurer took 38 days to reverse the initial denial and the patient later died.
Doctors see prior authorization as the insurance company practicing medicine, which it is in fact not licensed to do. However, there are no laws holding insurance companies responsible for errors in the way that doctors are liable for committing medical malpractice.
- There are no statistics about how often insurers require prior authorization. You need to nose around or have your broker nose around to see which companies are going to be particularly rigid with these requirements, and avoid them.
- You need to select doctors who will be aggressive with insurance companies in fighting denials. I’ve run into doctors who don’t want to spend the time, and doctors who hate insurers and relish the fight. The latter are what you need.