Prior Authorization: What You Need to Know

Many health plans require your physician to obtain prior authorization before prescribing a medication or ordering a service or procedure. If this approval isn’t received, claims for reimbursement may be denied, leaving you to pay the bill. To keep this from happening to you, you should understand what pre-authorization is and the role it plays in the diagnosis and treatment of any illnesses or injuries for which you seek care.

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What Is Prior Authorization?

Prior authorization is the formal approval issued by a health insurance provider that's needed before certain procedures may be performed or medications are prescribed. Without this approval, the insurer won't cover the cost of the procedure.

Although a prior authorization doesn’t guarantee payment, it’s essentially an acknowledgment that a service or treatment has been deemed medically necessary by the insurer. Not all procedures and medications require prior authorization.

What Does Pre-Authorization Mean?

Pre-authorization is just another term for prior authorization. It refers to the approval obtained by your physician or another healthcare practitioner prior to beginning a treatment or prescribing a medication.

What’s the Difference Between Pre-Authorization, Prior Authorization and Pre-Certification?

For most health insurance companies, there’s no difference between pre-authorization, prior authorization and pre-certification. These terms may be used interchangeably.

What Procedures or Tests Typically Require Prior Approval?

Each insurance carrier decides which procedures, services or medications need prior authorization. In most cases, the services that require this approval are those deemed expensive or high risk. For many carriers, the following services require prior approval:

• Diagnostic imaging such as MRIs, CTs and PET scans
• Durable medical equipment such as wheelchairs, at-home oxygen and patient lifts
• Infusion therapy
• Inpatient procedures
• Skilled nursing visits and other home health care

What Types of Medications Typically Require Prior Approval?

Some insurance companies require prior approval for certain types of prescription medications. These typically include the following categories of drugs:

• Drugs that are often misused or abused
• Drugs that may be unsafe when combined with other medications
• Drugs for which there are effective lower-cost alternatives
• Drugs that are typically only used for cosmetic reasons

What Is the Purpose of Prior Authorization?

Most insurance companies use prior authorization for three main reasons:

• Cost management: By requiring approval for expensive services and medications, the prior authorization process helps insurance companies keep costs down. Physicians are often required to try lower-cost alternatives that may be equally effective before receiving approval for the higher-cost drug or service.
  
  
• Patient safety: The prior authorization process lets the insurance company oversee the medications that are being prescribed to an individual, which helps to minimize the risk of dangerous or even lethal drug interactions. This oversight may also reduce the prescribing of unnecessary or potentially addictive drugs and ensure that the medication prescribed follows the most up-to-date medical guidelines for the condition being treated.
  
  
• Avoiding duplication: Sometimes multiple physicians are treating an individual. By requiring prior authorization, insurance companies can minimize the risk of patients undergoing duplicate services.
  
  
• Treatment effectiveness: By assessing repeat pre-authorization requests, your insurance company may be able to analyze the effectiveness of the treatment and keep you on the right path. To do so, your insurance company may engage in discussions with relevant clinicians to determine if you're making progress.

What Is the Prior Authorization Process?

The prior authorization process begins when your doctor recommends a test, procedure or medication that requires prior approval from your health insurance company. Your doctor or medical team communicates this recommendation to the insurance company. This request is often done electronically and should typically include the following information:

• The insured’s identifying information
• Information about the referring provider and the servicing providers
• The requested service, procedure or medication
• The facility where the procedure will be performed
• The related diagnosis

Once a request is received by the insurance provider, it’s reviewed by staff, who may ask for additional information or documentation, such as prior diagnostic services or treatment. After review, the company will approve or deny the request.

If the request is approved, your physician will receive prior authorization for the test, procedure or medication. The approval is typically assigned a preauthorization number, which should be included when a claim is filed to avoid an unnecessary denial.

If the request for prior authorization is denied, your physician may order a different test, procedure or medication. Your physician may also appeal the denial at their discretion or at your request.

Once you receive your prior approval, you may schedule the test or fill the prescription.

How Long Does a Prior Authorization Take to Get?

Once your physician submits a request for prior authorization, a decision is usually returned in several days. In some instances, the initial request may take as long as a week, and appeals may take even longer. Many state-specific laws limit how long an insurer may take to complete this review. If you’ve been waiting longer than expected, you may call your health insurance carrier to find out why the decision has been delayed.

Do You Need a Prior Authorization in an Emergency?

No. Most insurers don’t require prior authorization when there’s an emergency. 

Is There a Downside to Prior Authorizations?

Prior authorizations are sometimes controversial because they’re viewed by both physicians and patients as a barrier between an individual and the medical services they require.

This may be especially true for anyone dealing with a chronic or complex condition that involves high-cost medications or ongoing treatments. In these cases, physicians must often repeat the pre-authorization process multiple times, which can lead to treatment delays and potentially hinder a patient’s recovery or progress.

How Can You Find Out If a Test or Medication Requires Prior Authorization?

Because each insurance company determines which services and medications require prior authorization, you should contact your carrier directly to find out if a specific test or treatment option needs pre-approval.

The guidelines for pre-authorization are typically outlined in your plan's terms, which may be available on the company's website or in the paperwork provided with your plan's welcome packet. Your physician or medical team may also be able to tell you if a service or medication requires pre-approval.