Prior authorization (PA) — also referred to as preauthorization, preapproval and precertification — is a tool that is health insurance companies use to ensure patients receive treatments and medications that are medically necessary, appropriate, safe, and cost-effective. It requires clinicians to obtain pre-approval from a payer or health plan before a medical service or medication can be dispensed. Insurance pre-authorization is especially important for high-cost or high-risk prescription drugs. It requires the prescriber to obtain pre-approval before prescribing a specific medication to ensure it qualifies for coverage under the pharmacy benefit plan. This ensures that the drug is prescribed only to patients for whom it is clinically indicated. As the process of obtaining medication pre-approvals can be time-consuming and burdensome, many physicians work with medical billing outsourcing companies to ensure a smooth process.
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Why Prior Authorization Matters for Prescription Drugs
- Ensures medications are clinically appropriate – helps confirm that prescribed medications align with evidence-based guidelines, ensuring they are suitable for the patient’s specific medical condition.
- Prevents misuse and overprescribing: helps reduce the risk of medication misuse by ensuring that potentially addictive or high-risk drugs are prescribed only when actually necessary. For e.g., health plans require pre-approval for painkillers that are vulnerable to misuse.
- Manages healthcare costs: Requiring preapproval for expensive medications helps control healthcare spending, promoting the use of cost-effective treatment options when appropriate.
- Enhances patient safety: Serves as a safety check, helping to identify potential drug interactions, contraindications, or alternative therapies that may be safer or more effective.
- Supports pharmacy benefit plan coverage compliance: Medications requiring prior auth will not be approved for payment until the specified coverage criteria set by payers are met and the pre-approval is recorded in the system. This reduces the risk of claim denials and unexpected costs for patients.
Pharmacists and other qualified health professionals develop guidelines and administrative policies for prior authorization. Each managed care organization establishes coverage criteria tailored to its specific patient population and independently determines how these guidelines are implemented. Effective prior authorization programs balance clinical appropriateness with administrative efficiency, minimizing disruptions for patients and healthcare providers (www.amcp.org).
In a 202o America’s Health Insurance Plans (AHIP) survey, respondents said that prior authorization programs achieved what they were designed to do. Over 90 percent of the plans reported a positive impact on quality of care and affordability and 84 percent said that they also saw a positive impact on safety (healthpayerintelligence.com).
Types of Medications that May Require Prior Authorization
- Prior approvals are usually required for expensive medications for which a less costly alternative is available. Prescription medications that may need preapproval include those that:
- Are used to treat only specific health conditions or people of certain age groups
- Are costly (such as those used to treat psoriasis and rheumatoid arthritis)
- May pose health risks when combined with other medications
- Pose a higher risk for misuse or abuse
- May have less expensive alternatives such as a brand name medication available as a less expensive generic
- Are often used for cosmetic reasons
- Are used at higher doses than normal (opioids)
- Are deemed medically necessary by the physician but not covered by the patient’s plan
- Are used to treat non-life-threatening conditions
For medications that are approved to treat more than one condition, the prior auth process is used to obtain more information that is necessary for making sound, cost effective, clinical decisions. Here’s an example from the Academy of Managed Care Pharmacy (AMCP) of how prior auth is used within a prescription drug benefit: “Botox is used to treat muscular disorders, but can also be used for cosmetic purposes (e.g., eliminate wrinkles). If the plan does not cover cosmetic products or procedures, the prior authorization program would ensure that Botox is covered only when it used for appropriate medical indications”.
What’s the Challenge?
When a medication requires prior authorization, it can burden both patients and providers. Patients may face delays in getting prescriptions filled and risk paying out-of-pocket if coverage is denied. For physicians, prior authorization can hinder timely, patient-centered care.
In 2023, several national insurers took steps to reduce the number of services requiring prior authorization (PA). For instance, Cigna eliminated about 25% of medical services from PA requirements in August 2023 and announced plans to remove nearly 500 additional codes for Medicare Advantage (MA) plans by the year’s end.
Despite these changes, many physicians report a different experience. According to a recent survey, most physicians have observed an increase in PA requirements for both prescription medications and medical services over the past five years. This contrast highlights ongoing challenges in streamlining the PA process across the healthcare system.
Because of frequently changing formularies and prior authorization requirements, physicians are not sure about which treatment options will be approved without delay. Patients approaching pharmacies to pick up medications and initiate treatment are sometimes surprised when they are informed that that their physician has to initiate further action to get the health plan’s approval.
A recent article from the American Medical Association (AMA) noted that preapproval is often even required for medications that a patient has been taking for years to manage an illness and for chemotherapies, considered the only effective treatments for a particular cancer—a situation when timely treatment is especially important.
A 2023 AMA survey reported that:
- Practices complete an average of 45 prior authorization requests per physician each week.
- Physicians and staff spend 14 hours weekly on these requests.
- 35% of practices have staff dedicated solely to prior authorizations.
- 88% of physicians rate the prior authorization burden as “high” or “extremely high.”
- About 80% of physicians report an increase in prior authorization requirements over the past five years.
The article quotes Immediate Past President Jack Resneck, MD, a dermatologist as stating, “for the amount of time it takes myself and my office staff to go through that process now for almost all the prescriptions we write has gotten to be an enormous problem both for us and for our patients.”
Recently, electronic real-time prescription-benefit tools have been introduced to streamline electronic prior authorization. Integrated into electronic health records (EHRs), these tools automatically display a patient’s out-of-pocket costs for each prescription during the electronic prescribing process, using formulary and insurance-benefit information. Insurance prior authorization services also play an important role in reducing these challenges
Role of Insurance Authorization Services
Partnering with an insurance authorization company can ease the process for physicians. These companies have experts on board who will work with the provider to submit prior authorization requests promptly. They work with the latest technologies to streamline and centralize processes, promoting efficiency. Insurance verification specialists have experience working with all government and private insurers, ensuring that prior authorization requests are submitted to meet the requirements of different plans. Experts can help practices minimize denial risks while saving time and resources spent on prior authorizations, benefiting both physicians and patients.
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