Prior Authorizations – Sand in the Bathing Suit

“Irritation is the first step towards motivation.”

-   Steven Pressfield, The Art of War

Intentional barriers, created with intention

Fact: health insurance carriers are financially motivated to reduce healthcare utilization. They can’t come right out and say it openly, so instead they use lots of euphemisms about navigation to appropriate care venues and reducing low value care. But at the end of the day the truth is their corporate bottom line depends in large part on reducing claims cost.

Health insurance carriers us a number of tools in order to reduce utilization without falling afoul of regulations. The tool most often abused is the prior authorization. A 2023 study by the Kaiser Family Foundation (KFF) found the big, national publicly traded healthcare corporations required 2.2 to 2.9 prior authorizations per Medicare Advantage enrollee.

This means that during a calendar year, on average every consumer with insurance through one of these companies had to obtain more than two and sometime three prior approvals from the carrier before they could receive the procedure or drug proscribed by their doctor.

The worst of these large corporations denied up to 12% of the submitted requests. The only way to interpret this rate is to view it as a corporate policy of denying access to care in the hopes that expense can be avoided. Here are a few 2021 Medicare Advantage prior authorization denial rates as researched by KFF:

• CVS/ Aetna: 12%

• Kaiser Permanente: 12%

• Centene/ Wellcare: 10%

• United Healthcare/ AARP: 9%

• Health Care Service Corporation/ Cigna: 6%

But maybe the data is misleading, and doctors are over proscribing procedures and drugs?

The data indicates a far more pernicious reality. Of the prior authorizations required of doctors by these health insurance carriers, over 80% of the denials were overturned if they were appealed.

In summary, the largest for profit health insurance corporations require special approval via prior authorization for a specified set of procedures and drugs prior to agreeing to pay for them. They initially deny a large percentage of requests in what appears to be an internal policy. But when the patient and doctor push back, these corporations effectively say “oops, we were wrong” and agree to cover the procedure or drug.

Getting motivated by the irritation

Every health insurance carrier has their own list of procedures and drugs that require a prior authorization. In the case of drugs the requirement may come in the form of step therapy. While all carriers have fairly similar requirements, there is not an industry standard list of prior authorizations like there is for CPT codes. The submittal and review process is typically fairly slow and not always automated – with forms and dialog between the doctor and the insurance company for each request – creating an administrative burden for the doctor and frustration for the consumer.

A platform that streamlined the process and created more transparency for the doctor and patient would be a valuable product. Aggregating industry data reflecting similar requests across carriers and conditions would allow doctors to reference benchmarks with their request, perhaps making it more difficult for insurance carriers to out-right deny initial submittals.

Prior authorization requirements by insurance carriers are framed as tools to insure “the right care, at the right place, at the right time.” But the reality is they are tools to create friction in the hope of reducing healthcare utilization and benefiting the carrier’s bottom line. For those that are motivated, they create a business opportunity to launch a product than shifts the paradigm.

Copyright 2itive 2024

2itive is a Portland based consultancy founded by Erik Goodfriend, offering a unique combination of market intelligence, knowledge of healthcare payment systems and creative business strategy insights. Feel free to contact us at info@2itive.com