Prior Authorization Requirement—What It Is & How It Works

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If you have a managed care health insurance plan like a PPO, an HMO, or an EPO, you probably have a prior authorization requirement. If you don’t follow your health plan’s prior authorization rules, you could be on the hook for hundreds or even thousands of dollars you didn’t expect to have to pay.

Prior authorization requirements can be difficult to understand; even if you follow all of the rules, you might still have to pay for services you thought your health insurance was going to pay for.

Here’s what you need to know to avoid nasty financial surprises.

What Exactly Is a Prior Authorization Requirement?

A prior authorization requirement, also known as a pre-authorization requirement, is a clause in your health insurance policy that says you must get permission from your health insurance company before you receive certain health care services or certain prescription drugs. If you fail to get the service or drug authorized first, your health plan can deny the claim. You could be stuck paying the bill yourself if you don’t get prior authorization for a service that requires it.

Why Do Health Insurers Require Prior Authorization?

Your health insurance company uses a prior authorization requirement as a way of keeping health care costs in check. It wants to make sure that:

  • The service or drug you’re requesting is truly medically necessary.
  • The service or drug follows up-to-date recommendations for the medical problem you’re dealing with.
  • The drug is the most economical treatment option available for your condition. For example, Drug C (cheap) and Drug E (expensive) both treat your condition. If your doctor prescribes Drug E, your health plan may want to know why Drug C won’t work just as well. If you can show that Drug E is a better option, it may be pre-authorized. If there’s no medical reason why Drug E was chosen over the cheaper Drug C, your health plan may refuse to authorize Drug E.
  • The service isn’t being duplicated. This is a concern when multiple specialists are involved in your care. For example, your lung doctor may order a chest CT scan, not realizing that, just two weeks ago, you had a chest CT ordered by your cancer doctor. In this case, your insurer won’t pre-authorize the second scan until it makes sure that your lung doctor has seen the scan you had two weeks ago and believes an additional scan is necessary.
  • An ongoing or recurrent service is actually helping you. For example, if you’ve been having physical therapy for three months and you’re requesting authorization for another three months, is the physical therapy actually helping? If you’re making slow, measurable progress, the additional three months may well be pre-authorized. If you’re not making any progress at all, or if the PT is actually making you feel worse, your health plan might not authorize any further PT sessions until it speaks with your physician to better understand why he or she thinks another three months of PT will help you.

    In effect, a pre-authorization requirement is way of rationing health care. Your health plan is rationing paid access to expensive drugs and services, making sure the only people who get these drugs or services are the people for whom the drug or service is appropriate.

    How To Know Which Services Have a Prior Authorization Requirement

    Which health care services have a prior authorization requirement can be found on your health plan’s website or in the literature you got from your health plan when you enrolled. Additionally, you may call your health plan directly and ask if a service you’re considering requires prior authorization.

    Your pharmacy will be able to tell you if a drug you’ve been prescribed requires prior authorization. Or, you may be able to find this information on your health plan’s drug formulary. For example, a formulary may indicate that a drug requires prior authorization by placing “PA”, an asterisk, or another indicator beside the drug name in the formulary listing.

    You should have a high index of suspicion that a health care service or drug needs prior authorization if it falls into one of these categories:

    • It’s very expensive (think surgical procedures, invasive cardiac procedures, hospitalization, and specialty drugs.)
    • It’s an imaging study like an MRI or CT scan.
    • It’s a frequently abused item or service.
    • It’s a service or drug that has multiple uses, some of which are medically necessary, and some of which aren’t. For example, Botox can be used for both medical and cosmetic reasons. Your health plan may require prior authorization for it as a means to ensure that it doesn’t pay for Botox prescribed for cosmetic purposes, but does pay for Botox used to treat a debilitating medical condition.

    How To Get Prior Authorization

    Your physician’s office will usually take care of getting prior authorization for a health care service or drug that requires it. However, don’t just assume this will happen automatically. If your physician’s office doesn’t get the necessary prior authorization, you’re the one who will be left paying the bill, not the doctor’s office.

    When you need a drug or health care service that requires prior authorization, ask the prescribing physician if his or her office is going to get the required prior authorization. Then, before you actually get the service, make sure it was successfully pre-authorized.

    If your physician’s office doesn’t get the pre-authorization, you can do it yourself, but you’ll need a bit of health care savvy. You can call your health insurance company yourself and request pre-authorization for a drug or service. Depending on what you’re trying to get pre-authorized, your health plan will probably want to know the following information:

    • Your demographic information and health plan number.
    • The prescribing physician’s name and business information.
    • Your diagnosis, including the ICD-9 or ICD-10 code that describes your diagnosis.
    • The CPT code for the test, service, or procedure you’re requesting prior authorization for.
    • Why you need the test, service, or drug. For example, what is your physician looking for in this test? What is he or she trying to treat with this drug? Or, what is the goal of the service he or she is recommending?
    • In some cases, what types of treatments you’ve tried for this problem in the recent past.
    • In some cases, what physical exam findings, imaging findings, or lab results support your request.

    If you have a bit of health care savvy, you may be able to handle a simple prior authorization request yourself. If you feel a bit lost, it might help to get copies of the office records for your last few pertinent office visits and any lab or X-Ray results. Also, ask your physician’s office staff for the ICD-9 or ICD-10 code for your diagnosis, and for the CPT code for the test or procedure you need. If you get either of these wrong, it could result in a denial or could invalidate any pre-authorization you get.

    Next, call your health plan and speak with the pre-authorization reviewer. If you aren’t able to answer all of her questions, tell her that you have copies of your most recent office visit records. She may ask you to fax those records so she can get the clinical information she needs. I this doesn’t provide the information the reviewer needs, she may contact the prescribing physician’s office directly to try to obtain the clinical information she needs to process your request.

    Sometimes a drug or service can be pre-authorized within a few hours. Other times, it can take days. In bad cases, it may take weeks, especially if there is a communication problem between your physician’s office and your health plan, if you have to provide additional information, or if the initial request was denied and you have to appeal the decision.

    How To Get a Prior Authorization Requests Approved

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