Prior Authorization Reform Efforts Underway

May 6, 2024

High Hopes for Improved Patient Experiences and Less Paperwork

Prior authorization has long been a significant and controversial issue in the healthcare industry. For years, patients and healthcare providers across the country have become ever more frustrated by payers’ increased use of prior authorization to determine coverage before a treatment, test or medication can be furnished. Evidence and data provided by industry leaders have routinely demonstrated the harm patients suffer due to avoidable prior authorization delays and denials, along with the excessive administrative burdens placed on providers that limit face-to-face time with their patients.

As payers continue to expand the medical services requiring prior authorization, responses across the healthcare system—including licensing entities, legislatures, and regulators—have been slow to install checks and balances to prevent unnecessary care delays and improper denials. Recently, however, concerns about these practices are gathering sufficient support that reform efforts are achieving actionable results.

States are setting a positive trend by passing laws restricting or reforming prior authorization practices, and other government entities are following suit. In the first four months of 2024, 30 states have introduced legislation to address patients’ and providers’ concerns, demonstrating ongoing scrutiny and interest in change. On a national level, the Centers for Medicare and Medicaid Services (CMS) implemented final regulations providing baseline requirements for payer timeliness in responding to requests, necessary information that must be shared about denials, and enforcement activities.

While these actions do not fully alleviate the burdens faced by patients and providers, there is good reason for optimism that governments may finally be cracking down on bad faith payer behavior in prior authorization.

How Does Prior Authorization Harm Patients and Providers?

Health insurance payers ostensibly use prior authorization to combat fraud, waste and abuse related to insurance payments. The concept was originally designed to monitor the use of brand-new treatments for effectiveness before making permanent coverage determinations, but now is routinely used with little-to-no transparency about requirements or why coverage may be denied. Patients and providers express frustration that medically necessary and evidence-based care is often delayed or not covered due to opaque payer practices.

One major frustration is the amount of time it takes a payer to adjudicate prior authorization requests. Payers utilizing prior authorization and their technology vendors openly acknowledge that their systems can process determinations almost instantaneously, yet do not notify patients or their healthcare providers of the outcome in a timely manner.

Even more egregiously, a prior authorization approval may not always result in coverage of a medically necessary course of treatment. Some payers may retroactively revoke a prior authorization approval, even after the approved service has been performed and a claim has been submitted.

Studies have repeatedly demonstrated that the prior authorization process has a negative impact on patients and providers. Patients are at a higher risk of negative clinical outcomes while waiting for payer authorization, which may delay medically necessary services, deter patients from seeking care and lead to abandonment of a recommended course of treatment. Providers increasingly spend significant time—up to two business days per week—on prior authorization administrative tasks, preventing them from spending time with patients and driving up the costs of healthcare while contributing to provider burnout.

While patient and provider advocates continue to raise concerns with the existing prior authorization process, oversight organizations are finding payer noncompliance with current rules and requirements. For example, an investigation by the Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) found that Medicare Advantage payers failed to meet Medicare guidelines in 87% of prior authorization denials.

With overwhelming evidence of the harm caused by certain prior authorization practices and ongoing noncompliance, governments are moving to protect patients, alleviate burdens, and penalize bad actors.

State Prior Authorization Reforms

Many states are actively implementing prior authorization reforms. Ranging from stricter response requirements from payers to more transparency on the services which require prior authorization, these laws address many of the biggest impediments to providing patients with timely, quality care while also reducing the administrative burdens faced by providers:

  • New Jersey passed a reform law earlier this year addressing exorbitant delays and exacerbated health issues caused by onerous prior authorization processes. The Ensuring Transparency in Prior Authorization Act requires New Jersey insurers to make prior authorization determinations within three days, or 24 hours for urgent requests, instead of the historical standard of 14 days.
  • Washington D.C.’s Prior Authorization Reform Amendment Act of 2023 went into effect in 2024 and is already benefiting D.C. patients. The Act’s reforms protect patients from lengthy delays in care by requiring insurers to honor prior authorization decisions from a previous insurer for 60 days, ensure an approval’s validity for at least one year from the date the enrollee receives notice of the approval, and only requiring prior authorization for a covered service based on a medical determination that a different care plan is necessary.
  • Mississippi passed the Mississippi Prior Authorization Reform Act, effective July 1, 2024. Notably, the law aims to improve transparency in prior authorization by making requirements, restrictions, and written clinical review criteria publicly available on payer websites. Other improvements include a 60 days’ prior notice to implement new requirements or amendments and annual statistics on prior authorization approvals and denials.
  • Illinois continues to debate eliminating prior authorization entirely for Medicaid behavioral health services. The state previously passed meaningful reforms effective 2022 through the Prior Authorization Reform Act. Under the Act, health insurers are required to maintain and electronically publish a list of all services requiring prior authorization, information about the effective and termination dates of prior authorization approvals, and clinical review criteria.

Federal Prior Authorization Action

Due to repeated government investigations and reports on the excesses of prior authorization, CMS recently issued final regulations for Interoperability and Prior Authorization covering a variety of topics applicable to Medicare Advantage plans, managed Medicaid payers, and private plans on the health exchanges. Starting in 2026, payers will be subjected to several new federal prior authorization regulations, including:

  • Faster Turnaround Times – Medicare Advantage and managed Medicaid payers will now have seven days to review standard prior authorization requests and 72 hours for expedited requests, down from the current 14-day timeline. Part of this change was due to HHS’ findings that longer delays led to higher rates of patients abandoning care. This change is not applicable to federal exchange plans.
  • Status Updates – For the first time, payers will be required to respond to status requests within 24 hours.
  • Denial Information – Prior authorization denials will have to include the payer’s reasoning as part of the response to the provider. The lack of information about payer denials is a significant administrative burden, as providers often include more documentation than may be necessary in a request and face challenges appealing a decision where the reasoning is unknown. Even without the payer’s reasoning, providers successfully appeal denials and obtain reimbursement 82% of the time, suggesting overuse of denials and an opportunity to prevent appeals burdens.
  • Improved Transparency – Information about prior authorization practices will be publicly available, including denial and appeal rate metrics, representing a significant transparency improvement.
  • Better Enforcement – CMS confirmed that payers will be subject to financial penalties for violating regulatory requirements.

In addition to the above changes, starting in 2027, payers will be required to create and maintain data exchanges with providers, patients, and payers to facilitate the electronic transmission of health information, including information necessary for prior authorization requests, should offering both faster turnaround times and fewer operational burdens.

These ongoing reform and oversight efforts represent a growing understanding of problems related to prior authorization and positive developments to update and improve existing practices.

R1 Supports Policies Reducing Patient Harm and Removing Obstacles to Care

R1 supports its clients in their provision of quality patient care and streamlining administrative processes. The R1 Regulatory Affairs & Regulatory Compliance team provided a formal comment to assist CMS’ implementation of prior authorization reforms. The comment identified specific regulatory opportunities to minimize negative impacts on patients and providers. CMS incorporated R1’s feedback, including our recommendations for faster prior authorization turnaround times and imposing penalties against noncompliant payers.

R1 understands the challenges our clients experience navigating prior authorization and adjusting to regulatory changes. R1 advocates for patients, healthcare providers and health systems by participating in federal rulemaking. Our advocacy is backed by data-driven arguments and intentional recommendations designed to ensure changes to the regulatory landscape meet the needs of patients and clients. In this increasingly complex regulatory environment, R1 is proud to be a leading advocate for policies that align with our mission: to make healthcare work better for all.

The R1 Regulatory Team provides a wealth of CMS news and information.
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Key Takeaways

  • Prior authorization drains provider resources and impedes quality care delivery.
  • Several states are implementing prior authorization reforms to ease patient and provider challenges.
  • CMS has shortened prior authorization turnaround times for Medicare Advantage plans and Medicaid managed care, and created status update and medical necessity transparency requirements, though further reform is essential for optimal care experiences.
  • R1 monitors legislative and regulatory changes at the federal and state levels to keep clients informed of pertinent updates; the Regulatory Affairs & Regulatory Compliance team provides analysis and actionable insights to ensure R1 and our clients are prepared.

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