What Is Prior Authorization?
Prior authorization (also called prior approval or precertification) is a process where your insurance company reviews your upcoming medical procedure, treatment, or medication before you receive it. The insurer verifies that your treatment meets their specific coverage criteria and is medically necessary for your condition. If approved, they authorize payment. If denied, you have the right to appeal.
When you or your healthcare provider requests prior authorization, the insurer assigns a prior authorization number that both you and your provider can reference. This number indicates that your claim has been pre-approved, which can speed up payment processing and reduce claim denials.
Prior authorization applies to a wide range of medical services including surgeries, imaging (MRI, CT scans), specialty medications, mental health services, physical therapy, genetic testing, and many procedures considered elective or high-cost. The specific procedures requiring prior auth vary significantly by insurance plan and insurer.
Why Do Insurance Companies Require Prior Authorization?
Insurance companies argue that prior authorization serves three primary purposes: (1) cost control by reducing unnecessary procedures, (2) quality assurance by ensuring appropriate treatment selection, and (3) utilization review to identify overutilization patterns. From an insurer perspective, prior authorization is a utilization management tool that prevents unnecessary spending and ensures clinical appropriateness.
However, critics argue that prior authorization often delays necessary care, shifts costs to patients through denials, and creates administrative burden on healthcare providers who spend significant time on authorization requests instead of patient care. The American Medical Association reports that prior authorization causes treatment delays for approximately 94% of physicians surveyed.
The History of Prior Authorization
Prior authorization emerged in the 1990s as managed care expanded and insurance companies sought ways to control rising healthcare costs. Originally designed for truly experimental or potentially unnecessary procedures, it has expanded dramatically to cover routine, evidence-based treatments. Today, prior authorization affects millions of patients annually and has become a significant source of healthcare delays and denials.
Despite growing evidence that prior authorization delays care without improving outcomes, the practice remains widespread. Some states have passed legislation limiting prior authorization requirements (called "gold carding" laws), but federal reform has been limited.