Prior authorization targeted by more and more states

While Congress appears stalled with its legislative proposals to streamline prior authorizations, many states have surged ahead and imposed tighter rules on health insurance companies.

According to a National Conference of State Legislatures database, 23 states enacted more than 43 bills related to prior authorization in the last few years, with 18 enacted so far in 2024 alone. The list doesn't appear to be comprehensive, however, and some of those new laws are narrowly focused.

The American Medical Association, which opposes restrictive prior authorization polices, reported last week that 10 states — Colorado, Illinois, Maine, Maryland, Minnesota, Mississippi, Oklahoma, Vermont, Virginia and Wyoming — have approved broad prior authorization bills it supports. The new Illinois, Minnesota and Virginia laws are not yet in the National Conference of State Legislatures database.

The use of prior authorizations, created to discourage unnecessary and costly care, have surged in recent years, to the consternation of providers and patients.

Prior authorizations in Medicare Advantage alone jumped from 30.3 million in 2020 to 46.2 million in 2022, the healthcare research institution KFF reported this month. In December, the AMA surveyed doctors and found that 94% reported delays caused by precertification requirements and 19% said delays had caused hospitalizations.

Related: Less than half of patients challenge claim denials: report

“Prior authorization is a vital tool to ensure patients receive safe, evidence-based care, and to reduce low-value and inappropriate services so that coverage is as affordable as possible," a spokesperson for the health insurance trade group AHIP said in a statement. "Health insurance plans are always working to further simplify and improve this important process and encourage provider partners to do the same.”

Although insurers such as UnitedHealth Group and Cigna have eased prior authorization requirements for certain services, complaints from providers and patients continue.

The Centers for Medicare and Medicaid Services has noticed, and finalized a rule in January that requires speedier reviews of prior authorization requests under Medicare, Medicaid, the Children's Health Insurance Program and the health insurance exchanges. The agency is considering further steps.

Congress has proposed bipartisan legislation to enshrine such rules into law and codify CMS' authority to pursue additional restrictions. Lawmakers from both parties also proposed a bill to curb the use of artificial intelligence in care approvals. The prognosis for those bills passing is highly uncertain.

Those measures also focus primarily on federal programs, and states seem to be tired of waiting in a trend that has only accelerated since earlier in the year. State legislatures are increasingly passing bills that focus on the parts of the market states regulate, including small-group plans, Medicaid and the individual insurance market.

Legislation the AMA has highlighted generally includes time limits for preapprovals and appeals, and various levels of transparency. More narrowly focused bills often target specific procedures and drugs for exemption from prior authorization, such as substance use disorder treatment, various types of preventive care and cancer medications.

MedChi, the Maryland State Medical Society, was a leading advocate for a broad prior authorizations measure that passed this year. CEO Gene Ransom argued that both people and legislators are fed up with insurance companies abusing prior authorizations.

"The fundamental issue is that prior authorization is being used by insurance companies to shift costs onto patients and onto practitioners," Ransom said. "All it does is create more administrative burden, denies patients medications and treatments they need, increases complexity in the system, and increases the cost of healthcare."

Similar to many of the bills the AMA touts, the Maryland law requires electronic notifications, time limits for coverage decisions, and transparency provisions designed to enable providers to track requests and know who to contact to contest denials. The state also prohibits prior authorizations and reauthorizations under certain circumstances, particularly when drugs for chronic conditions are involved.

The lead sponsor, Delegate Bonnie Cullison (D), said the Maryland General Assembly worked on these measures in response to growing complaints from constituents, especially about limits on prescription medicines.

"Having access to the appropriate pharmaceutical drugs or treatment is one of the biggest issues," she said.

Cullison said her own doctor, who works in a large practice, told her that it employed 24 people just to deal with prior authorizations. "It shows the depth of the problem," the legislator said.

Maryland tried to balance demands from patients and providers with the need for some degree of utilization management to prevent healthcare spending from spiking and insurance premiums from rising, Cullison said. Earlier versions of the bill were more restrictive on insurers, pharmacy benefit managers and group health plan sponsors, she said.

"We really had to get all of them to the table and talk about what each one's interests were, and how do we make this right for patients," Cullison said.

Yet Maryland and other states can only affect about one-fifth of their health insurance markets because the federal government has jurisdiction over large-group health plans like those employers and labor unions offer, which cover almost half of the population. At present, no one in Congress has proposed sweeping limits on prior authorizations.

"I really wish the federal government would begin to take more responsibility," Cullison said.

These state laws may influence insurer behavior that they can't directly govern, however. Insurance companies may relax prior authorization requirements for federally regulated plans in states with stricter laws for other forms of insurance so their policies are consistent, Ransom said.

"It's easier for them to just have the same rules across the board, so we do get some shadow benefit from it. But it's not required," said Ransom. "If the plans really want it, they could have different rules."