Prior Authorization: AHIP’s Commitments

Introduction

In August, AHIP, the trade association for health insurance companies representing the industry’s top players, announced that they reached a deal with the White House to reform prior authorization for medical benefits.[1] This announcement has been viewed by some advocates as a step in the right direction for industry-based reform. But questions remain about the insurance industry’s commitment to reforming prior authorization, as well as the practicality and scope of what they have promised. Notably, these commitments appear to exclude pharmaceutical benefits. This brief will focus on three areas. First, it will provide an overview of the current general use and impact of prior authorization in both public and private insurance programs. Second, it will review AHIP’s announced commitments. And finally, it will touch on potential areas of consideration for stakeholders.

Background

What Is Prior Authorization?

Prior authorization is the requirement that a patient and their physician obtain approval from the insurer for a given medical procedure or medicine before the insurer will pay for that specific procedure or medicine. It is a “utilization management” mechanism used by insurers to control costs and ensure appropriate treatment. Medicines and procedures subject to prior authorization run the gamut from medical imaging to surgeries to drugs to lab tests.

Most private payers have prior authorization requirements, including commercial and employer-sponsored plans. Although traditional Medicare only has prior authorization requirements in extremely limited cases, Medicare Advantage plans often do. States and Medicaid managed care organizations are allowed to require prior authorizations as well.

Data on the total number of treatments subject to prior authorization is difficult to come by. One study found that 31.8 percent of Part B services were subject to prior authorization by at least one Medicare Advantage insurer.[2] The same study found that 74 percent of Part B medication use (and 93 percent of medication spending) was subject to prior authorization by at least one Medicare Advantage insurer. A 2023 Milliman analysis of private payers estimates that around 41.2 percent of allowed prescription drug costs are subject to prior authorization in the commercial market.[3]

Data from Medicare Advantage shows that 93.6 percent of prior authorization requests are approved, and 81.7 percent of denials are overturned on appeal.[4] An AHIP survey found that for initial prior authorization denials, 86 percent were the result of incomplete clinical documentation, while 34 percent of final prior authorization denials were due to incomplete clinical documentation.[5]

Savings from Prior Authorization

Prior authorization is one of the primary cost-control tools that insurers have. Analysis by Milliman found that if prior authorization were to be eliminated in the commercial insurance market for a “broad” range of services (defined as 26.3 percent of services), enrollees would see an estimated 4.8 percent increase in monthly premiums.[6] Eliminating prior authorization for a “narrow” range of services (defined as 8.8 percent of services) would increase monthly premiums by an estimated 3.3 percent. Milliman also estimated that due to increased utilization, out-of-pocket expenses for individuals would increase by 2.6 percent for a broad scope of services, or 1.0 percent for a narrower scope of services. All told, Milliman estimated that total premium increases could range from $43 to $63 billion annually if prior authorization were eliminated.

One specific type of prior authorization is known as step therapy. Step therapy requires patients to first try different medications before their medication of first choice is covered. Step therapy is often applied to pharmaceuticals, and in particular expensive specialty drugs. One 2019 review found step therapy for specialty medications reduced insurer costs by between 9 and 11 percent.[7]

Patient and Provider Concerns

A 2023 KFF survey of insured individuals found that 16 percent of all insured adults experienced prior authorization issues in the previous 12 months.[8] This varied by insurance type: 22 percent of those covered under Medicaid, 15 percent with employer-sponsored coverage, and 11 percent of those with Medicare experienced issues with prior authorization. These issues frequently included either delays or denials of care. Of those surveyed, 34 percent with prior authorization issues “were unable to receive medical care or treatment recommended by a medical provider,” while 32 percent experienced “significant delays in receiving medical care or treatment.”  In addition, certain health conditions had higher rates of prior authorization issues. Of those who sought treatment for mental health conditions, 26 percent had prior authorization issues, compared to 13 percent for those who did not seek mental health treatment. For individuals who sought out treatment for diabetes, 23 percent experienced prior authorization issues while only 8 percent of individuals who had not sought treatment for diabetes did. Notably, 26 percent of surveyed individuals who experienced prior authorization issues reported a decline in their health of some degree.

For physicians, prior authorization requirements add paperwork burdens as well as create issues for patient care. A 2024 physician survey by the American Medical Association (AMA) found that physician practices average 43 prior authorizations per physician per week, and that physicians and their staff spend around 12 hours completing prior authorizations each week.[9] Of the physicians surveyed, 87 percent said prior authorization led to higher overall health care utilization, 79 percent said it led to patients paying out-of-pocket for medications, 69 percent reported it led to ineffective initial treatments (due to step therapy or other requirements), and 29 percent reported hospitalizations.

AHIP’s Commitments

AHIP stated that, moving forward, its members—including most major insurance companies—would seek to implement six new reforms to its prior authorization process, including: standardizing electronic prior authorization, reducing the scope of medical claims subject to prior authorization, ensuring continuity of care, enhanced communications and transparency, enabling real-time responses for 80 percent of electronic prior authorization requests, and ensuring medical review of non-approved requests.

These commitments are not legally binding and are the result of political pressure from both the Trump administration as well as patient and provider groups. Whether insurers will follow through on these promises remains to be seen. However, internal industry reforms are almost always preferable to reforms imposed by regulators or policymakers that may not conform to the realities of the insurance market.

Standardizing Electronic Prior Authorization

Different insurers use different prior authorization systems and have different rules for those systems. These differences add time and complexity to the prior authorization process. AHIP members plan to begin using standardized data and submission requirements by January 1, 2027. The largest barrier to this commitment is likely to be the transition time for adoption by providers and plans agreeing on a shared system and set of rules.

Most medical plans do not have fully electronic prior authorization. According to a report by the insurance industry analysis firm Council for Affordable Quality Healthcare, as of 2024 only 35 percent of medical plans have fully electronic prior authorization processes.[10] The rest are either partially electronic or fully manual (using phone, mail, fax, and emails).

Reducing the Scope of Medical Claims Subject to Prior Authorization

Insurers have pledged to “commit to specific reductions to medical prior authorization as appropriate for the local market each plan serves” by January 1, 2026. This commitment has sparked the most interest by patients, providers, and politicians. Given the large number of services subject to prior authorization—according to one study, 48 percent of service utilization in Part B would have required prior authorization by at least one Medicare Advantage insurer—reducing the number of services that require prior authorization is considered a priority by patient and provider groups.[11] However, this is also the area that will most directly impact costs for insurers; the less prior authorization there is, the more their costs (and thus premiums) will increase. As such, many critics are doubtful that the self-assessed measure of “specific reductions…as appropriate for the local market” will yield any significant changes. It is important to highlight that this commitment is for the medical benefit—excluding prescription drugs, where most prior authorization is encountered.

Ensuring Continuity of Care

Starting January 1, 2026, if an enrollee switches plans mid-treatment, insurers have committed to honor existing prior authorizations for benefit-equivalent in-network services for 90 days. Ideally, this will prevent patients who switch plans from experiencing continuity of care issues or delays in care. This will require some significant coordination between competing plans, with little incentive beyond a non-binding commitment to do so.

Enhanced Communication and Transparency for Determinations

Insurers have promised to provide “clear, easy-to-understand explanations of prior authorization determinations,” including guidance for appeals and next steps, starting on January 1, 2026 for fully insured and commercial plans. Insurers claim they need regulatory changes in order to expand this promise to other types of coverage and promise to support those changes. Even if there is more transparency around prior authorization denials, that may not make the denial any easier to reverse.

Expanding Real-Time Responses

Insurers pledged to have at least 80 percent of electronic prior authorization approvals answered in real-time. This pledge involves adopting new technologies that will be part of the commitment to standardization. With the rapid pace of improvements in AI technology, this pledge is achievable and some insurers may have been well on their way already to fulfilling this commitment. However, as noted above, only 35 percent of plans had electronic prior authorization in 2024. This number has grown significantly from 21 percent in 2021. Technology will continue to improve, but achieving this goal in 2027 would still mean only 28 percent of plans will have fully electronic prior authorization.

Ensuring Medical Review of Non-Approved Requests

Insurers have “committed” to continuing to affirm that all non-approved requests (based on clinical reasons) are reviewed by medical professionals. Critics contend that in many cases, these medical professionals are not specialists in the relevant fields.[12]

Considerations Going Forward

While skepticism by patients and providers regarding insurers’ willingness to follow through is reasonable, insurers should be commended for making voluntary commitments to reform prior authorization. Private industry action will be better-informed and far less disruptive and costly than bureaucratic regulation. The most important of these reforms—both politically and financially—will be the reduction in the scope of claims subject to prior authorization.

The following framework is meant to be a tool to help insurers make these important scope reduction decisions. Importantly, this framework should be understood as a guide for payers working in collaboration with patients and providers and is not intended to be a legislative or regulatory framework.

Burden on Patients

Insurers should consider the level of burden on a patient that delays in care will cause. This includes both the severity of symptoms as well as the immediacy of the problem. Conditions with symptoms that incapacitate a patient should be at the forefront of consideration for reduced prior authorization requirements. Conditions that are immediate issues (as opposed to elective surgeries that can be put off for months or years) should also be considered. It should be an imperative to avoid cases where surgeons are called in the middle of surgery for prior authorization, as at least one news report has alleged.[13]

Little-To-No Evidence of Fraud or Abuse

Insurers should factor in conditions that are not particularly prone to fraud or abuse. This is admittedly easier said than done. The “sentinel effect,” whereby the mere existence of a watchman deters crime, is likely happening across various medical conditions and treatments that currently show little evidence of fraud or abuse. However, distinction is possible. Insurers should consider the likelihood and harm of overutilization (e.g., the overprescribing of opioid pain medications prior to legislative reforms in the late 2010s) or game-ability of a condition or service (skin substitute manufacturers taking advantage of Part B payment rules).[14] Insurers should ask if the treatments for a given condition provide a larger financial benefit to the provider relative to their efficacy compared to another treatment.

Consistently High Claims Approvals

Treatments that are consistently and frequently approved are an obvious candidate for reduced prior authorization requirements. There is little reason to have onerous processes for treatments that routinely receive approval. Insurers have already begun to experiment with similar concepts: UnitedHealthcare introduced a Gold Card program in 2024 that would allow providers who receive consistently high approval rates to have reduced prior authorization requirements.[15] Insurers should consider the same for treatments that are routine.

Existing Evidence Base for Treatment

Insurers may also want to consider reducing prior authorization requirements for treatments that are considered “best practices” by the appropriate medical society. These treatments ideally should be shown to be effective for a significant portion of patients and have been long-standing clinical practice. This does not mean that “older is better,” but simply that newer treatments might need a stronger evidence base than older ones.

Inclusion of Pharmaceuticals

Although AHIP excluded pharmacy benefits from its commitments, insurers should consider applying all their prior authorization reforms, and especially their scope-of-claims reductions, to pharmaceutical benefits. Drugs generally face higher rates of prior authorization and are the cause of much of patient and provider frustration (which in turn increases political pressure). Insurers should include patient history of treatments in their considerations as well; for example, if the patient has a documented history of a given drug working, re-approvals for that treatment may not need to be as frequent.

Sample Conditions and Services

The following list of conditions and services is by no means comprehensive and is meant to be illustrative of how insurers could apply this framework:

• Chronic Migraine: This condition frequently causes patients to experience debilitating pain and they are often unable to work or go about daily life. The impact on patient quality of life and the overall economy is significant[16]. Many plans require patients to fail on at least two triptans, a class of older, less-expensive drugs.[17] There is little incentive for overutilization of treatments by patients, as opioids are rarely prescribed for migraine.[18] Migraine specialists report that the vast majority of their patients get approval after meeting the various step therapy and other requirements—in other words, approval is routine, albeit slow.[19] However, we also know that if not effectively treated, migraine disease can worsen or progress. The American Headache Society, the professional society for migraine specialists, recently released a position statement advocating for newer, migraine-specific medications to be used first before having to try anything else. [20]
• Cancer care: The burden on patients is obvious as untreated cancer is lethal. One survey found that 96 percent of physicians said their patients were harmed by prior authorization delays.[21] Approval rates are also around 90 percent, so most people are eventually approved.[22] However, cancer drugs are very expensive and insurers cannot be expected to remove all prior authorization requirements. In addition, specific classes of cancer drugs may be considered “best practice” by oncology societies, but individual responses to those drugs vary widely, and different cancers respond differently to treatment.
• Magnetic Resonance Imaging (MRI): The immediacy of the issue and patient burden varies depending on the severity of the condition being examined. An athlete with a torn ACL does not have the same immediacy issue as someone facing internal bleeding. MRIs have an approval rate of over 94 percent—meaning ultimately most insurers think they are worth it.

Conclusion

Prior authorization is an important tool for insurers to control costs and keep premiums lower than they otherwise would be. However, it is in many cases a significant burden for patients and providers. Reducing this burden increasingly appears to be a political necessity for payers. Insurers should consider using the above framework in making decisions about what services and treatments should see reduced prior authorization requirements. In addition, they should also consider expanding their commitments to include pharmaceutical benefits. Conditions such as people living with migraine, cancer care and MRI fit within the proposed framework for making these decisions and would serve as a strong starting point to illustrate progress.