How to stop health insurance denial tactics

Prior authorization for medical care was started in the mid-1980s as a marketing scheme by health insurance companies. I know. I was in the room where it happened when I was an officer of the Health Data Institute , a company that developed managed care tools and techniques.
The companies and agencies that buy commercial health insurance and the Medicaid, Medicare, and Affordable Care Act marketplace programs can stop health insurance practices that delay and deny care to patients by taking three actions: They should demand the abolition of prior approval for medical care and prescriptions; require that insurance company denial rates be posted in all marketing materials; and force speedy and fair denial claim appeals. Insurance companies have lied to their customers about how their practices protect patients and save money. They don’t. Health insurance deny-and-delay practices block access to needed care and shift costs to patients and providers, while increasing insurance company profits.
The insurance companies wanted to show they were “doing something” to help control rapidly rising health care costs. Some insurance companies made money charging extra for “pre-admission certification.” There was no evidence then that prior authorizations for any medical test or procedure would protect patients, improve care quality, or save money. Forty years later, there is still not much evidence they do any good. In fact, they cause harm. About 25 percent of physicians in a recent national survey reported that prior authorization delays led to a patient’s hospitalization, a life-threatening event that required emergency intervention, or permanent disability, birth defect, or death. Some things are too broken to be fixed or reformed. Prior authorization is one of them.
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Problems with prior authorizations are responsible for almost half of all medical claim denials and are the starting point for additional claim denials that increase costs to patients or prevent them from getting needed care. One out of 6 patients and 23 percent of patients with mental illness reported difficulties with a prior authorization in a 2023 Kaiser Family Foundation survey. More than half the patients who reported prior authorization problems also encountered other claim denials such as the inability to get medications ordered by their doctors. Nearly all physicians (95 percent) reported that prior authorizations “somewhat or significantly” increased physician burnout in a recent American Medical Association survey. Eliminating prior authorizations would be a win-win for patients and health care providers, and would probably not raise total health care costs despite the unfounded fears of insurance company actuaries. More timely access to needed care may save more money than delaying or denying it.
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Requiring insurance companies to publish their prior authorization denial rates on all marketing materials and platforms would let patients and plan sponsors know how likely it is that their claim would be paid before they bought the insurance. The Affordable Care Act requires insurance companies to compile denial rates for plans offered on its marketplaces, but the information is not widely available, and the regulations to publish it have not been enforced. There are no similar requirements for commercial, Medicaid, or Medicare plans.
Denying claims is a very effective way for health insurance companies to make money. Only about half of all bill denials are ultimately overturned, resulting in payments to care providers. The process for appealing a denial is so complicated that fewer than 1 percent of patients bother to appeal, and most of them lose in a process that is controlled by insurance companies. Very few patients even know they have a right to an external appeal when the insurance company turns them down. Pharmacy benefit managers, often owned by health insurance companies, increase their profits through prior authorization. Sometimes they pay for only the brand-name drugs the benefit managers get a kickback for promoting. Transparent, speedy, and independent reviews of medical care, prescription, and bill denials can be implemented if the companies and agencies buying insurance tell the insurance companies to do so.
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Ending prior authorization, publishing denial rates, and forcing speedy, fair appeals would eliminate the majority of medical claim denials and delays in care. These changes would increase access to medical services and reduce patients’ anxiety. They would also create an atmosphere for legitimate research into policies that improve patient outcomes, improve quality of care, and prevent wasteful, harmful medical practices.
David L. Rosenbloom is a professor emeritus at Boston University School of Public Health. He served as commissioner of health and hospitals for the city of Boston from 1975 to 1983.