Health Insurance 101: What Is Prior Authorization?

In this case… it’ll cost less to ask for permission rather than forgiveness.

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Picture this: You go to the doctor for a certain ailment and they tell you that you’ll either need surgery, medication, or rehabilitation. You’d think that a doctor’s recommendation or prescription would count as getting prior authorization for the treatment… right?

Sadly, this isn’t always the case. In an effort to save money on medical expenses (for both you and the insurer), your insurance company may sometimes require prior approval for certain treatments.

What is prior authorization?

Prior authorization means that a doctor must contact your insurance before providing certain medical treatments. This ensures that the doctor and the insurer agree that the treatment is “medically necessary.” Prior authorization reduces the risk that the insurer will deny the claim, which is the request for payment after you receive medical care.

Your insurance may also call it:

  1. Preauthorization
  2. Prior approval
  3. Precertification

The ultimate goal of prior approval is to cut down on “unnecessary” costs. For example, the insurer may not approve of a more expensive option that they believe is not effective or necessary. This is meant to benefit you as well, since it could theoretically prevent your doctor from prescribing something that wouldn’t help you. It also prevents you from receiving a denied claim.

The downfall is that sometimes you, your doctor, and your insurance company may be in disagreement about what is necessary. After all, your insurance company is not your doctor. In most cases, your doctor is likely the person who will know your healthcare needs best.

Doctors are often familiar with which treatments require prior authorization. Still, it may be helpful to call your insurance rep beforehand to see if prior authorization is required, and if there is a time limit on that approval.

It’s not guaranteed

You’ve gotten preauthorization for a treatment option. You go forward with the treatment. Your doctor submits the claim. It’s a done deal, right?

Alas, getting prior authorization doesn’t guarantee the insurer will approve the claim. For example, you may need new authorization for medication refills or to continue with treatment by proving that it is helping. Another reason the insurer may deny the preauthorized claim is if you did not receive the service within the time limit after approval.

Moral of the story:

Prior authorization helps get everyone on the same page to reduce the risk of you having to foot unexpected medical bills. Learn more here about how to save money on your health insurance.