People across the country are facing increasing numbers of treatment denials from insurers, even after their insurers have approved these treatments for extended periods. Shalina Chatlani reports for Medical Express on how some states are addressing these prior authorization denials that are undermining patients’ continuity of care and causing them serious hardship. Meanwhile, Congress has been unwilling to act in meaningful ways.
One patient suffering from chronic pain had been getting monthly infusions for pain relief. Then, Medicaid refused to cover these infusions. After many months, the corporate insurer administering Medicaid benefits decided to overrule the patient’s treating physician and deem the treatment medically unnecessary.
Prior authorization denials keep health care spending down. They also enrich the insurers that contract to deliver Medicare and Medicaid services as well as coverage for working people. They are generally paid a fix rate upfront. What they don’t spend, they are largely able to keep for themselves, so they have an incentive to deny care or delay care. It helps to maximize their profits.
Insurers leave patients without needed treatments, often to the detriment of their health and sometimes their lives. States have been stepping in to reduce the number of prior authorization delays and denials. Nine states have laws in place now to protect patients.
New Jersey addresses insurer delays of care by requiring insurers to make determinations as to whether care is covered within 72 hours of a request. In Texas, doctors whose requests to provide care are approved 90 percent of the time receive a “gold card” that eliminates their need to seek prior authorization. But, to date, only three percent of doctors in Texas have gold cards.
Washington has a law that ensures insurers make swift prior authorization determinations. Michigan ensures that insurers use only prior authorization processes that are peer-reviewed and approved. Arizona is considering a law that would require insurers to honor their own, or another insurer’s prior authorization determination if someone switched insurers, within 90 days of the determination. But, it would not apply to Medicaid patients.
What’s insane is that our federal government effectively trusts insurers to implement prior authorization rules that are evidence-based and appropriate, with little oversight to ensure that is the case, even though mountains of evidence indicate that it is not. Moreover, the Centers for Medicare and Medicaid Services (CMS), which oversees Medicare and Medicaid, has little ability to hold insurers accountable when they violate prior authorization regulations.
A new CMS rule is intended to speed up insurer prior authorization decisions for medical services. It goes into effect in 2026. But, it has no meaningful enforcement mechanism. As well, inexplicably, it does not apply to insurer determinations as to whether a drug is covered.
State laws, for the most part, only apply to private health insurance that is state-regulated. Consequently, people in ERISA plans, who work for companies that self-fund their health insurance, are not protected by state laws. These laws also generally do not protect people with Medicaid.
One recent study found that one in five people with cancer are denied care their treating physicians recommend. The American Medical Association found that patients often experience “serious adverse event(s)” as a result of prior authorization processes.
Even when states are able to detect violations by insurers and hold them accountable, the penalties generally are so small as not to be a deterrent for the large insurers. One expert suggested holding insurance company medical directors accountable for wrongful prior authorization determinations; medical directors could be sued for malpractice. Oklahoma is considering a law that would do that.
Here’s more from Just Care:
- Bill in Congress to address burdensome Medicare Advantage prior authorization requirements will be of little help
- Medicare Advantage plans denied two million prior authorization requests in 2021
- How prior authorization requirements in Medicare Advantage could threaten your health
- Prior authorization in Medicare Advantage harms patients, sometimes severely
- Prior authorization: How dangerous is it?
I was once at a health policy conference with legislators and executive branch officials from several states and some Canadian provinces, and some guests from Great Britain. Several of the Americans were talking about problems dealing with ERISA. One of the Britons asked, “What is ‘Erisa’? Was that one of your hurricanes?” A fair question.
ERISA is the 1974 federal Employee Retirement Income Security Act. Among other things, it prohibits (preempts) states from enacting laws “relating to” employment benefits. However, it allows states to regulate “the business of insurance,” including health insurance.
New York has extensive laws and regulations governing the business of health insurance. including setting premiums, mandating coverage of a long list of benefits, etc. Most people who have private health insurance get it through their job. Under ERISA, New York can regulate that coverage because we are regulating what insurance companies sell.
But there’s a catch. About 60% of people who have non-government health coverage actually don’t have health insurance. They actually are covered by an employer-sponsored “self-insured” plan.
With insurance, you pay a premium, and the insurer is obligated to pay all the claims you file under the policy. The insurance company “bears the risk.” An insurance company has to have enough customers (its “risk pool”) so the premiums from the ones who file few or no claims are enough to cover the claims of people who file high claims.
With “self-insurance,” instead of paying a premium, the employer (sometimes jointly with a union and the employees) pays an “administrator” (often an insurance company) for actual claims paid. To work, a “self-insured” plan must have enough “covered lives” (large enough risk pool) so a handful of high-cost claims does not bankrupt the plan. For the employee, all the paperwork has the insurance company name on it, and it looks and feels mostly like insurance, but it’s not “insurance.”
What this means is that New York’s laws governing health insurance do not apply to the health coverage that the majority of New Yorkers with non-government health coverage actually have. (One exception: New York state government employees are covered by a self-insured plan, but state law requires it to comply with our health insurance laws, thanks to an ERISA provision that exempts public employee benefits from ERISA preemption.)
ERISA and the New York Health Act (NY’s single-payer bill): ERISA’s restrictions do not apply to the New York Health Act, because the coverage would not be an “employment benefit”. It would be a public service, like public schools, the fire department, etc., even though the NYHA tax would be paid in part by employers.