Prior Authorization May Result in Lower Insurance Payouts and Better Patient Outcomes

Prior authorization is an essential component in the healthcare provider and insurance provider relationship. Melanie Musson, a health insurance expert with InsuranceProviders.com, reminds providers, “Prior authorization can save companies millions, but streamlined processes are critical to a positive experience.”

AHIP recently published research findings that indicate the importance of prior authorization. It can prevent patients from receiving unnecessary tests and treatments. 

In some cases, preauthorization helps insurance providers by eliminating unnecessary claims, and in some of those situations, patients with many types of health insurance plans are protected from potentially harmful treatments.

Pros and Cons

Prior authorization provides a checks and balances system for healthcare providers. Knowing that an insurance provider has to approve a treatment may make healthcare providers think twice about the necessity of tests and treatments.

The more frequently insurance providers pay out claims, and the higher those payouts, the more premiums will increase for policyholders. The same principle applies to all types of insurance, from life insurance to car insurance premiums.

On the other hand, prior authorization can lead to some patients not having access to the care they need, even when their healthcare provider believes it’s essential, because the insurance company denies approval.

Data to Support Prior Authorization

AHIP’s research source found that 60% of lower back MRIs are unnecessary. They claim that physical therapy and other treatments can cost $2,500 less per patient than an MRI. And often, an MRI won’t change the treatment.

They also found that a $400 ultrasound is as effective as a $900 CT scan for abdominal tests. Ultrasounds also keep patients from being exposed to high levels of radiation that can occur with CT scans. 

The research also indicates that prior authorization can lead to more generic medication usage, often resulting in a price reduction of 80% or more.

Lower-cost treatments and testing that provide the same benefits as high-cost treatment will help insurance providers pay less without hurting patient outcomes. As a result, policyholders will face lower premiums when overall insurance spending decreases. 

Insurance Provider Response

Prior authorization has the potential to save insurance providers millions of dollars, but streamlined authorizations are critical for timely treatment and diagnosis. If an insurance provider can’t provide prior authorization quickly, patients may be denied the care they need, and physicians will become frustrated. 

Digital portals may result in better outcomes than faxed requests. Rewarding physicians who have built a proven track record of appropriate requests with automatic prior authorization can help improve the dynamic between insurance and healthcare providers. It will also result in a better customer experience.