States Try to Rein in Health Insurers’ Claim Denials, with Mixed Results
By Shalina Chatlani, Stateline.org
Introduction to the Issue
Health insurance companies are under increasing scrutiny for allegedly using artificial intelligence bots and algorithms to swiftly deny patients routine or lifesaving care — without a human actually reviewing their claims. The high-profile killing late last year of UnitedHealthcare CEO Brian Thompson has focused even more attention on so-called prior authorization, the process by which patients and doctors must ask health insurers to approve medical procedures or drugs before proceeding.
The Impact of Prior Authorization
There had been protests and outrage over the company’s practices for months before Thompson’s death, and UnitedHealthcare has been accused in a class-action lawsuit of using AI to wrongfully deny claims. As more patients and doctors voice their frustrations, states are responding with legislation designed to regulate prior authorization and claims reviews. So far this year, lawmakers in more than a dozen states are considering measures that would, for example, limit the use of AI in reviewing claims; exclude certain prescription medications from prior authorization rules; ensure that emergency mental health care is not delayed for more than 48 hours; and require that insurers’ review boards include licensed physicians, dentists or pharmacists with clinical experience.
The Role of Insurers
Insurers have long required doctors to obtain their approval before they’ll pay for certain drugs, treatments and procedures. They argue it is necessary to rein in health care costs and limit unnecessary services. But many doctors and patients say the practice has gotten out of hand, causing delays and denials of care that are harming and even killing people. In a survey last year by the American Medical Association, 93% of doctors said that insurers’ prior authorization practices delayed “necessary care” for their patients. Twenty-nine percent said such delays had led to a “serious adverse event,” such as hospitalization, permanent injury or death.
The Federal Role
Overview of Federal Involvement
Under the Biden administration, the Federal Trade Commission and the Department of Justice took a firmer hand against health care corporations alleged to be engaging in behavior resulting in limited and more expensive care for patients. The administration also approved rules requiring that beginning in 2026, Medicare and Medicaid plans create a streamlined electronic process for reviewing claims, making decisions more quickly and providing specific reasons for denying care.
Challenges in Holding Insurers Accountable
But it’s difficult to hold insurers accountable, according to Timothy McBride, a health policy analyst and co-director of a program at the Institute for Public Health at Washington University in St. Louis. “Each part of the health care industry — hospitals, pharmaceuticals, insurers — they all have a lot of concentrated power,” McBride said in a phone interview. “And unless somebody actually takes it on directly, it’s going to stay that way. I think the Biden administration tried to take it on, but didn’t make a lot of progress.”
State-Level Efforts
What States Are Doing
Pestaina said states are trying a number of solutions. For example, states such as Arizona, Michigan and Pennsylvania have given their insurance regulators more authority to directly access claims denial information, in order to overturn decisions or potentially enforce state rules. And these efforts have largely had bipartisan support. In Pennsylvania, Republican state Sen. Kristin Phillips-Hill pushed through bipartisan legislation in 2022 to streamline prior authorization practices for state-regulated health plans after hearing numerous complaints from patients and doctors.
Success Stories and Challenges
The legislation created an Independent External Review organization that allows Pennsylvanians to submit an online form to request a review if their insurer denies a service or treatment. If the review organization decides the service should be covered, the insurer must do so. Before then, patients could turn only to a federal review process, which may have been more challenging to navigate and taken more time. The program began in January 2024, and in its first year the Pennsylvania Insurance Department overturned half of 517 denials, which amounted to claims from 259 people. However, some state laws have proven to be less effective than advertised. In 2021, Texas enacted a first-of-its-kind law creating a “gold card” standard, under which physicians whose care recommendations are approved by insurers at least 90% of the time are exempt from the prior authorization process. But as of the end of 2023, only 3% of Texas physicians had earned gold card status, according to the Texas Medical Association.
Conclusion
In conclusion, while states are trying to rein in health insurers’ claim denials, the results are mixed. Some states have seen success with their efforts, while others have faced challenges. It is clear that more needs to be done to address the issue of prior authorization and ensure that patients receive the care they need in a timely manner.
FAQs
What is prior authorization?
Prior authorization is the process by which patients and doctors must ask health insurers to approve medical procedures or drugs before proceeding.
Why are states trying to regulate prior authorization?
States are trying to regulate prior authorization because many doctors and patients say the practice has gotten out of hand, causing delays and denials of care that are harming and even killing people.
What is the federal role in regulating prior authorization?
The federal government has approved rules requiring that beginning in 2026, Medicare and Medicaid plans create a streamlined electronic process for reviewing claims, making decisions more quickly and providing specific reasons for denying care.
What are some solutions that states are trying?
States are trying a number of solutions, including giving their insurance regulators more authority to directly access claims denial information, creating Independent External Review organizations, and exempting certain prescription medications from prior authorization rules.
