Pamela White advocates for strong consumer protection regulation of health insurance company use of prior authorizations.

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“Prior Authorization” is a management process used by insurance companies to determine if a prescribed product or service will be covered. About 70% of Canadians hold private health benefit plans paying for prescription drugs, non-hospital treatments (e.g. physiotherapy), and medical devices. To combat the rising costs of speciality drugs, most health care plans have added non-generic drugs to the list of medical treatments and devices requiring insurer pre-authorisation.

The problem for Canadians is that unlike our American neighbours, we lack consumer protection legislation mandating insurer prior authorization decision time limits and public reporting of denial and appeal acceptance rates. As Canadians come to rely increasingly on private insurance to cover their medical costs, it becomes important that we examine carefully the benefits and burdens of prior authorizations.

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Prior authorizations are justified by insurers as a mechanism to control costs and safeguard the healthcare insurance system. US research shows that prior authorizations have curbed physician over-prescribing of anti-psychotics and opioids. Pre-authorisation often also involves step therapy requiring patients to fail first with a less costly treatment before a more expensive one is covered. This approach usually reduces insurers’ drug expenditures, but it carries a high ethical and healthcare price tag.

However, any savings obtained by insurers should be greater than the costs sustained by physicians completing prior authorization requests, and the health system expenditures incurred due to decreased health or poorer patient well-being. US studies reveal prior authorization use results in substantial administrative burden, unnecessary delays in patient care, and care-delivery inequities with rejections being more common for women, racial minorities, those with low education, and for low-income groups. A 2021 KFF report found that 82% of denials resulted in fully or partially overturning the initial prior authorization decision. These findings require that we ask difficult questions about the use of prior authorizations in healthcare decision-making.

Organisations like the American Medical Association (AMA) have repeatedly expressed the view that the healthcare costs of prior authorizations outweigh financial gains for insurers and plan funders, and that the added administrative work drives increased overhead and physician burnout. The 2022 AMA survey found that 82% of physicians considered prior authorizations to contribute to higher health costs including more office visits, use of ineffective therapies that needed to be undertaken to substantiate requirements for the prescribed treatment or drug, and more emergency care visits. Over 35% of physicians hired staff to work exclusively on prior authorizations.

The US legislative response to prior authorizations is instructive. Coming on the heels of over 30 US states proposing to or already legislating insurers’ prior authorization applications, the US federal administration in December 2022 submitted for public review regulatory changes requiring health insurance plans to speed up prior authorization decisions (48 hours for expedited, 5 days for standard prior authorizations) and to provide reasons for denials. The AMA brief to this proposal recommended adoption of a 24-hour turnaround for urgent requests and 48-hours for standard decisions. My examination of the record of response to the US government proposal reveals that that AMA position is not unique. For example, New Jersey is regulating 24-hours for urgent prior authorization decisions, while Michigan requires annual insurer prior authorization reporting of decision and appeal times.

In response to the US legislative actions taken to regulate prior authorizations, it should not be surprising that the Canadian health insurance industry has voiced its concerns. Their key focus however centres on IT solutions. While a coordinated electronic prior authorization approach is certainly needed, this intervention will not address patient and healthcare professionals’ misgivings about healthcare delays, denials that overwhelmingly will be overturned, risks to patient care, and administrative burdens imposed on medical professionals.

Canadians do experience health-threatening consequences when prior authorizations are not handled in a timely manner or when drugs, treatments, and devices are denied. The CBC profiled a recent case of prior authorization delay resulting in emergency treatment of a patient whose chronic condition worsened.

In Canada, Federal and Provincial governments bear the brunt of added cost and time burdens for physicians and decreased health of patients caused by prior authorizations. At a time when Canada has a serious lack of healthcare professionals, insurers are asking them to decide between filling out lengthy forms justifying why a brand name drug or a diabetic insulin pump is required, or whether they can squeeze in a few more patients that day.

Canada, due to our provision of publicly-funded hospital care, has not been as exposed to US-style insurer coverage prior authorization issues. Yet, as Canadians come to rely more heavily on privatized services and supplementary insurance, we need to question the use of prior authorizations and be critical of the rationale advanced by insurers and plan funders. We should demand strong consumer protection legislation regulating prior authorization use, timeliness, and reporting transparency.

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Pamela White is a Senior Lecturer in Law, Kent Law School, University of Kent.