Recent legislation proposed by the Biden administration aims to address member dissatisfaction with insurance approval wait times. If passed, this rule will apply to prior authorization requests through government insurance plans and could go into effect starting in 2026 for Medicaid and Medicare members.

Prior Authorizations Associated with Cost Savings

In previous years, some experts have contentiously debated the utility of prior authorizations since they often lead to more paperwork for physicians. However, evidence supports the efficacy of these processes. Research from the American Enterprise Institute showed the prior authorization process reduced expenditures for Medicare’s prescription drug plan (Medicare Part D) by 3%. Considering gross spending for Medicare Part D reached $216 billion in 2021, this has a tremendous fiscal impact. Furthermore, this study found that prior authorization savings were nearly ten times greater than the cost of oversight for the processes.

New Wait Times Are Expected to be Cut in Half

This new regulation would require insurers to reply to prior authorization requests within the following timelines:

  • Urgent prior authorization requests: 72 hours
  • Non-urgent prior authorization requests: 7 calendar days

These projected deliverables would be about 50% quicker than the current turnaround times.

What Else?

As part of this rule, Medicaid and Medicare members would also be entitled to clear, specific reasoning for denials. This would not only take each member’s health literacy level into account but would also simplify the processes for appeals and resubmission requests.

In anticipation of this law, some insurers have noted that they plan to cut down on using prior authorizations altogether. Either way, health care provider network executives should be prepared for the changes this new law may bring about:

  1. Simplify language in all authorization decisions sent to members to increase member comprehension and reduce unnecessary paperwork.
  2. Streamline the appeals and resubmission process by providing clear and direct information on steps members must follow to appeal denials.
  3. Prepare your health care provider network in the event prior authorizations are eliminated altogether. Offer information about possible alternatives that may take its place and any other relevant changes that will impact reimbursement.