Prior Authorization
Prior authorization is the process through which an insurer reviews and approves certain medical treatments, procedures, or prescription drugs before they are performed or dispensed. It ensures that the recommended care is medically necessary, appropriate, and covered under the policy before expenses are incurred. Prior authorization helps manage costs and ensures the use of safe, evidence-based treatments that align with clinical guidelines.
How It Works
Prior authorization is a process by which private payers, such as insurers or pharmacy benefit managers, agree to reimburse a prescribed medication on the condition of satisfactory medical evidence from the patient and their physician, according to criteria established by the payer. It is a series of administrative steps in the claims process decided by the group benefits insurer that must be followed before reimbursement for a claim will be considered, after which the patient is advised whether the claim is approved, usually by mail or phone. An insurer may require prior authorization either because the cost of the drug prescribed is relatively high or because the drug has a high rate of use. It is an insurer's response to managing access to and costs for high-cost specialty drugs, ensuring the medication prescribed is medically necessary and cost effective, meaning there are no suitable lower-cost alternatives or all lower-cost alternatives have already been explored. Once a claim is received, the payer's adjudicators must manually review the submission to determine eligibility and request any further information by mail, which can delay decisions, particularly when additional information is required. Prior authorization is also used by public drug plans funded by provinces, where it is usually referred to as special authorization.
Example:
Suppose a Canadian on a group benefits plan is prescribed an expensive biologic medication for rheumatoid arthritis. Before the prescription can be filled and reimbursed, the insurer requires prior authorization: the physician submits a claim form along with supporting medical records showing the treatment is medically necessary and that lower-cost alternatives have been considered. The patient should wait for written or phone confirmation of approval before filling the prescription, since claims submitted without authorization may be denied.
What to Watch For:
In Canada, prior authorization requirements vary between public and private payers, and programs such as Ontario's Drug Benefit Exceptional Access Program publish detailed submission requirements for physicians to help streamline the process. For some treatments, common standards exist: the Canadian Life and Health Insurance Association and the Canadian Rheumatology Association established a national standard of common, clinically-based criteria that private insurers adhere to when providing access to biologic drugs for adult rheumatoid arthritis patients in private plans. Because manual review can delay decisions when additional information is required, submit complete medical documentation up front, and wait for confirmation that the claim is approved before filling a prescription or proceeding with treatment.
