States starting to limit payer use of prior authorization? – Healthcare Economist

Recently, I published a paper noting that the risk of using prior authorization and step edits may vary by the disease to which this type of utilization management is applied. States are starting to pass legislation to limit how health insurers can use prior authorization rules.

According to the American Medical Association (AMA), 10 states (Vermont, Minnesota, Wyoming, Colorado, Illinois, Mississippi, Maine, Maryland, Oklahoma and Virginia ) have passed laws to reform health insurer prior authorization laws.

The trend is continuing this year. Just a few weeks ago, Politico wrote:

Within the past few months, states including California, Connecticut, Hawaii, Iowa, New Jersey, North Carolina and North Dakota have either proposed or enacted reforms aimed at simplifying and streamlining prior authorization. And other states, including Illinois, Georgia, Texas, Rhode Island, Minnesota and Florida, have proposed cracking down on the use of artificial intelligence in prior authorization decisions.

Note that state laws don’t impact all health care plans in a state. Medicare is, of course, a federal program. Further, self-insured plans managed by national health insurers are governed by federal rules.

In addition, California’s Physicians Make Decisions Act (SB 1120) “requires the use of AI or any algorithms to be based upon a patient’s medical history and the individual’s clinical situation. A decision can’t be based solely on a group dataset, can’t supplant a clinician’s decision, and must be approved by a human physician.”

Payers are pushing back:

“We feel like our job is to say, ‘Is that the best use of money for our membership?’” Jackie Boyle, senior vice president of external affairs for Mountain Health Co-Op, said of prior authorization. “If we approve something, we are doing it for every patient like them.”

The increased use of prior authorization is getting increased scrutiny around the country.