Definition of Pre-Approval in Health Insurance

Pre-approval happens when your health insurance company agrees that a medical service you're going to have is medically necessary and covered under the terms of your policy.

But pre-approval, which can also be called prior authorization, preauthorization, or precertification, doesn't mean that your insurer is guaranteeing they'll pay for the service—a claim still has to be submitted after the service is provided, and claims are not guaranteed to be paid.

This article will explain how pre-approval works, what you need to do in order to make sure that you're following your health plan's rules, and what steps you should take if a pre-approval request is denied by your health plan.

If your insurer requires pre-approval for certain services and you obtain one of those services without getting pre-approval, your insurer can deny the claim because of the lack of pre-approval—even if they would otherwise have covered the cost.

This means that you or your healthcare provider must contact your insurer to obtain their approval prior to receiving care. Pre-approval rules vary from one health insurer to another, but in general, the more expensive the service, the more likely it is that the insurer will require pre-approval.

So things like surgery, MRIs, or hospital visits are more likely to need pre-approval than a simple office visit. But if you are in doubt, it's best to contact your insurance company in advance of obtaining any type of health care.

If you're receiving care from an in-network healthcare provider or facility, they will usually be able to complete the pre-approval process on your behalf. But if you're going outside your plan's network (and assuming your plan does cover some of the cost of out-of-network care; many plans do not), you may have to organize the pre-approval process yourself.

In either situation, it's best to double-check with your insurance plan prior to receiving care, to make sure that everything related to your pre-approval has been completed as required. You're the one who would ultimately be stuck with the bill if a claim is rejected based on pre-approval not having been obtained.

Also Known As: Precertification or prior authorization.

There are several reasons that a health insurance provider would require pre-approval. They want to ensure that: 

1. The service or drug you’re requesting is truly medically necessary (for example, drugs that are typically used to treat cosmetic conditions may tend to have higher rates of prior authorization requirements, with the insurer needing to make sure that the drug is being prescribed to treat a medical, rather than cosmetic, condition).

2. The service or drug follows up-to-date recommendations for the medical problem you’re dealing with.

3. The procedure or drug is the most economical treatment option available for your condition. For example, Drug C (cheap) and Drug E (expensive) both treat your condition. If your healthcare provider prescribes Drug E, your health plan may want to know why Drug C won’t work just as well. If you and your healthcare provider can show that Drug E is a better option, either in general or for your specific circumstances, it may be pre-authorized. If there’s no medical reason why Drug E was chosen over the cheaper Drug C, your health plan may refuse to authorize Drug E, or may require that you try Drug C first and see if it works. If it doesn't, they would then consider approving Drug E. This try-the-cheaper-drug-first approach is known as step therapy.

4. The service isn’t being duplicated. This is a concern when multiple specialists are involved in your care. For example, your healthcare provider may order a chest CT scan, not realizing that, just two weeks ago, you had a chest CT ordered by your cancer doctor. In this case, your insurer won’t pre-authorize the second scan until it makes sure that your healthcare provider has seen the scan you had two weeks ago and believes an additional scan is necessary.

5. An ongoing or recurrent service is actually helping you. For example, if you’ve been having physical therapy for three months and you’re requesting authorization for another three months, is the physical therapy actually helping? If you’re making slow, measurable progress, the additional three months may well be pre-authorized. If you’re not making any progress at all, or if the PT is actually making you feel worse, your health plan might not authorize any further PT sessions until it speaks with your healthcare provider to better understand why he or she thinks another three months of PT will help you.

Does Medicare Require Pre-Approval?

Original Medicare (Traditional Medicare) generally does not require pre-approval. And Medigap plans, which are used to supplement Original Medicare, also do not require pre-approval as they simply pay their share of the claim after it's been processed by Original Medicare.

But nearly all Medicare Advantage plans require pre-approval for at least some services. And Medicare Part D prescription drug plans often require prior authorization for certain medications. If you have Medicare Advantage or a Part D plan, you'll want to make sure you're following any rules your plan has for pre-approval, as the claim might otherwise be denied.

Does Medicaid Require Pre-Approval?

Fee-for-service Medicaid, provided directly by the state, generally does not require pre-approval. But most people with Medicaid are enrolled in managed care plans administered by private insurers.

Medicaid managed care plans do often require pre-approval for certain services, and regulators have expressed concern that some patients are being denied access to necessary care due to the pre-approval process.

Pre-Approval and Consumer Protections

Pre-approval is an important part of cost control, and is used by most health insurers, including public programs like Medicaid and Medicare.

But there are regulations in place to ensure that health plans address pre-approval requests in a timely manner. Under federal rules (which apply to all non-grandfathered plans), health plans must make pre-approval decisions within 15 days for non-urgent care, and within 72 hours for procedures or services that are considered urgent. Pre-approval cannot be required for emergency care.

And many states have even stronger consumer protections regarding pre-approval rules for health plans. As an example, Kentucky enacted legislation in 2019 that requires insurers to respond to pre-approval requests within 24 hours for urgent medical needs, and within five days for non-urgent situations.

There is also an internal and external appeals process that can be used if a pre-approval request is denied by your health plan. Your doctor or healthcare provider will generally work with you to complete this process, helping to ensure that your health plan has all of the information they need in order to approve the care you need.

However, the American Medical Association has long noted that pre-approval requirements are "burdensome and barriers to the delivery of necessary patient care." In 2018, the AMA joined with several other organizations, including America's Health Insurance Plans (AHIP), to publish a consensus statement regarding reforms to the prior authorization system.

But a survey of healthcare providers conducted in late 2018 found that most of the provisions in the consensus statement had not yet been implemented on a widespread basis at that point.

And according to another more recent AMA statement, this continued to be the case as of late 2022. In 2020, the AMA asked Congress to take action to improve prior authorization transparency and standardization. However, the legislation the AMA supported, H.R.3107, did not advance out of committee in the 2020 legislative session.

Improving the pre-approval process continues to be an issue that the AMA and its healthcare provider members are working to address. There are concerns that pre-approval requirements are burdensome to patients and practitioners, cause disruption to patient care, and aren't always clear-cut (the majority of healthcare providers reported that it was "difficult to determine" whether a given treatment needed prior authorization).

On the other hand, health insurers must have mechanisms to keep spending in check, and eliminating pre-approval requirements altogether could potentially result in run-away costs, particularly for services like imaging and specialty drugs. Stakeholders are working to find a solid middle ground that puts patient care first, but for the time being, pre-approval is very much a part of the US health insurance system.

Summary

Most health plans require pre-approval (also known as prior authorization) for various medical services, although the specifics vary from one plan to another. In general, expensive services are more likely to require pre-approval. Doctors and other healthcare providers are well-versed in the pre-approval process, and can help to ensure that the health plan has all of the necessary details. If a pre-approval request is rejected, the decision can be appealed. But ultimately, a health plan will not pay a claim for a service that requires pre-approval that was not granted.

A Word From Verywell

It's a good idea to double check with your health plan before receiving any non-emergency medical care, just to ensure that you know your plan's pre-approval requirements. If a particular service requires pre-approval and you don't obtain it, the plan can deny the claim even if they would otherwise have paid it. Your doctor can help you take care of all of the details, and many services do not require pre-approval. But checking in with your health plan before receiving medical care—especially if it's expensive care—is always a good idea.