Understanding Prior Authorization Denials in Health Insurance
Health insurance policies are supposed to pay for necessary medical care, but they often include requirements that can stand in the way of timely treatment. One such requirement is prior authorization — a process in which the insurance company must approve certain medical services in advance. A denial of prior authorization can be frustrating, even frightening, especially when the procedure in question is urgently needed. Below we explain what prior authorization is, why insurers deny it, and what options patients may have in response. If you believe your insurance claim has been wrongfully denied or unreasonably delayed in violation of the law, contact Gianelli & Morris in Los Angeles to speak with a skilled and experienced California insurance bad faith lawyer.
What Is Prior Authorization?
Prior authorization (also known as preauthorization or precertification) is a requirement by many health insurance plans that policyholders obtain approval before receiving certain medical treatments, procedures, medications, or services. Insurance companies use this process to determine whether the proposed treatment is medically necessary and covered under the plan.
Not every service requires prior authorization. Generally, it’s reserved for higher-cost procedures, newer or less common treatments, and medications that have less expensive alternatives. Common examples include:
- Advanced imaging like MRIs or CT scans
- Inpatient hospital admissions
- Certain surgeries or specialty treatments
- Brand-name or specialty prescription drugs
Prior authorization isn’t a guarantee that the insurance will ultimately pay for the service — it’s simply a preliminary approval that the insurer deems the procedure likely to be covered under the terms of the policy.
Your Provider May Not Handle Preauthorization Automatically
Patients often assume that their doctor or healthcare provider will handle all insurance paperwork, including prior authorizations. And in many cases, medical providers do initiate the preauthorization request. However, it’s important to understand that it is ultimately the patient’s responsibility to ensure that any required preauthorization is obtained.
Insurance companies view prior authorization as a contract obligation, not a courtesy. If your plan requires it and it wasn’t obtained, the insurer can deny coverage even after the procedure is completed. This can leave patients with the full cost of a medical service that might have been covered had prior approval been secured.
That’s why it’s critical to check with your insurance provider or have your medical provider confirm whether a specific treatment requires preauthorization before going forward with care.
Why Are Prior Authorizations Denied?
There are many reasons an insurance company may deny a prior authorization request. Some of the most common include:
1. Lack of Medical Necessity
Insurance plans typically only cover procedures deemed “medically necessary.” If the insurer believes there isn’t sufficient clinical evidence to support the need for the proposed treatment or believes a less costly alternative would suffice, they may deny the request.
2. Incorrect or Incomplete Documentation
Missing paperwork, incorrect coding, or lack of detail in the submission can all lead to a denial. Insurers often require specific information, such as medical records, test results, and a detailed explanation of why the requested service is needed.
3. Out-of-Network Providers
Some plans limit coverage to in-network doctors and facilities. If a procedure is requested through an out-of-network provider, the insurer may deny the authorization based on lack of coverage.
4. Plan Exclusions or Limitations
The requested treatment may fall under a category that the insurance plan does not cover, either because it is considered experimental, investigational, or cosmetic, or because there are annual or lifetime limits that have already been reached.
5. Failure to Follow Prior Authorization Procedures
If the provider or patient did not follow the insurer’s preauthorization rules — for example, by proceeding with treatment before approval — the insurer can issue a denial based purely on procedural grounds.
What Can You Do After a Prior Authorization Denial?
If your prior authorization request is denied, you don’t necessarily have to accept that decision as final. Insurance companies are required to provide a reason for the denial and outline your appeal rights. Here are some general steps that may be available:
1. Review the Denial Letter Carefully
Start by reading the explanation of benefits or denial letter you receive. It should state the reason for the denial and explain how to request a review. Sometimes the denial is based on a misunderstanding, missing information, or a coding error that can be corrected quickly.
2. Talk to Your Doctor
Your doctor or provider may be able to supply additional medical justification or clarify why the proposed treatment is necessary. Many medical offices have staff familiar with the appeals process and may help resubmit the request with added documentation.
3. Submit an Appeal
Most health insurance plans allow for both internal and external appeals. An internal appeal asks the insurer to reconsider its decision, while an external review involves an independent third party. Keep in mind that strict deadlines usually apply, and the appeal must be supported by appropriate medical evidence. Rules and procedures vary by insurance company and depend in large part on what type of policy you have (e.g., employer-sponsored versus private).
Again, it’s important to recognize that this is a general overview and not a substitute for legal advice or a guarantee of success. The appeal process can vary widely depending on your insurer, your policy terms, and state or federal laws.
Prior Authorization and Your Insurance Contract
While it may seem unfair that you need to jump through hoops to access medical care, the requirement for prior authorization is generally part of your insurance contract. When you signed up for your health plan, whether through your employer or an individual marketplace, you agreed to the plan’s terms, including any prior authorization requirements.
That means the burden falls on the policyholder (or someone acting on their behalf) to ensure that all necessary steps are taken before treatment. Failing to obtain required preapproval, even unintentionally, can give the insurer grounds to deny your claim. Courts often side with the insurer in these situations, even when the medical need is clear, because the legal question centers on whether the contractual conditions for coverage were met.
What If You Believe the Denial Was in Bad Faith?
In California, policyholders whose health insurance claims are denied in bad faith may have legal remedies available, but only if the policy is not governed by the federal Employee Retirement Income Security Act (ERISA). ERISA typically applies to employer-sponsored plans offered by private companies and preempts state law remedies like bad faith damages. However, public employees, religious organization employees, and individual policyholders often fall outside of ERISA and may pursue claims under California law.
If your insurer wrongfully denies a preauthorization request without valid justification, delays its response unreasonably, or fails to follow its own procedures, it may be acting in bad faith. For instance, the insurer may decide a procedure is not medically necessary without reviewing the patient’s case, or they may deem a procedure investigational or experimental when it has been performed many times in leading hospitals and published in quality medical journals. In such cases, policyholders may be able to seek damages beyond the value of the original claim, including:
- Compensatory damages for medical costs, lost income, or financial hardship
- Emotional distress damages where appropriate
- Punitive damages if the insurer acted with malice, fraud, or oppression
Because bad faith claims are highly fact-specific and depend on whether ERISA applies, it’s best to consult with an experienced California insurance attorney if you believe your insurer has treated you unfairly.
Know Your Rights, Know Your Responsibilities: Contact Gianelli & Morris Today
The prior authorization process can be confusing and even overwhelming, especially when your health is at stake. While insurance companies often use it to manage costs, they also owe a duty to review requests fairly and in good faith. Patients should be aware that:
- It is your responsibility to verify whether prior authorization is required
- A denial does not mean the end of the road; appeals are possible
- In some cases, legal remedies may be available for wrongful denials
If you’re struggling with a prior authorization denial and unsure of your rights, speaking with a knowledgeable insurance lawyer can help you understand your options and protect your access to necessary care. In California, contact Gianelli & Morris for a free consultation to review your situation and find out how we can help.
