New Federal Rule Overhauls Health Insurers' Prior Authorization Processes

A new federal rule requiring health insurers to streamline and disclose more information about their prior authorization processes is being touted by physicians groups who claim it will improve patient care and reduce doctors' administrative burden.

According to a report by Medscape, health insurers participating in federal programs, including Medicare Advantage and Medicaid, must now respond to expedited prior authorization requests within 72 hours and other requests within 7 days under the long-awaited final rule, which was released last month by Centers for Medicare & Medicaid Services (CMS).

According to the report, insurers are required to include their reasons for denying a prior authorization request and will be required to publicly release data on denial and approval rates for medical treatment. The insurers also will be required to provide patients with additional information about their decisions to deny care.

Impacted payers must also implement certain operational provisions, generally beginning January 1, 2026. In response to public comment on the proposed rule, impacted payers have until compliance dates, generally beginning January 1, 2027, to meet the API development and enhancement requirements in this final rule.

“To encourage providers to adopt electronic prior authorization processes, this final rule also adds a new measure for Merit-based Incentive Payment System (MIPS) eligible clinicians under the Promoting Interoperability performance category of MIPS, as well as for eligible hospitals and critical access hospitals (CAHs), under the Medicare Promoting Interoperability Program,” the Centers for Medicare and Medicaid Services said in its report.

In a post on X, formerly known as Twitter, Jesse M. Ehrenfeld, MD, MPH, president of the American Medical Association, called the final rule “a major win” for patients and physicians.

“The AMA commends reforms such as these that prioritize patients’ access to care and reduces administrative burdens for physicians and their staff,” Ehrenfeld said in the post.

In recent years, health insurers have lobbied against increased regulation of prior authorization, arguing that it's needed to rein in healthcare costs and prevent unnecessary treatment.

"We appreciate CMS's announcement of enforcement discretion that will permit plans to use one standard, rather than mixing and matching, to reduce costs and speed implementation," America's Health Insurance Plans, an insurers' lobbying group, in an unsigned statement to Medscape. "However, we must remember that the CMS rule is only half the picture; the Office of the Coordinator for Health Information Technology (ONC) should swiftly require vendors to build electronic prior authorization capabilities into the electronic health record so that providers can do their part, or plans will build a bridge to nowhere."

The rule comes as health insurers have increasingly been criticized for onerous and time-consuming prior authorization procedures that physicians say unfairly delay or deny the medical treatment that their patients need.

With federal legislation to rein in prior authorization overuse at a standstill, 30 states have introduced their own bills to tackle the issue. Lawsuits and regulators have both brought attention to insurers’ increasing use of algorithms and artificial intelligence to reject claims without human review.