Understanding Preauthorization in Health Insurance

What is Preauthorization and How Does it Work?

Pre-authorization refers to the process of obtaining prior approval from your health insurance company for a medical service, procedure, or treatment before it is performed. The purpose of preauthorization is to ensure that the medical service is covered by your insurance and to determine the cost-sharing responsibilities of you and your insurance company and to control costs. Many times insurance companies will revert to the treating hospital and outline typical and customary costs for the specific procedure and ask the hopsital to lower the cost to meet the expected expense and thus reducing medical inflation and the ever increasing pressure to increase medical premiums.

For example, if you need to undergo a complex medical procedure, such as a surgery or a diagnostic test, your doctor may need to get preauthorization from your insurance company before scheduling the procedure. The preauthorization process involves your doctor submitting detailed information about the procedure, including its medical necessity, expected outcome, and cost. Based on this information, your insurance company will determine whether to approve or deny the preauthorization request. If approved, the preauthorization will outline the terms and conditions of coverage, including the cost-sharing responsibilities and any limits or restrictions.

Preauthorization helps you to avoid unexpected medical bills and ensures that you have a clear understanding of your insurance coverage before a medical service is performed.