Prior authorization rules don’t apply to employer-based health insurance

Centers for Medicare and Medicaid Services put forth a new set of rules to curb private insurance's use of prior authorization. These new rules will go into effect in 2026 and will impact care for the 105 million Americans who receive insurance through Medicare, Medicaid and individual plans bought on the Affordable Care Act marketplace. But the prior authorization rules will not affect the largest number of Americans who have health insurance – the 158 million who receive insurance from their employer.

Erik Wissig is chief operating officer of SureCo, which offers an administration platform for individual coverage health reimbursement arrangements. He told InsuranceNewsNet two factors are behind CMS’s decision to exempt employer-based coverage from the prior authorization rules.

“First, the regulations lean on the federally funded programs and are aligned with where taxpayer money is being spent, so they are moving in a direction toward what the federal government wants to achieve,” he said.

“But in addition to that, we likely have a cost question when it comes to employer-based health programs,” he continued. “In our eyes, the rules on prior authorization come down to a few things that are trying to achieve clarity and transparency, and then also drive accountability. The rules specify 72-hour turnarounds for prior authorization decisions and make sure insurers list specific reasons for denial of prior authorization. These benefit a situation where the individual has the ability to choose their insurance carrier. In the individual market, you can go out and compare between carriers and pick a different one. In the employer market, you have less choice – if any – of a carrier.”

It is challenging for an employer to implement a similar requirement surrounding prior authorization in a workplace-based health plan, Wissig said.

“The employer must either directly or indirectly manage to these regulations, which then means they need resources and that likely increases costs,” he said.

“Another thing is that prior authorization regulations would put employers in an adversarial position with workers if the benefits the employer offers don’t fit their workers’ needs.”

Wissig said he believes the movement to greater transparency in health insurance “and the spirit of what it looks to accomplish is fantastic.”

“I think that providing clarity and accountability is good for consumers and allows them to make their own choices when those choices are available.”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on X @INNsusan.

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].