Legislators hear report on thin hospital margins, advance prior authorization reform

BOISE — Legislators held a final meeting for the Idaho Health Insurers Working Group Wednesday, Oct. 14, hearing a broad overview on the standing of Idaho hospitals and making recommendations on future legislation, including around prior authorization reform.

The group was initially formed during the legislative interim to respond to a dispute between Regence BlueShield of Idaho and Portneuf Health, a Southeast Idaho hospital. The parties announced in August an agreement had been reached to restore coverage for members.

With the issue resolved, legislators have since turned their attention toward addressing rising healthcare costs observed across the country and hearing about prevailing issues faced by health insurers and providers. For Wednesday’s hearing, the focus was on the latter.

Brian Whitlock, president and CEO of the Idaho Hospital Association, representing the 51 community hospitals in the state, went before members of the committee Wednesday to provide an overview on the trends these hospitals are seeing in claims, denials and other areas compared to the national average.

Using data drawing from 25 of the state’s hospitals, Whitlock presented a report outlining concerns regarding delayed payments and denied claims, which in turn “create significant financial pressure for all hospitals.”

Looking at clean claims — health insurance claims that are accurate and don’t require revising or requests for additional records — Whitlock said the rural hospitals in Idaho averaged 60 days to receive payment while urban hospitals averaged 54 days. Of the claims initially met with denial, 40 percent were eventually paid in full, though 48 percent of rural claim dollars and 39 percent of urban claim dollars remain “entirely unpaid.” Whitlock said the result of extended wait times to resolve claims, or claims going unpaid entirely.

Even with extended wait times for clean claims, Whitlock said the state fared favorably compared to the national average when comparing payer performance for claims over a 12-month span through May of this year.

Idaho’s first pass yield — the percentage of medical claims paid on the first submission without correction or denial — stood at 92.3 percent compared to the national average of 86.6 percent, meaning Idaho’s hospitals were seeing a larger percentage of claims paid correctly the first go-round.

Though Idaho’s 5 percent unpaid claim dollars for the period compared favorably to the national average of 6.9 percent, even a single-digit percentage results in hospitals facing a “cash-flow burden,” Whitlock said.

Citing a report from Becker’s Hospital Review, a hospital industry publication, Whitlock said 43 percent of hospitals across the country were “operating in the red,” up from 33 percent prior to the COVID-19 pandemic. Whitlock said about half of the state’s 26 Medicare-certified critical access hospitals are operating with a margin of below 1 percent, with three holding less than 30 days cash on hand compared to the standard 60 days.

“I would say that 43 percent is probably fairly consistent with what we’re seeing in Idaho today,” he added.

Prior authorization reform

Prior authorization, a permission required by health insurance companies before covering care, was highlighted as one of the key factors contributing to extended wait times and thin margins for healthcare providers.

Whitlock said more than 30 states have enacted legislation or regulatory reforms to curb these burdens, with one of the more recent reforms coming out of Utah through Senate Bill 319, which was signed into law in March and takes effect Jan. 1, 2027.

Key changes enacted through Utah’s law include a 72-hour timeline insurance companies need to respond to when prior authorization is requested and a seven-calendar-day response time for non-urgent requests. The bill also included provisions for chronic condition authorizations, meaning individuals seeking treatment for cancer or other diseases requiring several rounds of treatment will have valid prior authorization for a 12-month span.

Some members of the Idaho Legislature brought forward their own reforms through an Idaho Prior Authorization Reform Act during this year’s session — in House Bill 611 and a revised House Bill 841 — but both bills failed to receive a hearing.

Idaho House Bill 841 would have required health insurers respond to a standard prior authorization request no later than seven calendar days after receiving all necessary information and within two business days for pharmaceutical devices and products. Expedited or urgent prior authorization requests would have needed to be approved within 72 hours if submitted with all necessary information, aligning with the timelines implemented in Utah’s legislation.

It would have also required health insurers to publicly disclose prior authorization requirements and establish standards for appeal, including that the personnel reviewing a given appeal not have been directly involved in making the previous denial.

Committee members concluded the meeting by approving several motions directing draft legislation for the next session, including a new bill reforming prior authorization and a requirement that the Idaho Department of Insurance present annual data on denial rates and prompt claim payment.

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