The growth of health-maintenance organizations as a primary payer of covered health services has introduced the ideas of pre-authorization and pre-certification into the language of health insurance coverage. These two practices attempt to limit unnecessary spending by requiring the payer to agree that a service is medically necessary before a claim will be paid.
A pre-authorization requirement means that the insurance company will not pay for a service unless the provider (a physician or hospital, usually) gets permission to provide the service. Sometimes this permission is to ensure that a patient has benefit dollars remaining (e.g., a payer may limit a patient to 12 chiropractor visits in a calendar year), other times it is to ensure that a particular kind of service is eligible for payment under the patient's contract. Authorization can be granted retroactively--for example, a patient or hospital may have a 24-hour window to notify a payer after receiving emergency care.
A pre-certification requirement means that a payer must review the medical necessity of a proposed service and provide a certification number before a claim will be paid. This is often true with elective surgeries--a physician or nurse with the payer must review a physician's order and the medical record to agree that a proposed procedure is medically appropriate.
In general, a provider will contact the payer to obtain the necessary approvals. This is transmitted in the form of an authorization or certification number, which is attached to a claim. Usually, the patient is not involved in the process.
Denial of Coverage
If the provider fails to obtain the necessary financial clearance before providing services, then the payer can deny some or all of the claim. In most cases, the patient is not financially liable for the difference. The provider usually has the right, within a contract with the payer or under state insurance law, to appeal the denial through several levels including an administrative law judge.
If a patient fails to provide accurate or timely information to the payer or provider about her insurance coverage or medical condition, the patient can be held liable for any charges incurred by the provider or improperly reimbursed by the payer. Sometimes, the payer will stipulate that the patient has a partial financial benefit--for example, that an elective plastic surgery is covered at 80 percent, with the remaining 20 percent payable by the patient.