What does the term "prior authorization" mean in insurance?

The term "prior authorization" specifically refers to a requirement imposed by some insurance plans that necessitates obtaining approval from the insurance provider before certain services, treatments, or medications are covered. This process ensures that the proposed service is deemed medically necessary and meets the payer’s criteria for coverage before any financial responsibility is incurred.

This requirement helps control healthcare costs and ensures appropriate utilization of resources. Prior authorization can apply to a wide range of services, including surgeries, specialist consultations, and certain prescription medications, thereby allowing the insurance company to review and assess the need for those services before they are rendered.

The other options do not accurately reflect the concept of prior authorization; for example, collecting copayments pertains to the patient’s out-of-pocket costs for visits or treatments but does not involve the approval process related to insurance coverage. A type of insurance certificate would refer to documentation confirming a policy’s existence rather than a procedural requirement. Denying claims relates to the rejection of insurance claims after a service is rendered, which is a separate process from obtaining authorization beforehand.