What is preauthorization and why might a claim be denied if it is not obtained?

• A. Preauthorization is prior approval from the insurer for certain services; without it, the insurer may deny or reduce coverage if the service is deemed not medically necessary or not covered.
• B. Preauthorization is billing code verification.
• C. Preauthorization is the process of appealing a denied claim.
• D. Preauthorization is the patient's consent to treatment.

Answer: (A)

Preauthorization is the insurer’s prior approval of a planned service before it’s performed. This step helps confirm that the service is medically necessary under the specific plan and that it’s covered. If you skip getting this approval, the insurer may deny or reduce payment because the service might be considered not medically necessary, not covered, or not authorized for that plan, or because it doesn’t meet plan-specific criteria (such as frequency limits or the use of a preferred vendor). In short, preauthorization acts as a green light from the insurer that the service will be reimbursed under the policy, provided all other requirements are met.

Other concepts you might hear about are different parts of the process. Billing code verification is about making sure the correct codes are used, not about obtaining approval for coverage. Appealing a denied claim is what happens after a claim is denied and you’re challenging that decision. The patient’s consent is about agreeing to treatment, not about insurance coverage or reimbursement.