CMS proposes certain payers implement electronic prior authorization systems by 2026

The Biden administration released a proposal which, if finalized, would mandate Medicare Advantage (MA), Medicaid managed care, Affordable Care Act (ACA) plans and state Medicaid agencies implement electronic prior authorization systems by 2026. 

The proposed rule, released Tuesday by the Centers for Medicare & Medicaid Services (CMS), will require payers and states to streamline prior authorization processes and improve the electronic exchange of health data by 2026. It also contains incentives for hospitals and physicians to adopt electronic prior authorization.

“The prior authorization and interoperability proposals we are announcing today would streamline the prior authorization process and promote healthcare data sharing to improve the care experience across providers, patients and caregivers,” CMS Administrator Chiquita Brooks-LaSure said in a statement. 

It is the revised version of a Trump administration rule originally finalized in late 2020 but withdrawn after concerns about costs and a short deadline. That rule only applied to Medicaid managed care, the Children’s Health Insurance Program and ACA plans, while the new version would apply also to MA plans. 

Prior authorization is a cost containment tool used by insurers in which providers seek approval for certain drugs and services. Physicians have long complained that the amount of prior authorization requests has ballooned in recent years, causing undue administrative hardships for practices. 

Starting Jan. 1, 2026, the impacted payers must build and maintain a Fast Healthcare Interoperability Resources (FHIR) application programming interface that can ensure electronic prior authorization, according to a fact sheet on the rule.

This requirement applies to MA, ACA qualified health plans as well as state Medicaid and Children’s Health Insurance Program programs. Medicaid managed care plans are also affected. 

The FHIR API must help identify whether a prior authorization request is required and “facilitate the exchange of prior authorization requests and decisions” from the provider’s electronic health records or practice management system.

Payers would have to include a specific reason that a prior authorization request is denied. The payer must also decide on a request within 72 hours if it is urgent. The goal is to ease long wait times for responses that some providers have said could take weeks to get. A payer will have seven days to turn around a request for a non-urgent service or item.

CMS is not proposing payers must use implementation guides for the installation of APIs, which was a requirement in the 2020 rule. The agency conceded that while the guides will “play a critical role in supporting interoperability, we are not ready to propose them as a requirement,” the fact sheet said.

However, the agency does want payers to publicly report certain prior authorization metrics by posting them on the payer’s website. This requirement goes into effect on March 31, 2026.

If finalized, the rule would also create a new electronic prior authorization measure in the Merit-based Incentive Payment System to entice adoption by clinicians and hospitals of such technology.

CMS issued several requests for more information to get feedback on how to improve the electronic exchange of Medicare fee-for-service information as well as how to accelerate the adoption of standards to collect and send social risk factor data. This is part of a larger effort by the agency to address gaps in health equity.

Initial reactions from provider groups were positive, as groups have been hoping CMS will take action on the issue. 

“An alarming number of medical groups report completing prior authorization requests via paper forms, over the phone, or through varying proprietary online payer portals,” said Anders Gilberg, senior vice president of government affairs for the Medical Group Management Association, in a statement. “The onerous methods of completing these requests, coupled with the increasing volume is unsustainable.”

Some payer groups have also praised the rule. The Better Medicare Alliance, an advocacy group that pushes for Medicare Advantage policy, said the rule "complements our goals of protecting prior authorization’s essential function in coordinating safe, effective, high-value care," according to a statement.

The proposed rule comes as Congress could weigh in on the issue before the end of the year. The House overwhelmingly passed back in September the Improving Seniors' Timely Access to Care Act, which mandates electronic prior authorization for MA plans and requires quick approval times for routinely approved prior authorization requests. 

The legislation has been in the Senate but has widespread bipartisan support.