Health insurance terminology can be complex, and terms related to prior approval often confuse patients navigating their benefits. Preauthorization and precertification describe an insurer’s requirement to review and approve proposed medical services before they are provided. This process is a utilization management tool used by health plans to confirm that a service is covered under the policy and meets the criteria for appropriate care.
Defining Preauthorization
Preauthorization, also known as prior authorization, is a process where the health plan determines if a specific medical service, procedure, or prescription drug is medically supported and covered under the patient’s plan before the service takes place. This requirement is typically placed on services that are expensive, have alternative treatment options, or have the potential for overuse. The goal of this review is to ensure the proposed treatment aligns with the insurer’s clinical guidelines and is a necessary step in the patient’s care plan.
The responsibility for initiating this review typically falls to the healthcare provider’s office, which submits the request and supporting medical documentation to the payer. Examples of services that commonly require preauthorization include advanced diagnostic imaging, such as CT scans and MRIs, non-emergency or elective surgeries, and specialty medications. This approval step must be completed and confirmed before the patient receives the service to secure the plan’s financial commitment.
Defining Precertification
Precertification also refers to a process of obtaining approval from a payer before a medical service is rendered to the patient. While many insurers use this term interchangeably with preauthorization, it has historically carried a more specific meaning. Precertification often focuses on the approval for a patient’s admission to a facility, such as an inpatient hospital stay or a stay in a rehabilitation center.
The scope of the review traditionally covers the overall facility-based service and sometimes the initial anticipated length of stay. This type of prior approval is common for planned hospital admissions, including elective surgeries that require an overnight stay. The healthcare provider usually handles the submission of clinical details and admission notes to the insurance company.
Core Functional Differences
The distinction between preauthorization and precertification is largely semantic and depends entirely on the specific insurance company providing the coverage. Many large payers use “prior authorization” as the umbrella term for all types of pre-service approval, rendering the terms functionally identical.
When a plan does differentiate, the difference typically lies in the scope of what is being approved. Preauthorization generally targets a specific procedure, test, or drug, focusing on the clinical justification for that single item. Conversely, precertification often refers to the approval of a larger context of care, such as an entire hospital admission or a course of facility-based physical therapy.
In this differentiated usage, precertification verifies that the facility is covered and the stay is warranted. Preauthorization may be simultaneously required for a specific high-cost procedure performed during that stay. Regardless of the term used, both processes share the requirement of seeking and obtaining approval from the payer before the patient receives the proposed medical service.
Consequences of Skipping Approval
Failing to secure the necessary preauthorization or precertification before receiving a service results in significant financial liability for the patient. If the required approval is not on file when the claim is submitted, the insurance company will typically deny payment, even if the service would have otherwise been covered under the plan.
This denial means the patient becomes responsible for the entire cost of the service, as the insurer will not contribute to the bill. The financial exposure can be substantial, especially for high-cost services like hospital admissions or advanced surgeries. Since prior approval is a condition of payment, understanding policy requirements is essential to avoid unexpected out-of-pocket expenses.