Prior authorization comes under greater scrutiny 

Prior authorization has long been a commonplace part of plan administration, both for controlling costs and ensuring that only medically necessary care is covered. But its increased use over the years has caused many regulators to view it not as a gatekeeper but as a roadblock. State and federal authorities have taken note and are taking action.

That regulatory shift reflects growing concerns — and recent headlines — about how prior authorization affects patients and clinicians. Prior authorization has emerged as the public’s biggest burden when accessing healthcare. Recently proposed federal regulations — if finalized as drafted — aim to improve prior authorization processes in Marketplace plans, Medicare Advantage, and Medicaid/CHIP plans. For doctors, prior authorization is an acute pain point: a 2024 American Medical Association survey estimated the average physician handles 39 prior authorizations per week. Last year, major insurers pledged to simplify the process and reduce volume. An April 2026 analysis found 6.5 million fewer prior authorizations following those commitments, and leading insurers have since announced new prior authorization standards. At the same time, the use of artificial intelligence in prior authorization is increasing, and studies are currently evaluating both the potential benefits and risks of applying AI to this process.

Amid this swirl of activity, here is how states have responded:

Recently enacted legislation

• Alabama. SB 63 regulates AI use in prior authorizations. While the law contains no outright prohibition, insurers must base determinations on a participant’s medical history, unique clinical circumstances, and additional relevant clinical information.
• California. SB 306 requires health insurers and health care service plans — including HMOs — to provide detailed prior authorization reports to the state by December 31, 2026. Services with at least a 90% approval rate will not be subject to prior authorization as of January 1, 2028, except in instances of fraud or clinically inappropriate care.
• Kentucky. HB 176 requires fully insured plans to create an exemption program for prior authorizations for conditions with a high approval rate, known as “gold-carding.” Various parts of the law will take effect in 2027 and 2028.
• New Mexico. Per SB 20, pharmacy benefit managers must comply with prior authorization rules previously applicable only to insurers. For prescription drugs, approval is presumed after three business days (seven days for other determinations). For certain conditions, prior authorization is prohibited. The law will take effect for plan years starting on or after January 1, 2027.
• Rhode Island. Under HB 5120A/SB 168B, a fully insured plan cannot use prior authorization for items, services, and treatments, except prescription drugs, ordered by a primary care provider for three years, starting on October 1, 2025.
• South Dakota. HB 1199, effective on July 1, requires plans to eliminate prior authorization where “requests are routinely approved with such frequency as to demonstrate that the prior authorization requirement does not promote healthcare quality or reduce health care spending.” While the law does not provide a clearly defined rule, insurers’ annual reports must include prior authorizations with at least an 80% approval rate.
• Virginia. HB 481, generally effective July 1, bars insurers from making any adverse determination of a prior authorization for prescription drugs or healthcare services unless approved by a licensed individual.

Pending legislation

Between now and Memorial Day, when most legislatures will adjourn, these states may push forward legislation:

• Minnesota. HF 2500/SF 3984 would prohibit use of an algorithm or AI in prior authorization.
• Missouri. SB 846 would implement gold-carding for services with at least a 90% approval rate.
• New Jersey. AB 249/SB 3123 would implement an outright ban on prior authorization for medical tests, procedures, and prescription drugs.

Keep in mind that ERISA preemption largely stops states from imposing these restrictions on self-funded ERISA plans. Still, this trend bears watching for all stakeholders: patients, plans and other payers, insurers, PBMs, and providers.