💡 What’s Happening?
Health insurers are responsible for covering and paying for the healthcare needs of covered patients. Hospitals and providers have a responsibility to provide care to patients who need it, when they need it.
So, what happens when providers and hospitals prescribe care, and insurers say “no?”
Insurers control their costs by limiting how much they pay out for care. But when those cost controls become barriers to necessary care, everyone feels the impact. Patients can be left without medically needed care or face unexpected costs, while hospitals absorb uncovered costs, chase payments and fight denials.
That question goes beyond individual claims. Insurers also have significant influence in shaping the laws and regulations governing coverage and payment. This issue follows the money insurers don’t pay, and looks at how hospitals, providers and patients end up footing the difference.
📈 Prior Auth Pioneers
Prior authorization is intended to help health plans determine whether a service is covered and medically appropriate. But prior authorization can delay care, and when the process becomes overly complex, inconsistent or slow, it becomes a significant barrier between patients and their healthcare.
Hospitals devote significant staff time to securing approvals and appealing denials. The American Hospital Association reports that 95% of hospitals and health systems have seen increased staff time spent seeking prior authorization approval – a costly endeavor in both time and resources.
And the appeal process gets plenty of use. A 2026 report from the U.S. Health and Human Services Office of Inspector General found that Medicare Advantage plans overturned 95% of appealed prior authorization denials for skilled nursing facility admissions. That raises the question: given how many denials are ultimately overturned, why do so many patients encounter an unnecessary barrier before an appeal is even filed?
Texas has taken steps to address prior authorization practices. The state’s Gold Card law exempts providers with high approval rates from certain prior authorization requirements, and changes made by the Legislature in 2025 expanded the data considered when determining eligibility.
“Across market segments, insurers denied between 12% and 18% of standard prior authorization requests in 2025. On average, 12% of standard prior authorization requests and 10% of expedited prior authorization requests were denied in Medicare Advantage; 14% of standard requests and 12% of expedited requests were denied in Medicaid managed care; and 18% of standard prior authorization requests and 16% of expedited prior authorization requests were denied in the ACA Marketplace.
Across all markets, the share of standard prior authorization requests that were denied was similar to or slightly higher than the share of expedited prior authorization requests that were denied.”
KFF: Prior Authorization Metrics Provide New Insights into Insurer Practices, but Gaps Remain
“Traci Hurley says watching her husband battle cancer in late 2021 was harrowing. ‘It was heartbreaking, and it was awful,’ she said. ‘I lived in fear every day.’ … Millions of Americans say they are struggling to get medical care: either unable to pay sky-high deductibles, or, like Dan Hurley, denied coverage for tests and treatment by health insurance companies.
…Traci said, ‘Many of his treatments were denied. We had PET scans, we had CT scans denied. We had chemotherapy, we had radiation, we had certain medications that required prior-authorization, and were denied.’ The basis for the insurers’ denials, Traci said, was that they were ‘not medically indicated.’”
CBS News: State of denial: How insurance companies impact health care today
⛰️ Medical Debt Mountain
A patient can faithfully pay for coverage, yet still face thousands of dollars in medical expenses when illness or injury strikes. As THA previously reported, rising premiums, deductibles and copays are leaving some Texans insured on paper but unable to afford care in practice.
Hospitals work to help close that gap. For example, by law, Texas hospitals provide billions of dollars in charity care and other community benefits each year. Because when insurance doesn’t pay, someone still has to.
Hospitals end up paying for care that insurers don’t cover, adding to the overall cost of healthcare while insurers retain the premiums paid for coverage. When insurers delay payments, deny claims or leave patients with coverage gaps and unexpected cost-sharing, the financial consequences don’t disappear; they get absorbed into the system and add to the cost of healthcare for everyone.
“One in three Americans with health coverage through their employer, the Affordable Care Act marketplace or the private market say they have medical debt that they are paying off over time, the Commonwealth Fund, a nonpartisan health policy research group, said in a report on Thursday. …‘The primary reason why these people have debt is about the extent to which their insurance covers their out-of-pocket costs,’ Sara Collins, the study’s lead author [said].”
CBS News: 1 in 3 Americans with health insurance have medical debt, survey finds
“Several policies and insurance market trends make it harder to predict what patients will owe hospitals. On the one hand, the rise in high-deductible health plans means that some patients could face bills of several thousand dollars. Fifty-seven percent of US workers face annual deductibles of $1,000 or more, yet most Americans cannot afford a $1,000 emergency expense.”
Health Affairs: Trends In Patient Cost Sharing For Hospital Care And Implications For Urban And Rural Hospital Revenue
🚧 Regulation Reroute
Healthcare is a complex regulatory environment, and insurers have found ways to structure contracts, coverage and businesses around – and sometimes through – existing rules. At the same time, insurers increasingly point to “mandates” as a source of added cost and regulatory burden.
Many of those mandates exist because policymakers took actions to address problems in the insurance system. Requirements such as automatic coverage for newborns for their first 60 days of life, rather than 30 days, prompt pay protections and prior authorization requirements establish basic protections for patients and providers. Texas’ gold card law, mentioned above, would meet the insurer definition of a “mandate,” and one created in response to the burdens of prior authorization.
That tension shows up at the negotiating table. Insurers shape health plan design and structure contracts around that design, directly impacting reimbursement and, ultimately, whether patients can access a hospital as an in-network provider. Hospitals and other healthcare providers can negotiate their contracts with insurers but have limited influence over health plan design. As such, hospitals must respond to terms largely established by the insurer and are forced to be reactive rather than proactive during contract negotiations.
The issue extends beyond individual contracts. Texas has enacted laws intended to protect patients from payment disputes between insurers and providers, including protections against surprise billing for certain state-regulated plans for out-of-network services. As insurance products, corporate structures and payment arrangements evolve, new and unanticipated gaps in patient protections and negotiations with hospitals can emerge – creating additional ways for insurers to limit what they pay while maintaining the premiums charged to patients.
The concern is straightforward: a law is only as effective as the rules, definitions and enforcement mechanisms surrounding it.
⭐ The problem isn’t simply who pays how much. It’s whether patients and providers are getting what they’re paying for – and whether the rules of the healthcare system make it easier or harder to get the care they need.
📖 Learn More
The Rising Cost of Health Insurance Premiums
