What does the term “pre-authorization” refer to in insurance processes?

Pre-authorization is a critical step in the insurance process, referring to the approval that must be obtained from an insurance company before a patient undergoes specific medical services. This process ensures that the insurance provider agrees that the proposed procedure is medically necessary and covered under the patient's policy. It helps to manage costs and prevent unnecessary procedures, as healthcare providers must demonstrate that the service meets the insurer's criteria for necessity and appropriate medical care.

This is essential for both the patient and the provider, as it establishes a clear understanding of coverage before the service is performed, which can lead to smoother billing processes and avoid unexpected charges for the patient. Without pre-authorization, there is a risk that the insurance company may deny claims after the service has been rendered, leading to financial burdens for the patient.