HB2175 - 571R - Senate Fact Sheet

Purpose

Effective July 1, 2026, requires a medical director or health care provider, before a health care insurer may deny a claim or issue a direct denial of a prior authorization, to individually review any denial that involves medical necessity or experimental status or that requires the use of medical judgment and prohibits the director or provider from relying solely on recommendations derived from any other source during the prior authorization denial or claim denial review.

Background

A prior authorization requirement is a practice implemented by a health care services plan, or its utilization review agent, in which coverage of a health care service is dependent on an approval from the health care services plan before the service is performed, received or prescribed. Medically necessary or medical necessity means covered health care services provided by a licensed provider acting within the provider's scope of practice in Arizona to prevent or treat disease, disability or other adverse conditions or their progression or to prolong life. Medically necessary or medical necessity does not include services that are experimental or investigational or prescriptions that are prescribed off label (A.R.S. § 20-3401).

For prior authorization requests concerning health care services, the health care services plan or its utilization review agent must notify the provider of the prior authorization or adverse determination by the applicable deadline. The notification must state whether the prior authorization request is approved, denied or incomplete. If the prior authorization request is denied, the health care services plan or its utilization review agent must state the specific reason for the denial. A prior authorization request is deemed granted if a health care services plan or its utilization review agent fails to comply with the deadlines and notification requirements. If a prior authorization request is denied, the enrollee and the provider may exercise statutory review and appeal rights (A.R.S. § 20-3404).

Any direct denial of prior authorization of a service requested by a health care provider on the basis of medical necessity by a health care insurer must be made in writing by a medical director who holds an active unrestricted allopathic or osteopathic license to practice medicine in Arizona. The written denial must be signed by the medical director and include an explanation of why the treatment was denied. The medical director is responsible for all direct denials that are made on the basis of medical necessity. A health care insurer is not prohibited from consulting with a licensed physician whose scope of practice may provide the health care insurer with a more thorough review of the medical necessity (A.R.S. § 20-2510).

A claim is a request for payment for an already provided diagnostic or therapeutic medical or health care service, benefit or treatment (A.R.S. § 20-2501). Statute prescribes and governs the health care appeal process for members whose claim for a service has been denied by an insurer. Each utilization review agent and insurer whose utilization review system includes the power to affect the direct or indirect denial of requested medical or health care services or claims for medical or health care services must adopt written utilization review standards, criteria and processes for the review, reconsideration and appeal of denials (A.R.S. Title 20, Chapter 15, Article 2).

There is no anticipated fiscal impact to the state General Fund associated with this legislation.

Provisions

1. Requires a medical director or provider, before a health care insurer may deny a claim that involves medical necessity or experimental status or that requires the use of medical judgment, to individually review the denial.

2. Requires a medical director or provider, before a health care insurer may issue a direct denial of a prior authorization that involves medical necessity or experimental status or that requires the use of medical judgment, to individually review the denial.

3. Requires, during each individual review of a prior authorization or claim denial, the medical director or provider to exercise independent medical judgment and prohibits the director or provider from relying solely on recommendations derived from any other source.

4. Becomes effective on July 1, 2026.