KFF’s Larry Levitt Examines Criticism of Health Insurers and Their Role in Rising Costs and Prior Authorization Challenges

As the United States grapples with escalating healthcare costs and fragmented access, the role of private health insurance companies has come under intense scrutiny from policymakers, clinicians, and the public alike. A recent JAMA Health Forum column by Larry Levitt of the Kaiser Family Foundation (KFF) critically examines whether insurers are drivers of systemic dysfunction or necessary actors in a complex payment landscape, particularly highlighting their influence on prior authorization requirements and overall cost trajectories.

Key Clinical Takeaways:

• Private insurers administer prior authorization for approximately 40% of all outpatient services, contributing to delays in care that affect an estimated 25 million Americans annually.
• Administrative costs tied to insurance billing and utilization review account for roughly 8% of total U.S. Healthcare expenditures, exceeding $1 trillion in 2024.
• While insurers negotiate lower provider rates, their administrative practices often shift burdens to clinicians and patients, exacerbating burnout and non-adherence to evidence-based treatments.

The core issue lies not in the existence of insurance intermediaries but in how their administrative mechanisms interact with clinical workflows. Prior authorization—a utilization management tool designed to prevent low-value care—has evolved into a pervasive bottleneck. According to a 2023 American Medical Association (AMA) survey, 94% of physicians reported delays in necessary care due to prior authorization, with 33% citing serious adverse events, including hospitalization, as a direct result. These delays disproportionately affect patients with chronic conditions such as rheumatoid arthritis, multiple sclerosis, and oncology diagnoses, where timely initiation of disease-modifying therapies is critical to preventing irreversible morbidity.

From a health economics perspective, insurers argue that prior authorization reduces wasteful spending by discouraging use of high-cost, low-efficacy interventions. While, evidence suggests the savings are often marginal. A 2022 Health Affairs study analyzing Medicare Advantage plans found that prior authorization reduced low-value imaging by only 4.7%, while increasing administrative burden on providers by 16 hours per physician weekly. This inefficiency contributes to the U.S. Spending nearly twice as much per capita on healthcare administration as peer nations like Canada or the United Kingdom, where single-payer systems streamline utilization review.

“The problem isn’t that insurers seek to manage costs—it’s that the current prior authorization system lacks transparency, timeliness, and clinical nuance. We require real-time decision support tools grounded in evidence, not bureaucratic checklists that delay chemotherapy or biologics for autoimmune disease.”

Compounding these challenges is the opacity of insurer formularies and tiered cost-sharing structures, which often steer patients away from clinically appropriate therapies in favor of cheaper alternatives. This practice, known as non-medical switching, has been linked to increased relapse rates in conditions like epilepsy and bipolar disorder. A 2024 longitudinal study in JAMA Neurology tracked 1,200 patients with refractory epilepsy and found that forced switches to non-preferred antiseizure medications increased the risk of breakthrough seizures by 38% over 12 months, even when the substitute was deemed therapeutically equivalent.

Yet insurers are not monolithic actors. Some are pioneering value-based payment models that align reimbursement with outcomes rather than volume. For instance, certain Medicare Advantage plans have implemented bundled payments for joint replacement surgery, reducing 90-day readmission rates by 18% through coordinated post-acute care. These innovations suggest that insurers, when incentivized correctly, can function as catalysts for care coordination rather than mere claims processors.

“We’re seeing a shift where forward-thinking insurers are investing in predictive analytics and care management programs that actually reduce downstream costs by preventing complications—not just denying upfront expenses. The key is aligning financial incentives with long-term patient health.”

For patients navigating this complex landscape, access to knowledgeable specialists who understand both clinical indications and insurance constraints is essential. Rheumatologists, neurologists, and oncologists frequently serve as de facto advocates, helping patients appeal denials and secure exemptions through peer-to-peer reviews. Similarly, healthcare compliance attorneys play a growing role in advising provider networks on how to challenge arbitrary denials under ERISA and state prompt-pay laws, particularly when delays threaten life-saving interventions.

The path forward requires recalibrating the incentives within the insurance model. Policymakers are exploring reforms such as gold-card programs for low-risk providers, real-time adjudication platforms, and stricter timelines for urgent requests—measures that could reduce administrative friction without sacrificing oversight. Until such changes are implemented, clinicians and patients must rely on trusted intermediaries who can bridge the gap between evidence-based care and insurance realities.

the question is not whether health insurance companies belong in the system, but how their design and governance can be reformed to support—not impede—the delivery of timely, effective, and equitable care. As value-based care gains traction and data interoperability improves, there is cautious optimism that insurers can evolve from barriers to care into partners in population health management.

Disclaimer: The information provided in this article is for educational and scientific communication purposes only and does not constitute medical advice. Always consult with a qualified healthcare provider regarding any medical condition, diagnosis, or treatment plan.