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Significant Amendments to Kentucky’s Health Insurance Utilization Review Laws

During the 2019 Regular Session, the Kentucky General Assembly passed Senate Bill (SB) 54, which goes into effect January 1, 2020. At first blush, these amendments to Kentucky Revised Statute Chapter 304.17A, which governs health benefit plans and health insurers, appear directed at making the prior authorization process less burdensome for providers. However, some of the amendments could have the opposite effect.

Prescription Preauthorizations and E-Prescribing

Section 1 of SB 54 requires Kentucky health insurers and Medicaid MCOs to have an electronic process for providers to request prior authorizations for prescription drugs and devices. Section 1 also makes prior authorizations for “maintenance drugs” good for up to a year when the patient’s condition is within the FDA’s approved use of the drug as a maintenance drug. Non-maintenance drugs, drugs lacking evidence to support 12-month ongoing use, opioids, benzodiazepines, and prescription drugs for patients receiving community-based palliative care are excluded.

Section 2 of the new law amends the list of statutes under KRS 304.17A that also apply Medicaid managed care organizations (MCOs) to include the utilization review statutes governing commercial plans and which have also been amended by SB 54 as discussed below.

Sections 3 and 4 create new restrictions for e-prescribing software. E-prescribing software cannot be designed to interfere with a patient’s choice of pharmacy by steering prescriptions to pre-selected pharmacies. The software can include messaging about a drug to aid a prescriber’s clinical decision-making consistent with current FDA information on the drug, but that information must be updated quarterly. With certain restrictions, the software can be written to give providers access to the drug formularies, copays, and benefits under a patient’s health plan.

Utilization Review

Section 5 of SB 54 adds two new defined terms with implications for the utilization review process. The term health care service is broadly defined to include health care procedures, treatments or services rendered by a provider within the scope of their practice and license and the provision of prescription drugs and home medical equipment. The term medically necessary health care services is defined for the UR purposes as health care services that a provider would render to a patient for… preventing, diagnosing, or treating an illness, injury, disease, or its symptoms in a manner that is: (a) In accordance with generally accepted standards of medical practice; and (b) Clinically appropriate in terms of type, frequency, extent, and duration.

Section 6 amends Kentucky’s version of EMTALA by eliminating the mandate for hospital emergency departments to contact a patient’s primary care provider as quickly as possible. Instead, emergency departments must contact a patient’s PCP “as appropriate” to discuss follow-up and post-stabilization care, basically leaving the decision to notify a patient’s PCP to the discretion of emergency department personnel.

Section 7 redefines the term “prospective review” in that it is no longer limited to pre-certification of a hospital admission or course of treatment. Prospective review now refers to pre-service review of a health care service for medical necessity and includes “prior authorization, step therapy, preadmission review, pretreatment review, utilization management and case management.” Read together, the new definitions of health care service, medically necessary health care services, and prospective review may allow health insurers and Medicaid MCOs to impose prospective review requirements on more services, including outpatient services, non-maintenance prescription drugs and home medical equipment. The only exceptions are births and neonatal intensive care services.

Consequently, instead of reducing the administrative burden of the preauthorization process for physicians and other providers, SB 54 may actually increase that burden depending on how payers choose to apply them to their utilization review process.

Section 8 of SB 54 creates a few new, but not particularly significant, compliance obligations for payers related to prospective review. The Department of Insurance has administratively required payers to publish their UR procedures and prior authorization lists on their websites for some years. Section 8 codifies this requirement, and also mandates that those prior authorization lists include the effective date of a prior authorization requirement for a health care service and the date the requirement will expire (if any).

Section 8 also prohibits payers from denying provider claims for failure to get a preauthorization if the service wasn’t included on the payer’s prior authorization list or the date of service precedes the effective date of the prior authorization requirement. This section also prohibits payers from denying coverage for incidentals and supplies routinely used in preauthorized procedures.

Under Section 9, a physician performing UR for a payer who determines a service is medically unnecessary, experimental, or investigational must be “of the same or similar specialty and sub-specialty, when possible, as the ordering provider.” This amendment is obviously intended to benefit patients and their providers in the prospective review process. And, it may reduce the number of appeals of denied claims a payer receives and the number of those claims that are reversed on external review. However, the phrase “when possible” gives payers room to interpret the new requirement as more optional than mandatory.

Finally, Section 9 of SB 54 shortens the turnaround times for a payer to notify a member and his or her provider of urgent and non-urgent care decisions. The timeframe to give notice of an urgent care decision has been shortened from 48 hours to “within 24 hours” of the insurer’s receipt of the “necessary information” to decide the claim. A payer must give notice of a non-urgent claim determination within 5 days instead of 15. The amendment limits necessary information to the results of a face-to-face clinical evaluation, a second opinion if required and other information the Department of Insurance may decide (presumably by regulation) is needed for a UR decision.

If the payer doesn’t give notice of an urgent or non-urgent care decision within new shorter timeframes, the health care service will be deemed preauthorized, but “subject to review.” What “subject to review” means is unclear given that under KRS § 304.17A-611, a claim cannot be denied on retrospective review if prior approval for the service was obtained from the insurer. Hopefully, the Department of Insurance will issue regulations or guidance to clarify whether a provider risks not getting paid if they perform a service that is deemed preauthorized simply because the insurer/MCO didn’t issue a UR decision timely.

The bottom line is that starting in January 2020, services, prescription drugs and supplies that were not previously subject to prospective review may appear on payer prior authorization lists. It will be important for physicians and other providers to review the 2020 prior authorization lists of the payers and plans they participate with to determine if any services, drugs or supplies they typically provide will require precertification going forward.

Sarah Charles Wright is a healthcare law attorney at Sturgill, Turner, Barker & Moloney, PLLC. She may be reached at 859.255.8581 or This article is intended to be a summary of state and/or federal law and does not constitute legal advice.