Best estimates are that work comp accounts for 1-2% of overall healthcare costs in the US. We are close to a rounding error when compared to private health insurance (28-31%), Medicare (20-23%), Medicaid (18-20%), private pay (10%), and other government programs (5%) like the Veterans Administration, Tricare, and Indian Health Service.
Although we’re small in the big picture, broader healthcare trends almost always find their way into work comp eventually.
Something important is happening in healthcare right now that deserves our attention.
I’ve had a history of identifying and talking about medical issues in work comp before most of the industry recognized them. That includes the over-prescribing of opioids (and crazy cocktail of ancillary medications) in 2003, cognitive behavioral therapy and a biopsychosocial treatment model in 2010, medical use of cannabis in 2014, virtual reality in 2019, psychedelics for PTSD in 2023. My “Spidey senses” are that this macro change might be headed our way.
What is it? A kerfuffle on prior authorizations of medical care.
Aetna, Blue Cross Blue Shield Association, Centene, Cigna, Elevance, Humana, Kaiser Permanente, and UnitedHealth announced efforts to simplify and reduce prior authorization requirements. Actually, in June 2025 a total of 60 major health insurers “Pledge(d) to Improve Prior Authorization.” Their stated goals are to reduce the number of services requiring preauthorization, accelerate approvals, standardize electronic prior authorization, and improve transparency around denials and appeals. None of them, to my knowledge, say that preauthorization is bad practice. Instead, it’s about reducing administrative burdens and modernizing outdated workflows. They’ve already made a couple of mistakes, like leaning too much into AI for auto-denials. For example, ProPublica uncovered in 2023 that 300,000 claims were inappropriately denied by an algorithmic system called PxDx.
However, these changes are not happening without a reason. In my opinion, it is because pressure has been building for years from patients and providers who increasingly see prior authorization as an obstacle to care rather than a safeguard against inappropriate utilization. The December 2024 killing of UnitedHealthcare CEO Brian Thompson brought that frustration into sharp public focus.
According to an AMA survey published on May 13:
- More than one in four physicians (26%) report that prior authorization has led to a serious adverse event, including hospitalization, permanent impairment, or death.
- More than nine in 10 physicians (95%) say prior authorization delays access to necessary care.
- Nearly four in five physicians (79%) report that patients abandon treatment due to authorization challenges.
- More than nine in 10 physicians (92%) say prior authorization negatively affects clinical outcomes.
Whether you agree with that perception or not almost doesn’t matter anymore. Perception drives politics, and politics eventually drives policy.
To be clear, prior authorization did not appear out of nowhere. There were legitimate reasons it was introduced. In workers’ compensation, preauthorization became a necessity to better manage utilization, control costs, encourage evidence-based treatment, and reduce unnecessary or excessive care.
Most states have some combination of treatment guidelines, utilization review requirements, drug formularies, or procedural approval thresholds. In many jurisdictions, entire administrative infrastructures have been built around determining whether a treatment request is “reasonable and necessary.” That created a multitude of vendors who facilitate the process.
From a payer perspective, that structure exists for a reason.
Workers’ compensation is vulnerable to overtreatment, prolonged disability, excessive pharmaceutical utilization, provider shopping, and procedural inflation. We’ve all seen examples where oversight was necessary. Some level of utilization management is probably unavoidable in any system where financial responsibility and treatment decisions are disconnected (i.e. the patient does not pay for their medical care).
However, the public conversation around prior authorization is no longer being framed around “appropriate oversight.” It is increasingly being framed as “denial of care.”
For a quick overview of the vibe around preauthorization, read “Denied by a Bot? Doctors Warn AI Is Blocking Your Medicare Advantage Coverage” by Zack Sigel. Stories like this break trust and create a public backlash.
An injured worker does not differentiate between group health prior authorization and workers’ compensation utilization review. They simply hear stories about delayed MRIs, denied surgeries, postponed medications, or administrative barriers while someone is suffering. Those stories create emotional reactions. Emotional reactions create political momentum. Political momentum creates reform efforts. I was involved in the early 2010s in lobbying for drug formularies and saw firsthand how the political process is driven by facts and emotion, not necessarily in that order.
As large national insurers begin publicly repositioning themselves as reducing preauthorization requirements, that changes expectations across the broader healthcare ecosystem. That could eventually include work comp.
Workers’ compensation already faces a perception problem in some circles. There are people who believe the system is too slow, too adversarial, too administrative, and too focused on cost containment. There are periodic stories that feed the stigma that some cast it as an indictment of the entire industry. I do not agree as I think the system works well a vast majority of the time. But one really bad experience can paint a broad-brush over all stakeholders. In legislative or regulatory environments, perception can sometimes beat reality.
The issue is not if preauthorization is “good” or “bad.” The issue is whether there is proper balance.
Nobody wants medically necessary treatment delayed unnecessarily. But nobody should want a system without guardrails either. Workers’ compensation is unique because treatment decisions directly impact disability duration, return-to-work outcomes, indemnity exposure, reserve adequacy, litigation risk, and long-term claim trajectory.
Ignoring this macro trend, however, would be a mistake.
Healthcare is clearly moving toward simplification and faster decisions facilitated by AI. The expectation of immediate access and reduced administrative burden is becoming culturally normalized.
Workers’ compensation will not be immune to that pressure forever.
It would be a good idea … now … to start evaluating where preauthorization truly adds value versus where it simply adds delay. Finding ways to drive innovation and efficiency to deliver evidence-based medicine will reduce friction.
I’ve heard of networks that treat the highest performing physicians and clinicians – those with quick and full functional recovery – differently than those who don’t have similarly good outcomes. It makes logical sense to reduce or even eliminate preauthorization requirements for medical providers who consistently deliver quality care that focuses on a return to function and work.
We should also better communicate the process to all the system stakeholders. The industry often explains utilization management in technical language while the public experiences it emotionally. That communication gap matters. Transparency as to purpose will help resolve that gap.
If this is news to you, this is your 2-minute warning.
