Health care coverage: prior authorizations.

The bill text was reformatted from the official chaptered document layout (with page numbers, 'Ch. 408' headers, and formal legislative styling) to a web page display format that includes site navigation elements such as quick search, bill information links, and version history dropdowns.

The threshold rate for identifying 'most frequently approved' services is now explicitly stated as 90 percent in the operative text of both Section 1367.025(c)(1) (Health and Safety Code) and Section 10133.52(c)(1) (Insurance Code), rather than being described only as a cap that 'shall not exceed 90 percent.' The language also clarifies that 'approved' may include modified requests for threshold calculation purposes.

Subsection (k)(3) of Section 1367.025, which stated 'This section applies only to covered health care services ordered or prescribed by in-network providers,' was deleted. This removes the explicit statutory limitation tying the prior authorization elimination to in-network provider-ordered services.

The exemption allowing plans to continue requiring prior authorization for services from noncontracting providers (Section 1367.025(d)(5)) was expanded to read 'an out-of-network or noncontracting provider,' adding out-of-network providers as a separate category eligible for the exemption.

The interagency consultation requirement in Section 1367.025(i)(2) was expanded. The Department of Managed Health Care must now consult with the Department of Insurance not only before issuing instructions but also before publishing the list of covered health care services for which prior authorization is prohibited, with the stated purpose of ensuring consistency to the extent practical.

Header changed from enrolled bill format (Senate/Assembly passage dates, Secretary signatures, Governor receipt line) to chaptered format (STATE OF CALIFORNIA AUTHENTICATED ELECTRONIC LEGAL MATERIAL, CHAPTER 408, approved by Governor October 6, 2025).

Page layout and pagination changed from the enrolled bill's narrow-column format (page numbers starting at 93) to the chaptered bill's wider format (page numbers starting at 92).

Replaced the automatic prior authorization exemption (triggered when a plan approved 90% or more of requests) with a regulatory process: plans report data by December 2026, the department evaluates and publishes a list of exempted services by July 2027, and plans must stop requiring prior authorization for listed services by no later than January 1, 2028.

Added a petition process allowing plans to request the department authorize reinstatement of prior authorization for an entire service if lack of prior authorization has caused a demonstrable increase in cost or decrease in quality of care. The department must decide within 60 days.

Added a delegation restriction: plans cannot delegate the requirements of this section to a delegated provider, pharmacy benefit manager, or other entity without negotiating a new contract provision, which is considered a material change.

Added specific exemptions allowing prior authorization to still be imposed on: tier 3 or 4 outpatient prescription drugs, drugs or devices used off-label (different from FDA-approved use), experimental or investigational services, novel applications of existing therapy or technology, and services delivered by noncontracting providers.

Added exclusions: the law does not apply to specialized health care service plans (except for essential health benefits), Medi-Cal managed care plan contracts with DHCS, and only applies to services ordered or prescribed by in-network providers.

Changed the bill title from 'to add Section' to 'to add and repeal Section' to reflect the new sunset/repeal provisions.

Added a provider-specific reinstatement mechanism allowing plans to reinstate prior authorization for a specific provider based on clear and convincing evidence of fraudulent activity or a pattern of clinically inappropriate care causing patient harm or excessive resource use.

Added payment protection: plans and insurers cannot deny or reduce contracted or agreed-upon payment for a covered service exempted from prior authorization unless the provider failed to substantially perform or supply the service.

Added a sunset provision repealing both new sections on January 1, 2034. Also added a requirement that the department publish an impact report no later than four years after the cessation date.

Added authority for the department to contract with consultants (with conflict-of-interest provisions) to assist with implementation, exempt from certain state procurement rules. Also added authority to implement via all-plan letters or bulletins without formal regulatory action.

Expanded the definition of 'covered health care service' to include 'drug' and 'supply' in addition to the previous 'item, product, procedure, treatment, or service.'

Removed the automatic one-year prohibition on prior authorization for covered services where a plan approved 90% or more of requests in the prior calendar year. Also removed the requirement for plans to post a list of exempted services on their websites by March 15 each year. This eliminates the self-executing exemption trigger and makes all exemptions dependent on the department's evaluation and publication process.

Broadened the noncontracting provider exception from services 'delivered, furnished, or dispensed by a noncontracting provider' to services 'requested, ordered, prescribed, delivered, furnished, or dispensed by a noncontracting provider,' allowing plans to maintain prior authorization when a noncontracting provider initiates the service request.

Added a requirement that data regarding modifications be reported separately from approvals in both the Health and Safety Code (Section 1367.025) and Insurance Code (Section 10133.52) reporting provisions, giving regulators more granular data.

Clarified in both code sections that the threshold rate for identifying 'most frequently approved' services may include modified requests in addition to approvals, at the department's discretion. This broadens the pool of services that could qualify for exemption from prior authorization.

Third-party entities that health care service plans or health insurers contract with for prior authorization are now directly covered by the prohibition, closing a potential loophole where plans could outsource prior authorization to avoid compliance.

The prohibition now covers both 'prior authorization' and 'prior notification,' broadening the types of pre-service requirements that can be restricted when approval rates exceed 90 percent.

A new exclusion was added: the exemption does not apply to a covered health care service that was not subject to prior authorization in the prior calendar year, including services previously exempted under this section. This prevents plans from being permanently barred from imposing prior authorization on newly added or previously exempted services.

A new public reporting requirement mandates that both health care service plans and health insurers post on their websites by March 15 each year: (1) a list of all covered services subject to prior authorization during the prior calendar year, and (2) the approval rate for each such service.

A new provision clarifies that a covered health care service exempted from prior authorization under this bill constitutes a service 'authorized' by the plan or insurer for purposes of existing code sections (Section 1371.8 for plans, Section 796.04 for insurers), ensuring exempted services are treated as pre-approved.

'Covered health care service' is now explicitly defined as any health care item, product, procedure, treatment, or service covered by a plan contract or insurance policy.

The definition of 'prior authorization' was changed from requiring an enrollee or provider to 'notify' the plan/insurer before a service is provided, to requiring them to 'obtain approval' from the plan/insurer before a service is provided, making the definition more precise about the approval requirement.

References to contract documents were made more specific: 'plan contract documents' became 'health care service plan contract documents issued to enrollees' and 'policy documents' became 'insurance policy documents issued to insureds.'

A new sentence was added to both Section 1(a) (health care service plans) and Section 2(a) (health insurers) stating that the prior authorization exemption 'shall apply to in-network contracted providers.' This limits the exemption so it does not cover out-of-network providers.

The approval rate calculation was narrowed. The old version counted requests that were 'approved or modified by the plan at final disposition, including upon appeal' in the numerator. The new version counts only requests that were 'approved during the prior calendar year.' This removes modified requests and appeal outcomes from the favorable count, making it harder to reach the 90% threshold needed to exempt a service.

In the definition of 'prior authorization,' the phrase 'notify the health care service plan' (or 'health insurer') was changed to 'obtain approval from the health care service plan' (or 'health insurer'). This clarifies that prior authorization requires actual approval, not merely notification.