Health Insurance Under Fire: Examining Industry Role in Rising Costs and Prior Authorization Challenges

As criticism mounts against health insurance companies for their role in rising costs and administrative burdens, a new analysis from KFF examines whether insurers are primarily responsible for the nation’s healthcare challenges or if they can be part of the solution.

The scrutiny comes amid growing public frustration with insurance practices, particularly prior authorization requirements that delay care and increase costs. According to a 2024 American Medical Association survey of 1,000 practicing physicians, nearly 90% reported that prior authorization leads to higher overall utilization of healthcare resources, with almost half saying this occurs “often” or “always.”

Physicians cited specific consequences: 69% reported ineffective initial treatments due to step-therapy requirements, 68% said prior authorization leads to additional office visits, 42% reported immediate care or emergency department visits and 29% reported hospitalizations. As AMA President Bruce A. Scott, MD, noted, when patients face care delays or abandon necessary treatment, worsening conditions often force them to seek urgent or emergency care, ultimately increasing overall costs.

These delays not only harm patient outcomes but also create financial strain across the system. The AMA survey found that prior authorization “squeezes the pocketbooks of patients, employers, physicians, hospitals and health systems through higher overall use of healthcare resources,” contradicting insurers’ claims that the process saves money.

Beyond prior authorization, broader affordability concerns are intensifying. A December 2025 report noted that people increasingly cannot afford health insurance, with costs for both Obamacare and employer-sponsored plans projected to rise sharply in a country where healthcare is already the most expensive in the developed world. Despite these surging costs, companies and investors profiting from the system are also facing financial strain, as evidenced by UnitedHealth Group’s shares declining 44% from the previous year.

In response to mounting pressure, the health insurance industry has made its most significant public commitment to reform in years. Fifty insurers, including all six publicly traded giants, have pledged to overhaul prior authorization practices affecting 257 million Americans. The initiative, announced three months after the killing of UnitedHealthcare CEO Brian Thompson sparked national scrutiny of industry practices, includes concrete commitments with specific timelines.

Immediate changes slated for implementation by January 2026 include reducing the number of services requiring prior authorization, providing clear patient-friendly explanations for denials with appeals guidance, and honoring existing authorizations for 90 days when patients switch plans mid-treatment. Technology improvements targeted for January 2027 involve standardizing electronic systems, delivering real-time approvals for 80% of electronic requests, and implementing common data submission requirements to reduce administrative burden on providers.

Quality control measures include ensuring all clinical denials are reviewed by medical professionals and creating public accountability through a planned transparency dashboard. The reforms apply across commercial insurance, Medicare Advantage, and Medicaid managed care nationwide.

While the industry’s pledge represents a notable shift, questions remain about whether these changes will meaningfully reduce administrative burdens and costs or simply serve as damage control following increased public scrutiny. The analysis underscores that addressing healthcare’s challenges requires examining both the role insurers play in creating problems and their potential to contribute to solutions through meaningful reform.