Assigned to FIN AS PASSED BY COW
ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
AMENDED
FACT SHEET FOR H.B. 2175
claims; prior authorization; conduct
(NOW: prior authorization; claims)
Purpose
Effective July 1, 2026, requires a medical director, before a health care insurer may deny
a claim or issue a direct denial of a prior authorization, to individually review any denial that
involves medical necessity and prohibits the medical director from relying solely on
recommendations derived from any other source during the prior authorization denial or claim
denial review.
Background
A prior authorization requirement is a practice implemented by a health care services plan,
or its utilization review agent, in which coverage of a health care service is dependent on an
approval from the health care services plan before the service is performed, received or prescribed.
Medically necessary or medical necessity means covered health care services provided by a
licensed provider acting within the provider's scope of practice in Arizona to prevent or treat
disease, disability or other adverse conditions or their progression or to prolong life. Medically
necessary or medical necessity does not include services that are experimental or investigational
or prescriptions that are prescribed off label (A.R.S. § 20-3401).
For prior authorization requests concerning health care services, the health care services
plan or its utilization review agent must notify the provider of the prior authorization or adverse
determination by the applicable deadline. The notification must state whether the prior
authorization request is approved, denied or incomplete. If the prior authorization request is
denied, the health care services plan or its utilization review agent must state the specific reason
for the denial. A prior authorization request is deemed granted if a health care services plan or its
utilization review agent fails to comply with the deadlines and notification requirements. If a prior
authorization request is denied, the enrollee and the provider may exercise statutory review and
appeal rights (A.R.S. § 20-3404).
Any direct denial of prior authorization of a service requested by a health care provider on
the basis of medical necessity by a health care insurer must be made in writing by a medical
director who holds an active unrestricted allopathic or osteopathic license to practice medicine in
Arizona. The written denial must be signed by the medical director and include an explanation of
why the treatment was denied. The medical director is responsible for all direct denials that are
made on the basis of medical necessity. A health care insurer is not prohibited from consulting
with a licensed physician whose scope of practice may provide the health care insurer with a more
thorough review of the medical necessity (A.R.S. § 20-2510). FACT SHEET – Amended
H.B. 2175
Page 2
A claim is a request for payment for an already provided diagnostic or therapeutic medical
or health care service, benefit or treatment (A.R.S. § 20-2501). Statute prescribes and governs the
health care appeal process for members whose claim for a service has been denied by an insurer.
Each utilization review agent and insurer whose utilization review system includes the power to
affect the direct or indirect denial of requested medical or health care services or claims for medical
or health care services must adopt written utilization review standards, criteria and processes for
the review, reconsideration and appeal of denials (A.R.S. Title 20, Chapter 15, Article 2).
The Joint Legislative Budget Committee (JLBC) fiscal note on H.B. 2175 states that JLBC
cannot estimate the impact in advance (JLBC fiscal note)
Provisions
1. Requires a medical director, before a health care insurer may deny a claim that involves
medical necessity, to individually review the denial.
2. Requires a medical director, before a health care insurer may issue a direct denial of a prior
authorization that involves medical necessity, to individually review the denial.
3. Requires, during each individual review of a prior authorization or claim denial, the medical
director to exercise independent medical judgment and prohibits the medical director from
relying solely on recommendations derived from any other source.
4. Becomes effective on July 1, 2026.
Amendments Adopted by Committee of the Whole
1. Narrows the requirement to individually review insurance claims and prior authorizations
before a health care insurer may issue a denial by requiring a medical director, rather than a
medical director or health care provider, to review any claim or prior authorization that
involves medical necessity, rather than claims and prior authorizations that involve medical
necessity or experimental status or that require the use of medical judgment.
2. Makes technical changes.
Senate Action
FIN 3/17/25 DPA/SE 5-2-0
Prepared by Senate Research
April 17, 2025
MG/ci