What is preauthorization in the context of health insurance?

Preauthorization is a process in health insurance whereby a healthcare provider must obtain approval from the insurance company before proceeding with a specific treatment or procedure. This approval is necessary to ensure that the insurer agrees that the proposed medical service is medically necessary and covered under the patient's policy.

This process helps manage healthcare costs and ensures that patients receive appropriate and necessary treatments without incurring unwanted expenses. By obtaining preauthorization, both the healthcare provider and the patient can confirm that the insurance company will cover the costs associated with the treatment or procedure, reducing the risk of unexpected bills.

In contrast, the other options describe different aspects of health insurance practices. Submitting medical bills after services rendered pertains to the billing process but does not reflect preauthorization. Reviewing claims post-treatment is a different phase in the insurance process and does not involve obtaining prior approval. Lastly, penalties for unnecessary procedures relate to the regulation and management of healthcare costs but do not directly connect to the concept of preauthorization, which is primarily about obtaining prior approval for specific treatments.