UnitedHealth, CVS Among Major Insurers To Fast-Track Prior Authorizations: Will It Cut Profits Even More?

Leading health insurers announced on Monday that they have agreed to a set of measures aimed at connecting patients to care faster and reducing paperwork for providers.

What To Know: According to CNBC, several major U.S. health insurers — including CVS Health Corp. (NYSE:CVS), UnitedHealth Group Inc. (NYSE:UNH) and Elevance Health, Inc. (NYSE:ELV) — will voluntarily speed up and simplify the prior authorization process, which often causes delays and frustrations for patients and healthcare providers. 

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These changes, coordinated through the industry group AHIP, will apply to commercial insurance as well as some Medicare and Medicaid plans, potentially benefiting 257 million Americans.

Key steps include:

• Setting a common standard for submitting electronic prior authorization requests by 2027.
• By that time, at least 80% of electronic requests with all required documents will receive real-time responses.
• Reducing the number of services that require prior authorization by 2026.
• Streamlining processes to lessen the administrative burden on doctors and hospitals, many of whom still use paper forms.

Why It Matters: The insurers acknowledged that while these changes could increase patients' use of care, possibly affecting profits, they are necessary to improve the healthcare system. 

Healthcare stocks are already underperforming the broader market by the widest margin since 2008, as investors favor technology and AI companies. 

The Healthcare Select Sector SPDR Fund (NYSE:XLV) now trades at its lowest value relative to the S&P 500 in over a decade — a 40% drop from 2015 levels.

History shows that such deep undervaluation in healthcare often leads to strong rebounds, as seen after similar slumps in 2001 and 2008. Major companies like UnitedHealth, Eli Lilly and Merck have all posted steep declines this year.

Despite recent struggles, analysts are optimistic: 59 out of 60 healthcare companies in XLV have 12-month price targets above current prices, with an average expected upside of 17%. 

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