SB 306 requires California-regulated health care service plans to report detailed data on services subject to prior authorization and gives the state authority to remove prior-authorization requirements for services that plans or their delegates approve at or above a high-approval threshold. The Department must issue a reporting template, collect plan- and delegate-level data, evaluate approval and modification rates, publish a list of services to exempt from prior authorization, and set a deadline by which plans must stop requiring authorization for those services.
The bill aims to reduce administrative burden and delays for commonly approved care while preserving carve-outs for high-cost, off-label, experimental, or out-of-network services. It creates new operational obligations for plans and delegates, a petition and reinstatement process for plans, protections for provider payment when prior authorization is eliminated, an implementation path that relies heavily on department guidance, and a built-in sunset and impact review.
At a Glance
What It Does
The bill obliges the Department to issue a standard reporting template and requires plans to report all covered services subject to prior authorization—approval, modification, and utilization metrics—by specified deadlines. The Department will flag services with high approval rates (90 percent threshold), consult stakeholders, publish a list, and require plans to cease prior authorization for listed services by a date no later than January 1, 2028.
Who It Affects
Applies to California-regulated health care service plans and any delegated entities (including utilization review contractors and pharmacy benefit managers) that make prior-authorization decisions; it excludes Medi-Cal managed care plans and certain specialized plans. Providers who deliver now-exempted services and enrollees who use them are directly affected.
Why It Matters
This is a data-driven curtailment of utilization management: it can speed access to commonly approved care and reduce paperwork for providers, but it also removes a routine tool plans use to control costs and clinical appropriateness. The law forces operational changes—reporting systems, contract amendments with delegates, and new petition/reinstatement workflows—across the commercial managed-care market.
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What This Bill Actually Does
SB 306 establishes a two-step, department-led process to shrink prior-authorization requirements for services that, in practice, are overwhelmingly approved. First, the Department must create and issue a standard reporting template (by July 1, 2026) that captures which covered services require prior authorization, the rates at which requests are approved or modified, and detailed utilization metrics such as requested duration, frequency, or level of care.
Health plans must use that template to report full data, including information collected from any delegated entities, to the Department by the end of 2026.
Second, the Department evaluates the incoming reports and identifies services with approval (or approval-plus-modification, as the Department may define) rates that meet or exceed the statute’s 90 percent threshold. The Department can consider additional factors—alignment with clinical guidelines, fraud risks, potential cost savings, and likely effects on quality and access—before deciding to remove prior authorization for a given service.
The Department must consult stakeholders and publish the final list of exempted services by July 1, 2027, and set a concrete date by which plans and delegates must stop requiring prior authorization, no later than January 1, 2028; the Department is instructed to factor in time needed to update plan contracts.The bill preserves several key exceptions: plans may keep prior authorization for higher-tier outpatient drugs, off-label uses, experimental or investigational services, novel applications lacking evidence, and services performed by out-of-network or noncontracting providers. When prior authorization is eliminated for a service, the law treats it as an authorized service for payment purposes and bars plans from reducing contracted reimbursement unless the provider failed to substantially perform.
Plans may petition the Department to reinstate prior authorization for a service on a showing of good cause, and may reinstate prior authorization for an individual provider only upon clear and convincing evidence of fraud or a pattern of clinically inappropriate care.Operationally, the Department can hire consultants (with conflict-of-interest controls) and is exempted from certain state procurement rules for those contracts. The Department may implement the statute through all-plan letters and similar non-regulatory guidance, and it must publish an impact report four years after the cessation date specified in its instructions.
The section is temporary: it sunsets on January 1, 2034, so the policy is subject to later review and discontinuation unless extended by future legislation.
The Five Things You Need to Know
The Department must issue a standard reporting template by July 1, 2026; plans must submit their reports, including delegated-entity data, by December 31, 2026.
The Department will target services approved at or above a 90 percent threshold (including department-defined modifications) for removal of prior authorization and must publish the list by July 1, 2027.
Plans and delegated entities must cease prior authorization on listed services by a date the Department sets—no later than January 1, 2028—and must update contracts accordingly.
Statute preserves exceptions allowing prior authorization for tier 3/4 outpatient drugs, off‑label uses, experimental or novel applications lacking evidence, and services from out-of-network providers.
The section sunsets January 1, 2034, and the Department must publish a four-year impact report after the cessation date assessing utilization, administrative costs, access, outcomes, and reinstatements.
Section-by-Section Breakdown
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Department must create reporting instructions and template
This subsection requires the Department to issue instructions and a standard reporting template to health care service plans by July 1, 2026. Practically, that forces the regulator to define data elements, formatting, and submission processes up front—work that will determine the quality and usefulness of the entire program. The template is the control point for comparability across plans and for later identification of services to exempt from prior authorization.
Plan reporting obligations and delegated-entity data
Plans must report all covered services subject to prior authorization—including approval and modification rates, and metrics on duration, frequency and level of care—by December 31, 2026, using the Department’s template. If plans delegate prior-authorization decisions, they must obtain and include the delegated entities’ data and require compliance from those entities. This creates a downstream compliance obligation: plans must ensure contracts and data flows with delegates support the reporting requirement.
Department evaluation, 90% threshold, stakeholder consultation, list publication, and cessation timeline
The Department evaluates reports and identifies services approved at or above the 90 percent threshold; it may count modified approvals as approvals per its methodology. The Department can weigh additional factors—clinical guideline alignment, abuse risk, cost-saving potential, and access/quality effects—before deciding to remove prior authorization. After stakeholder consultation, the Department must publish the list of services by July 1, 2027, and set a date (no later than January 1, 2028) by which plans must stop requiring prior authorization, taking account of time needed to update contracts.
Statutory exceptions where prior authorization remains allowed
The statute expressly preserves prior authorization for a set of higher-risk categories: outpatient formulary drugs in tiers 3 or 4, off-label uses, experimental or investigational services without evidence, novel applications of existing therapies lacking evidence, and services provided by out-of-network or noncontracting providers. These carve-outs narrow the impact of the exemptions and keep utilization controls for categories that often drive cost or clinical uncertainty.
Payment protections for providers when prior authorization is removed
When a service is exempted from prior authorization, the bill treats it as an authorized service for payment purposes and prohibits plans from reducing contracted rates or denial-based payment adjustments unless the provider failed to substantially perform. This provision protects provider revenue streams and reduces payer leverage to contest claims on the basis of missing prior authorization once a service is on the exemption list.
Reinstatement rules for plans and provider-specific reinstatements
The Department must accept petitions from plans seeking to reinstate prior authorization for a service on a showing of good cause—specifically demonstrable increases in cost or decreases in quality, including fraud or abuse—with decisions due within 60 days of receiving complete information. Separately, plans may reinstate prior authorization for individual providers only upon a finding supported by clear and convincing evidence of fraud or a pattern of clinically inappropriate care.
Use of consultants and procurement exemptions
The Department may contract with external experts to implement the statute, imposing conflict-of-interest clauses to bar consultants with material financial stakes in outcomes. Those contracts are exempted from several standard state procurement statutes and Department of General Services review, speeding engagement but raising oversight questions the statute addresses only partially through COI language.
Impact reporting, administrative implementation tools, delegation limits, scope, definitions, and sunset
The Department must publish an impact report four years after the cessation date assessing utilization, administrative costs, access, outcomes, and reinstatements. The Department can implement the law via all-plan letters and similar non-regulatory instruments and must consult with the Department of Insurance for consistency. Changes to delegation must be treated as material contract amendments; specialized plans and Medi‑Cal managed care are excluded. The statute includes definitions for covered health care services and prior authorization mechanics and contains a sunset date of January 1, 2034.
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Explore Healthcare in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Enrollees who receive services with near-universal approval: faster access and fewer administrative delays because prior-authorization barriers are removed for services the Department deems routinely approved.
- Providers and health systems that routinely deliver those services: reduced administrative burden, lower staff time spent on authorization workflows, and protections against retroactive payment reductions when services become exempt.
- Clinically standard-of-care pathways: when the Department removes prior authorization for services aligned with guidelines, care delivery can become more timely and predictable, benefiting care coordination and scheduling.
- State regulators and researchers: richer, standardized data on prior-authorizations gives the Department visibility into utilization patterns and decision-making across plans and delegates.
Who Bears the Cost
- Health care service plans: must build data collection and reporting systems, renegotiate contracts with delegated entities, and lose a utilization-management lever for services on the exemption list—potentially increasing claim costs.
- Delegated entities and PBMs: will face new compliance obligations and may lose operational authority or revenue tied to utilization review, while still being required to provide detailed data to plans.
- The Department: bears implementation and analysis work, must manage stakeholder consultation and petitions, and may need to monitor reinstatements and perform the four-year impact assessment without an explicit funding stream.
- Employers or purchasers of coverage (indirectly): removing prior authorization may raise utilization and net costs that could translate into higher premiums or cost-sharing if payers cannot offset increases elsewhere.
Key Issues
The Core Tension
The central dilemma is straightforward: SB 306 reduces procedural friction by eliminating prior authorization for services that are almost always approved, improving timeliness and administrative efficiency, but in doing so it removes a payer tool used to control inappropriate use and costs—producing a trade-off between faster access and population-level utilization and cost control.
The statute pivots on data quality and definitional choices that the Department must make but that the text leaves flexible. The 90 percent threshold is a blunt instrument: it identifies services that are almost always approved, but without careful specification of what counts as an "approval" (the law allows the Department to include modified approvals), the list could capture services where modifications substantially alter scope or cost.
How the Department defines and separates approvals from modifications in its template will materially affect which services are exempted.
There is a risk of strategic behavior and unintended consequences. Plans or delegated entities could alter coding, request framing, or modification practices to influence approval rates; conversely, removing prior authorization can increase utilization for services previously constrained by utilization management, with downstream cost implications.
The statutory exceptions (high-tier drugs, off-label uses, experimental or novel applications, and out-of-network care) blunt some cost risks but also leave significant discretion and a petition/reinstatement pathway that allows plans to regain authorization authority if costs or quality shift—reintroducing administrative churn. Additionally, the statute exempts consultant contracts from several procurement reviews, which accelerates implementation but raises oversight and conflict-of-interest risks despite the COI clause.
Finally, the law’s reach is limited: it does not apply to Medi‑Cal managed care or specialized plans and cannot affect self-funded ERISA plans, potentially leaving significant populations outside the policy change. The sunset (January 1, 2034) and the four-year impact report create a review mechanism, but they also mean the regime is temporary and any long-term cost or access effects will require future legislative decisions.
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