State Legislatures Move to Regulate AI in Insurance Coverage and Prior Authorization
As artificial intelligence (AI) becomes increasingly integrated into the administrative and clinical workflows of the healthcare industry, state lawmakers are stepping in to establish boundaries. A growing movement across several states aims to ensure that technology does not replace human judgment in critical medical decisions, particularly regarding insurance coverage and the prior authorization process.
The American College of Radiology (ACR) has identified a significant trend in state legislatures: a push to mandate human review for insurance coverage denials and to prohibit determinations made solely by automated systems.
The Three Pillars of AI Healthcare Regulation
Current legislative efforts regarding AI in healthcare broadly fall into three distinct categories. These themes reflect a multifaceted approach to managing the risks associated with rapid technological adoption:
- Restrictions on AI in Utilization Review: Limiting how AI is used in prior authorization or claims processing to prevent automated denials of necessary care.
- Clinical AI Guardrails: Establishing specific protections and oversight for AI tools used directly in clinical decision-making.
- Transparency and Privacy: Implementing requirements for how AI-driven consumer communications and data practices are managed and disclosed to patients.
Combating Automated Insurance Denials
One of the most pressing concerns for patients and providers is the potential for “black box” algorithms to deny medical necessity without human oversight. To combat this, several states are considering or have proposed bills that would require a qualified healthcare professional to review adverse determinations.
By mandating human intervention, these legislative measures aim to ensure that patient-specific clinical information is considered, rather than relying on broad algorithmic patterns that may miss individual medical nuances.
State-by-State Legislative Landscape
The following table outlines the current status of key AI-related healthcare bills as reported by the ACR:
| State | Bill Number | Primary Focus | Current Status |
|---|---|---|---|
| Alabama | SB 63 | Requires insurers to use patient-specific clinical info and disclose AI use in utilization reviews. | Engrossed; last placed on House calendar March 17. |
| Minnesota | SF 1856 | Proposes a ban on AI use in utilization review. | Referred to Senate Commerce and Consumer Protection Committee March 18. |
| New Hampshire | HB 1406 | Mandates records on AI use and requires qualified professionals to make adverse determinations. | Pending in the Senate Commerce Committee. |
| Wisconsin | SB 1066 | Bars insurers and self-insured plans from using AI to deny certain prior authorization requests. | Pending in the Senate Utilities, Technology and Tourism Committee. |
| Michigan | HB 4537 | Blocks Medicaid from using AI to deny, modify, or delay claims. | Referred to the House Communications and Technology Committee March 19. |
| Massachusetts | SB 2632 | Reserves medical necessity decisions to licensed professionals. | In the Joint Health Care Financing Committee. |
Key Takeaways for Healthcare Stakeholders
- Human Oversight is Paramount: The central theme across most pending legislation is the requirement for qualified healthcare professionals to review and finalize adverse coverage decisions.
- Transparency Requirements: New laws may require insurers to disclose when AI is being used in the utilization review process.
- Medicaid Protections: Specific efforts, such as Michigan’s HB 4537, are targeting the protection of Medicaid recipients from automated claim delays or denials.
- Clinical Accuracy: Legislation like Alabama’s SB 63 emphasizes that AI-driven decisions must incorporate patient-specific clinical information to be valid.
Looking Ahead
The rapid evolution of artificial intelligence presents both opportunities for efficiency and risks to patient autonomy. As these bills move through various state committees, the outcome will likely set a precedent for how the intersection of technology and medical necessity is governed nationwide. For providers and patients alike, the focus remains on ensuring that while technology may assist in the process, the final word on medical care stays in human hands.
