Health care service plans have increasingly used Artificial Intelligence (“AI”) to automate prior authorizations, process claims, and manage health outcomes, arguing it reduces costs and increases consistency. However, concerns about AI errors, biases, and unwarranted coverage denials have caused California and other states to curb AI’s uses to prevent discrimination and protect patient rights.
Of particular interest is California’s SB 1120 (“The Physicians Make Decisions Act”), which has already passed in the State’s Senate and is advancing quickly through the Assembly. SB 1120 is designed to regulate the use of AI and algorithms in health plans’ prior authorization decisions and management functions by ensuring that AI-based determinations are made with adequate human oversight.
Insurers and health plans use prior authorizations as a tool to determine whether a health care service or treatment is medically necessary. While health plans and insurers are subject to certain regulatory requirements in California, existing law does not expressly limit these entities’ use or application of AI when making patient coverage determinations. SB 1120 would require denials, delays, or modifications of health care services based on medical necessity be made by a licensed physician or other competent health care provider.
The bill further mandates that AI tools used for prior authorization base decisions on an enrollee’s medical history and individual clinical factors. Finally, the use of AI tools must not directly or indirectly discriminate against individuals based on race, gender, age, disability, or other protected characteristics, be open to inspection, and comply with existing medical privacy laws.
Originally printed in California Society for Healthcare Attorneys: SB 1120: California’s Initiative to Ensure Ethical AI Use in Healthcare