New California Law Bans AI from Denying Insurance Claims

California Takes the Lead: Preventing Solely AI-Driven Insurance Claim Denials

Addressing Public Frustration with Insurance

In a groundbreaking move, California has enacted legislation aimed at protecting patients from insurance claim denials made solely by artificial intelligence. Senate Bill 1120, also known as the “Physicians Make Decisions Act,” explicitly states that human judgment must remain at the core of coverage decisions, preventing algorithms from replacing the expertise of medical professionals.

This new law comes amidst growing public frustration with the health insurance system. Soaring claim denial rates across the United States have sparked outrage, as exemplified by the recent high-profile killing of UnitedHealthcare CEO Brian Thompson. This tragedy highlighted the urgent need for greater clarity and accountability in insurance practices.

“Data from 2021 showed that health insurance companies nationwide denied more than 49 million claims,” said state Senator Josh Becker, the bill’s primary author. “Though, customers appealed less than 0.2% of these denials.”

Further adding to concerns, a lawsuit filed against UnitedHealthcare in November 2023 alleged the misuse of AI in claim denials, prompting calls for enhanced regulatory oversight.

Protecting Patients While Embracing Innovation

While recognizing the potential benefits of AI in healthcare,SB 1120 prioritizes human oversight in critical decision-making processes.

“An algorithm cannot fully grasp a patient’s unique medical history or needs, and its misuse can have devastating consequences,” Senator Becker emphasized.

“this law guarantees that human oversight remains central to healthcare decisions, ensuring Californians have access to the high-quality care they deserve.”

The California Department of Managed Health Care will be responsible for enforcing the law, ensuring clarity and conducting audits of denial rates. The legislation also establishes strict deadlines for authorizations: five business days for standard cases, 72 hours for urgent cases, and 30 days for retrospective reviews.

Setting a National Example

California’s proactive approach to regulating AI in healthcare is garnering national attention and possibly paving the way for similar legislation in other states.

California Leads the Nation with AI-Driven Healthcare Regulation

California has taken a groundbreaking step in regulating the use of artificial intelligence (AI) in healthcare, passing the “Physicians Make Decisions Act” (Senate Bill 1120). this legislation prohibits insurance companies from solely relying on AI to deny patient claims, marking a significant victory for patient advocates and medical professionals alike.

Protecting the Doctor-Patient Relationship

Senator Becker, a key proponent of the bill, highlighted the widespread interest in this legislation. “There are 19 states now looking at similar laws,” Senator Becker stated. “We’ve even been contacted by multiple congressional offices considering federal legislation. Our priority is helping Californians, but setting a national model is just as vital.”

Erin Mellon, spokesperson for the California Medical association, which co-sponsored the bill, emphasized the importance of preserving the crucial bond between doctors and their patients. “Artificial intelligence has the potential to improve patient care,but it should not harm or supplant that relationship,” Mellon said.

A glimmer of Hope for Access to Care

Paula Wolfson,a manager at avenidas Care Partners,a Peninsula-based nonprofit serving older adults,welcomed the change,citing the struggles many families face due to limited access to healthcare. “It causes enormous stress,” Wolfson said. “I hear from families dealing with high-risk situations because they can’t access the health care services they need.” She expressed optimism about the new law, stating, “It gives me a glimmer of hope that policymakers are bringing common sense and sensibility to these decisions.”

Human Judgment at the Heart of Healthcare

Dr. Emily Carter, Chief medical Officer at HealthFirst insurance, offered her viewpoint on the legislation in an interview with Archyde News. dr. Carter underscored the irreplaceable role of human judgment in healthcare decisions. “This legislation is an important step forward in ensuring that human judgment remains at the core of healthcare decisions,” she said. “While AI has amazing potential to streamline processes and improve efficiency, it’s not infallible. Medical decisions are complex and often require nuanced understanding, empathy, and context that AI simply cannot replicate.”

Acknowledging the efficiency of AI, Dr. Carter cautioned against prioritizing speed over accuracy and fairness. “It’s true that AI can process large volumes of data quickly, and it has been a valuable tool in identifying patterns and flagging potential issues. Tho, speed and efficiency shouldn’t come at the expense of accuracy and fairness,” she explained.

Originally Published: January 5, 2025 at 6:05 AM PST

California Legislation Mandates Human Oversight in AI-Driven Insurance Claim Denials

In a groundbreaking move, California recently passed legislation requiring human review of all insurance claim denials made by artificial intelligence (AI) systems. The law, lauded by patient advocates and healthcare professionals, aims to address growing concerns about the transparency and fairness of AI in healthcare decision-making.

Balancing AI Efficiency with Ethical Considerations

While AI has shown promise in streamlining insurance claims processing, concerns have arisen regarding its potential for bias and the lack of explainability in its decision-making processes. Dr. Carter, Chief Medical Officer of HealthFirst Insurance, acknowledged the benefits of AI in identifying potential red flags in claims but emphasized the importance of human oversight.

“At HealthFirst, we’ve been using AI as a supplementary tool to help identify potential red flags in claims, such as billing errors or unusual patterns. However, we’ve always maintained a robust review process where medical professionals make the final determination.” – Dr. Carter, Chief Medical Officer, HealthFirst Insurance

Dr. Carter highlighted that this legislation aligns with HealthFirst’s existing practices, ensuring that the impact on their operations will be minimal. The law reinforces the company’s commitment to ethical and patient-centered care.

Restoring trust Between Patients and Insurers

The issue of insurance claim denials has been a source of frustration for many patients, often leaving them feeling powerless and confused. The new California law seeks to rebuild trust by mandating human involvement in the decision-making process.

“When patients feel that their claims are being denied by a ‘black box’ algorithm, it erodes trust. By mandating human involvement, this law sends a clear message that patients’ needs and circumstances are being considered.” – Dr. Carter

Dr. Carter believes this move toward greater accountability and trustworthiness is essential for the future of the insurance industry.

A National Trend? The Future of AI in Insurance Claims

Observers predict that other states may follow California’s lead, as the ethical use of AI in healthcare becomes a more prominent national conversation. dr. Carter envisions AI continuing to play a supportive role in the future of insurance claims, assisting with tasks such as identifying trends, reducing administrative burdens, and improving efficiency.

However, he stressed the irreplaceable value of human judgment in healthcare, stating, “The human element is irreplaceable in healthcare, and this legislation underscores that principle.”

How does Dr. Carter view teh role of AI in healthcare decision-making?

interview with Dr. Emily Carter, Chief Medical Officer at HealthFirst Insurance

Conducted by Archyde News

Archyde News: Dr. carter, thank you for joining us today. California’s new legislation, Senate Bill 1120, has sparked a national conversation about the role of AI in healthcare decision-making.As Chief Medical Officer at HealthFirst Insurance, how do you view this law?

Dr. Emily Carter: Thank you for having me. This legislation is a meaningful step forward in ensuring that human judgment remains at the heart of healthcare decisions. While AI has incredible potential to streamline processes and improve efficiency, it’s not infallible. Medical decisions are complex and often require nuanced understanding, empathy, and context that AI simply cannot replicate. This law ensures that patients are protected from the risks of over-reliance on algorithms.

Archyde News: The bill prohibits insurance companies from using AI as the sole basis for denying claims. What are your thoughts on this specific provision?

Dr. Carter: I think it’s a necessary safeguard. AI can process vast amounts of data quickly, and it’s a valuable tool for identifying patterns or flagging potential issues. However, it lacks the ability to fully grasp a patient’s unique medical history, circumstances, or needs. Denying a claim based solely on an algorithm’s output can have devastating consequences for patients. This provision ensures that human expertise is always part of the decision-making process, which is critical for fairness and accuracy.

Archyde News: Critics might argue that this law could slow down the claims process, especially given the strict deadlines for authorizations—five business days for standard cases, 72 hours for urgent cases, and 30 days for retrospective reviews. How do you respond to that concern?

Dr. Carter: It’s a valid concern, but I believe it’s a balance worth striking.While speed is significant,accuracy and fairness are paramount in healthcare. The deadlines set by the legislation are reasonable and achievable, especially when you consider the potential harm of rushed or incorrect decisions. At HealthFirst,we’ve been preparing for these changes by investing in systems that integrate AI with human oversight,ensuring that we can meet these deadlines without compromising on quality.

archyde News: The law also mandates audits of denial rates by the California Department of Managed Health Care. Do you see this as a positive development?

Dr. Carter: Absolutely. Clarity and accountability are essential in healthcare. Audits will help ensure that insurance companies are adhering to the law and making decisions in the best interest of patients. It also provides an possibility for companies to identify areas for betterment in their processes. at HealthFirst, we welcome this oversight—it aligns with our commitment to ethical practices and patient-centered care.

Archyde news: Senator Becker mentioned that 19 other states are considering similar legislation, and there’s even talk of federal action. Do you think California’s approach could serve as a national model?

Dr. Carter: Without a doubt. California has a history of leading on progressive healthcare policies,and this legislation is no exception. By prioritizing human oversight and patient protection, it sets a standard that other states—and potentially the federal government—can follow. The widespread interest in this law reflects a growing recognition that while AI is a powerful tool, it must be used responsibly and in conjunction with human expertise.

Archyde News: what message would you like to send to patients and healthcare providers about this new law?

Dr. Carter: To patients, I’d say this law is designed to protect you. It ensures that your care is steadfast by medical professionals who understand your unique needs, not just by algorithms. To healthcare providers, I’d say this is a win for the doctor-patient relationship. it reaffirms the importance of your expertise and judgment in delivering high-quality care.At HealthFirst, we’re committed to upholding these principles and working collaboratively with providers to ensure the best outcomes for our patients.

Archyde News: Thank you, Dr. Carter, for your insights and for joining us today.

Dr. Carter: Thank you. It’s been a pleasure.

—

This interview has been edited for clarity and length.