NEWSROOM

According to reporting by The Mercury News, one of California’s leading daily newspapers, about one-fourth of all health insurance claims in the Golden State were denied last year. Some may have been denied due to Artificial Intelligence (AI). However, new legislation prohibits health insurers from relying solely on AI to deny a claim based on medical necessity.
 
The “Physicians Make Decisions Act,” signed by Governor Gavin Newsome in September 2024, took effect January 1, 2025. It amends the state’s long-standing Knox-Keene Health Care Service Plan Act that regulates health care plans and managed care organizations. The act now imposes new guidelines and standards on the use of AI in health care claims processing. The California Attorney General has issued guidance to insurers, providers, and other health care entities on the use of AI in compliance with the act.
 
Many insurers have embraced AI as part of a strategy to improve efficiency, automating tasks related to customer service, marketing, claims, underwriting, fraud detection, risk selection, reporting, and forecasting.
 
California Senate Bill 1120 requires that medical professionals, not algorithms, determine whether a treatment is medically necessary. AI tools cannot be used to deny, delay, or alter services that doctors deem are necessary. Standard coverage decisions are required within five business days, urgent care cases within 72 hours. Organizations that miss deadlines or fail to comply with the new legislation are subject to penalties.
 
The California Medical Association was a co-sponsor of the legislation, arguing that AI should only supplement a physician’s sound medical judgement, not replace it. Insurance companies can still use AI subject to the new requirements. The objective is to strike the right balance between implementing innovative technology, improving health care delivery, and safeguarding patient access to care.