Red and Blue States Alike Want To Limit AI in Insurance. Trump Wants To Limit the States.

Last month, the House Ways and Means Committee brought together executives from Cigna, UnitedHealth Group and other major health insurers to address concerns about affordability. When pressed, executives either denied or avoided talking about the use of the most advanced technology to reject authorization requests or reject claims.

AI is “never used for denial,” Cigna CEO David Cordani told lawmakers. Like others in the health insurance industry, the company is being sued over its methods of denying claims, as ProPublica points out. Cigna spokeswoman Justine Sessions said the company’s claim denial process “is not powered by AI.”

Indeed, companies find it difficult to present AI as a faithful servant. Optum, part of healthcare giant UnitedHealth Group, announced Feb. 4 that it was rolling out technology-based prior authorization, with many mentions of faster approvals.

“We are transforming the prior authorization process to resolve the friction it causes,” John Kontor, senior vice president of Optum, said in a press release.

Still, Alex Bores, a computer scientist and New York Assembly member prominent in the state’s legislative debate over AI, which resulted in a comprehensive bill governing the technology, said AI was a natural area to regulate.

“So many people already find the answers they get from their insurance companies impenetrable,” said Bores, a Democrat running for Congress. “Adding a layer that, by its nature, cannot be explained by itself, does not seem to be helpful.”

At least some medical professionals – doctors, for example – are encouraging lawmakers and regulators. The American Medical Association “supports state regulations requiring greater accountability and transparency from commercial health insurers that use AI and machine learning tools to review prior authorization requests,” said John Whyte, the organization’s CEO.

Whyte said insurers are already using AI and “doctors still face delays in patient care, opaque insurer decisions, inconsistent authorization rules and overwhelming administrative work.”

Insurers push back

With legislation approved or pending in at least nine states, it’s unclear what effect state laws will have, said Daniel Schwarcz, a law professor at the University of Minnesota. States cannot regulate “self-insured” plans, which are used by many employers; only the federal government has this power.

But there are deeper problems, Schwarcz said: Most state laws he’s seen would require a human to approve any decision proposed by the AI, but don’t specify what that means.

The laws don’t provide a clear framework for understanding how much review is enough, and over time, humans tend to get a little lazy and just rubber-stamp every suggestion through a computer, he said.

Still, insurers view rising bills as a problem. “Generally speaking, the regulatory burden is real,” said Dan Jones, senior vice president of federal affairs at the Alliance of Community Health Plans, a trade group for some nonprofit health insurers. If insurers spend more time working through a patchwork of state and federal laws, he continued, that means “less time that can be spent and invested in what we’re supposed to do, which is ensuring that patients have the right access to care.”

Linda Ujifusa, a Democratic state senator from Rhode Island, said insurers spoke out last year against the bill she sponsored to restrict the use of AI in coverage denials. He was adopted in one house, but not the other.

“There is enormous opposition” to anything that regulates tactics such as prior authorization, she said, and “huge opposition” to identifying intermediaries such as private insurers or pharmacy benefit managers “as a problem.”

In a letter criticizing the bill, AHIP, a trade group for insurers, advocated for “balanced policies that promote innovation while protecting patients.”

“Health plans recognize that AI has the potential to drive better health care outcomes – improving the patient experience, closing care gaps, accelerating innovation and reducing administrative burden and costs to better focus on patient care,” AHIP spokesperson Chris Bond told KFF Health News. And, he continued, they need a “coherent national approach anchored in a comprehensive federal AI policy framework.”

In search of balance

In California, Newsom signed some laws regulating AI, including one requiring health insurers to ensure their algorithms are applied fairly and equitably. But the Democratic governor vetoed other bills with a broader approach, such as a bill that included more mandates on how the technology must work and a requirement to disclose its use to regulators, clinicians and patients upon request.

Chris Micheli, a Sacramento-based lobbyist, said the governor likely wants to ensure the state budget — constantly fueled by outsized stock market gains, particularly those of tech companies — stays level. This requires balance.

Newsom is trying to “ensure that the financial spigot continues, and at the same time ensure that there is some protection for California consumers,” he said. He added that insurers believe they are already subject to a multitude of regulations.

The Trump administration seems convinced. The president’s recent executive order proposes continuing and restricting certain federal funding for any state that enacts what he calls “excessive” state regulations – with some exceptions, including for policies that protect children.

The order may be unconstitutional, said Carmel Shachar, a health policy expert at Harvard Law School. The source of preemption authority is usually Congress, she said, and federal lawmakers twice took up, but ultimately declined to pass, a provision barring states from regulating AI.

“Based on our prior understanding of federalism and the balance of power between Congress and the executive branch, a challenge here would have a very high chance of succeeding,” Shachar said.

Some lawmakers view Trump’s order with skepticism, at best, noting that the administration has removed guardrails and prevented others from erecting them, to an extreme degree.

“There’s not really a question of should this be federal or should this be state right now? » said Bores. “The question is: should it be state-run or not at all?

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