Health insurers are using AI to speed up prior authorization, but Fitch expects regulators to keep requiring humans in the loop when care is denied, and that will limit how much efficiency payers can gain.
The outlook comes from Fitch’s AI Stress Test, published Oct. 5. The report scores 107 sub-sectors on how adverse AI scenarios could affect their credit over five years. A score of 40 or higher signals potential negative rating action. Health insurers scored 20, which reflects limited near-term risk of disruption from AI-enabled new entrants.
Five things to know:
1. Fitch said expanded use of AI in prior authorization decisions has drawn more scrutiny from regulators and lawmakers. That scrutiny has already led to reductions in prior authorization requirements for certain services.
2. Broader AI adoption should shorten review times and make processing more efficient. But Fitch said “regulatory expectations for human involvement in care-denial decisions are likely to persist,” which partially offsets those gains.
3. Prior authorization is one of several areas where payers are using AI. Insurers have also applied it to claims processing, customer service, enrollment and appeals management to cut administrative costs, and to fight fraud, waste and abuse.
4. Fitch noted the ongoing AI contest between providers and payers. Providers are using AI to optimize coding and maximize reimbursement per encounter. Insurers are responding with AI that flags aggressive coding patterns and factors their expected impact into pricing. Fitch said provider coding optimization has modestly contributed to the high medical costs pressuring insurers’ underwriting.
5. Fitch has not taken any rating actions on health insurers directly attributable to AI-driven disruption. It said large incumbents could use AI to strengthen their competitive advantages, though AI may also make administrative scale less important as a source of protection. Under Fitch’s adverse scenario, in which well-funded AI startups enter competitively vulnerable states, the agency expects only modest credit pressure on large, geographically diversified insurers and somewhat greater pressure on those concentrated in targeted markets.
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