As states float prior authorization reform, some are specifically targeting AI use with prior authorization and claims review.
A May 6 KFF issue brief broke down where these policies stand and the role the federal government could play.
Here are six points payers should know:
1. The Employee Retirement Income Security Act usually shields private employers’ self-insured plans from most state insurance laws, which could prevent state AI laws from interfering. The federal government oversees these plans, instead. ERISA still requires “full and fair” reviews of claims.
2. A federal AI framework could be more straightforward, such as for insurers operating across state lines. However, a fresh agenda could lower the bar that states have established for AI use. One of President Donald Trump’s broader legislative priorities with AI is removing barriers to adoption. Federal guidance in regards to Medicaid and Medicare is currently limited, as well.
3. As of April 28, nine states had enacted laws regarding AI use for prior authorization or claims reviews: California, Illinois, Maryland, Texas, Nebraska, Washington, Utah, Indiana and Alabama.
4. HIPAA may not protect data used by AI tools. The law’s scope is limited to health plans, providers and clearinghouses — while third-parties and technology companies could pose security risks.
5. The new Wasteful and Inappropriate Services Reduction Model, which introduced prior authorization in traditional Medicare across six states, relies on several technology vendors. Some of these vendors are using AI, and many Democratic lawmakers have pushed back. Earlier Medicare Advantage guidance and regulations clarify how algorithms cannot be used to determine medical necessity without consideration of individual conditions.
6. Legal actions grappling with AI algorithms in denials are taking center stage and could inform future approaches.
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