Artificial intelligence (AI) applications and platforms are more and more becoming a part of our daily lives, whether we know it or not—it took me a moment to realize that AI responses now lead most of my Google search results. However, one area where AI has been somewhat curtailed is in the health insurance claims process. Effective Jan. 1, 2025, through Senate Bill No. 1120 (SB 1120), the California legislature amended California law to provide that AI may not be used to deny health care services based upon medical necessity. In view of California’s bifurcated regulatory scheme for health care service plans (generally referred to as HMOs) and insurance companies, SB 1120 amends the utilization review standards regarding the use of AI in both Health and Safety Code § 1367.01 (for health care service plans) and in Insurance Code § 10123.135 (for health insurance companies). The amendments under both statutes essentially mirror each other.
In addition to setting forth requirements regarding the general use of AI in the claims process, SB 1120’s focal point is a provision in the bill stating that a determination of medical necessity may be made only by a licensed physician or licensed health care professional. Moreover, this limitation cannot be avoided by the insurer, itself, not utilizing AI, but, rather, by the insurer’s engaging a third party that utilizes AI in the claims process—in other words, insurers remain responsible for their service providers in that regard.