Source: Bloomberg Law

California has enacted new legislation aimed at regulating the use of artificial intelligence (AI) in health insurance decisions, marking a significant step in the oversight of AI in the healthcare industry. The law, signed by Governor Gavin Newsom, mandates that health insurers using AI in their coverage decision processes must ensure that physicians or qualified healthcare providers review any AI-driven recommendations to determine medical necessity.

The legislation, known as SB 1120, requires insurers to develop written policies that ensure AI-based decisions are equitable and do not discriminate against patients. The bipartisan support for the bill underlines its potential to set a national precedent for regulating AI in health insurance. With at least 45 states considering AI legislation in 2024, California’s move could influence broader discussions about AI governance in healthcare across the U.S.

The law reflects growing concerns about the use of AI in critical decision-making processes, especially in areas like healthcare where the stakes are high. AI tools can help streamline processes and reduce costs, but they also raise ethical questions about fairness, transparency, and accountability. California’s new regulations aim to balance the benefits of AI with the need for proper oversight to protect patients' rights.

By requiring human oversight, the law ensures that AI cannot be solely responsible for making life-altering decisions about patient care. It also emphasizes the importance of transparency in how AI recommendations are used, particularly in ensuring that decisions based on AI are medically appropriate and compliant with both state and federal regulations.