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A handful of state legislatures have passed AI health insurance state laws this year that limit how health insurers use artificial intelligence when making coverage or reimbursement decisions.
Alabama’s Approach to AI Health Insurance State Laws
SB 63 regulates how insurers use AI when making coverage authorization determinations. Coverage decisions can’t be solely made by AI, insurers must disclose when AI is used in the review process, and determinations are expected to reflect the patient’s own clinical circumstances rather than automated output alone. The law takes effect Oct. 1.
Colorado’s Broad Utilization Review Requirements
HB 1139 covers insurers, pharmacy benefit managers, private utilization review organizations, behavioral health ASOs and managed care entities. Any AI used for utilization review must base decisions on the patient’s individual clinical history rather than group data alone, must not be applied in a discriminatory way, and must be periodically audited for accuracy. A denial based on medical necessity cannot be issued on AI output alone without review by a qualified professional. The law also bars insurers from covering AI-delivered psychotherapy, effective Jan. 1, 2027.
Georgia and Illinois Add Specific Protections Within AI Health Insurance State Laws
Georgia’s SB 444 amends the state’s private review agent statute to provide that insurance coverage decisions for healthcare services cannot be based solely on AI systems or other software tools, effective Jan. 1, 2027.
Illinois Targets Claim Downcoding Specifically
Illinois’s SB 3114 creates the Transparency in Downcoding Act, which targets claim downcoding directly. It bans insurers from using any algorithm or automated process that bypasses the information a billing professional submitted in order to downcode a claim. Automated tools may flag claims for review, but a person must make or review every downcoding determination using current AMA CPT coding guidelines. The law also bars downcoding based solely on diagnosis codes and prohibits targeting clinicians who treat complex or chronic patients, though self-insured ERISA plans and workers’ compensation plans are excluded. It takes effect Jan. 1, 2028.
Iowa’s More Permissive Approach Among These AI Health Insurance State Laws
Iowa’s HF 2635 allows insurers and utilization review organizations to use an AI-based algorithm for the initial review of a prior authorization request, but it prohibits using AI as the sole basis to deny, delay or downgrade a medical necessity request. The law also addresses claims audits and certificate of need processes, effective July 1.
Utah’s Focus on Public Transparency
Utah’s SB 319 requires insurers to post their prior authorization requirements and approval and denial statistics publicly, and to disclose to the state, providers and enrollees when AI is used in reviewing requests. Anyone reviewing an adverse determination must use independent medical judgment rather than relying solely on any other source. The law also sets maximum decision timeframes and minimum validity periods for chronic or long-term care requests, effective Jan. 1, 2027.
Washington Rounds Out This Year’s AI Health Insurance State Laws
SB 5395 builds on existing prior authorization law to add AI transparency and accountability requirements. Only a licensed physician or health professional may deny a request on medical necessity grounds, and AI cannot be the sole means used to deny, delay or modify care. The law took effect June 11, 2026.
Common Threads Across These Seven Laws
Despite differences in scope and specific requirements, these seven laws share consistent themes: prohibiting AI from being the sole basis for adverse coverage decisions, requiring human clinical judgment in the review process, and mandating disclosure when AI tools are used in utilization review or claims processing.
What This Means for Insurers Operating Across Multiple States
With effective dates ranging from July 2026 through January 2028, insurers, pharmacy benefit managers, and utilization review organizations operating in these seven states will need to build compliance timelines that account for varying requirements, from Iowa’s relatively permissive framework to Colorado’s more comprehensive audit and non-discrimination mandates. National payers in particular will need to navigate a patchwork of state-specific AI health insurance state laws rather than a single uniform standard.
What to Watch Going Forward
As more states consider similar legislation, insurers may increasingly need to standardize internal AI governance practices, human review protocols, and disclosure processes to meet the most stringent state requirements across their entire book of business, rather than building separate compliance frameworks for each jurisdiction. Given the range of effective dates already set through 2028, this list of AI health insurance state laws is likely to grow as additional states introduce comparable measures in future legislative sessions.
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