Beginning January 1, California health care service plans and disability insurers will operate under new rules governing the use of artificial intelligence (AI) and algorithms in utilization review and management processes. These regulations, introduced through Senate Bill 1120 (SB 1120), aim to ensure that AI tools are employed responsibly, with an emphasis on fairness, transparency, and compliance.
Signed into law by Governor Gavin Newsom on September 28, SB 1120 amends sections of the Health and Safety Code and Insurance Code to establish clear standards for the application of AI in evaluating requests for health care services. The law also extends to vendors contracted to perform these functions for health plans, making compliance critical for all involved parties.
Purpose and Scope of SB 1120
SB 1120 addresses the increasing integration of AI and machine learning in health care decision-making, particularly in processes determining the medical necessity of services. The law focuses on ensuring that AI serves as a supplement rather than a replacement for human clinical judgment.
Key areas covered include:
- Decision-Making Standards: AI systems must base decisions on individualized clinical data, such as a patient’s medical history and specific circumstances provided by their physician, rather than relying solely on generalized datasets.
- Human Oversight: Licensed medical professionals must remain the final authority on decisions regarding medical necessity, ensuring that AI does not independently approve, modify, delay, or deny care.
- Transparency Requirements: Health plans must disclose their use of AI tools in utilization review, including their policies and compliance records. These disclosures must be accessible to regulators, patients, and providers.
- Non-Discrimination: AI tools must not directly or indirectly discriminate against enrollees and must comply with all relevant anti-discrimination laws.
- Audits and Compliance Reviews: AI systems will be subject to routine audits by state authorities to verify adherence to regulatory standards and protect patient data.
Penalties for Non-Compliance
Failure to meet the requirements of SB 1120 could result in significant penalties from the California Department of Managed Health Care (DMHC) or the Department of Insurance (DOI). These penalties are intended to ensure adherence to the law and safeguard patients from inappropriate or harmful denials of care.
Implications for Health Plans and Insurers
Organizations using AI in utilization review must assess and potentially update their systems to comply with SB 1120. This includes:
- Enhancing transparency in how AI tools are employed.
- Ensuring human oversight in all decisions regarding medical necessity.
- Preparing for audits and maintaining detailed records on AI-driven decision-making processes.
SB 1120 sets important standards for integrating AI into health care, ensuring a balance between technological innovation and the irreplaceable value of human judgment in patient care.
Alignment with Federal Guidelines
Earlier this year, the Centers for Medicare & Medicaid Services (CMS) reinforced similar principles in a memo, clarifying that Medicare Advantage Organizations (MAOs) may use AI in coverage determinations but must comply with federal regulations. This includes considering patient-specific medical history and clinical recommendations, underscoring the shared emphasis on individualization and oversight.
Next Steps for Compliance
Health care providers and insurers should:
- Review AI Practices: Evaluate current utilization review processes and vendor systems to align with SB 1120’s requirements.
- Prepare for Audits: Implement robust documentation and compliance protocols.
- Monitor Guidance: Stay informed on additional directions from the DMHC and DOI as the law is implemented.
SB 1120 marks a significant step in regulating the use of AI in health care, aiming to protect patients while fostering responsible technological advancements.
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