Health insurers are increasingly integrating artificial intelligence (AI) into their operations, particularly in claims processing and coverage determinations. This trend has prompted a wave of regulatory scrutiny and legal challenges across the United States, as concerns mount over the potential for AI to unjustly deny coverage and exacerbate existing disparities in healthcare access.
In December 2023, the National Association of Insurance Commissioners (NAIC) adopted a Model Bulletin on the Use of Artificial Intelligence Systems by Insurers. This bulletin emphasizes that insurers must adhere to all applicable laws and regulations when employing AI in consumer-impacting decisions. It serves as a guiding document for state regulators to ensure uniformity in overseeing AI applications within the insurance sector. ([mcdermottlaw.com](https://www.mcdermottlaw.com/insights/state-regulators-address-insurers-use-of-ai-11-states-adopt-naic-model-bulletin/?utm_source=openai))
Following the NAIC’s lead, several states have implemented measures to regulate insurers’ use of AI. Colorado was at the forefront, enacting legislation in July 2021 that prohibits insurers from using external consumer data and predictive models that result in unfair discrimination based on factors such as race, color, national origin, and other protected characteristics. The law mandates that insurers demonstrate compliance through detailed reporting and governance frameworks. ([deloitte.com](https://www.deloitte.com/content/dam/assets-zone3/us/en/docs/services/risk-advisory/2023/us-advisory-deloitte-ai-state-of-play-in-insurance-regulation-march-2023.pdf?utm_source=openai))
Other states have taken similar steps. California, for instance, has prohibited the use of AI for coverage denials, reflecting a growing trend among states to address the potential misuse of AI in health insurance. ([axios.com](https://www.axios.com/local/indianapolis/2025/02/05/indiana-lawmakers-oversight-health-insurers?utm_source=openai))
Legal actions have also emerged in response to insurers’ AI practices. In December 2023, a class-action lawsuit was filed against Humana, alleging the company used an AI algorithm to systematically deny medically necessary rehabilitation care to Medicare Advantage patients, effectively replacing doctors’ decisions with automated judgments. ([axios.com](https://www.axios.com/2023/12/13/humana-ai-lawsuit-deny-care-seniors-rehabilitation?utm_source=openai))
These developments underscore a significant shift in the regulatory landscape, with states actively working to balance the benefits of AI in streamlining insurance processes against the imperative to protect consumers from potential harms. As AI continues to evolve, insurers must navigate an increasingly complex compliance environment, ensuring that their use of technology aligns with both legal standards and ethical considerations.