States Pursue Legislation Limiting AI’s Growing Role in Payer Prior Authorization Denials and Claims Processing
This follows class action lawsuits in multiple states against insurance companies that deny millions of healthcare claims each year
Artificial intelligence (AI) has become ubiquitous in many aspects of healthcare. But perhaps its most controversial use is in the payer denial-of-claims process. Multiple states are pursuing legislation that would limit or outright ban AI’s use without physician involvement.
Clinical laboratories experience payment denials at both the prior authorization stage when a doctor orders a lab test as well as when the claim is submitted for reimbursement. And many labs perform tests for which they know they will not be paid just to maintain the client account relationships with doctors.
Now, several states are taking measures to protect patients from what some say is a dangerous trend to use AI algorithms only to review and deny medical claims for critical healthcare and clinical laboratory testing. This will be of interest to lab managers and those in charge of their lab’s revenue.
“Physicians and patients already face daunting challenges in navigating medical insurers’ bureaucratic administrative processes,” said Arizona Medical Association (ArMA) President Nadeem Kazi, MD, in a news release. “Taking physicians’ clinical experience out of these processes entirely is a misguided step,” he added.
In Arizona, the state’s House of Representatives passed Bill 2175 on February 20, which includes a ban on using AI to deny medical claims without physician involvement, NBC News reported.
However, on March 13, the Arizona Senate’s Finance Committee altered the language in its version of the bill. In it, AI is not specifically mentioned.
Instead, the bill’s language now “requires a medical director or healthcare provider, before a healthcare insurer may deny a claim or issue a direct denial of a prior authorization, to individually review any denial that involves medical necessity or experimental status or that requires the use of medical judgment and prohibits the director or provider from relying solely on recommendations derived from any other source during the prior authorization denial or claim denial review.”
Presumably, “any other source” includes AI-driven software platforms used by payers for prior authorization denials and claims processing.
“While AI promises innovation for several areas of healthcare, the review and denial of medical insurance claims—some of which represent life-changing treatments and procedures—should be left to physicians who can make nuanced clinical judgments,” said Shelby Job, ArMA communications director, in a statement following that state’s passage of the House bill in February.
The bill is now being debated in the Arizona Senate. If the Senate passes its version, the two sides will need to reconcile their bills.
“Patients deserve healthcare delivered by humans with compassionate medical expertise, not pattern-based computer algorithms designed by insurance companies,” said ArMA President Nadeem Kazi, MD (above), in a news release. (Photo copyright: Arizona Medical Association.)
Multiple States Move to Limit Use of AI in Claims Denials
In an Arizona House of Representatives Committee on Commerce meeting, state Republican representative Julie Willoughby, who is also an ER nurse, said that “she hopes the bill will protect Arizonians from losing healthcare access due to AI interference,” NBC News reported following passage of the House bill.
“What we’re asking for in this is that any claims that are denied have a provider look them over for completeness to ensure that there isn’t anything that the AI algorithm may not have accounted for,” she said.
If signed into law, the bill will require a medical director at the insurance carrier in question to “individually review each claim or prior authorization before a healthcare insurer is able to deny a claim for that patient,” NBC News noted.
California passed similar legislation in September that would “ensure that a licensed physician supervises the use of AI decision-making tools when they are used to inform decisions to approve, modify, or deny requests by providers,” NBC News reported.
The author of the California bill, Democratic senator Josh Becker, JD, argued upon the bill’s passing that AI “should never replace the expertise and judgment of physicians,” adding, “An algorithm cannot fully understand a patient’s unique medical history or needs, and its misuse can lead to devastating consequences.”
And in Texas, a bill introduced by Republican senator Charles Schwertner, MD, states that AI “should not be used as the ‘sole basis of a decision to wholly or partly deny, delay, or modify healthcare services,’” NBC News reported.
In a statement, the Texas Coalition of Patients said the bill is “crucial in ensuring that life-altering healthcare decisions remain in the hands of medical professionals rather than Big Insurance’s automated systems.”
In all, 11 states have introduced legislation to “to push back on artificial intelligence use in reviewing medical claims,” according to NBC News.
In May 2023, The Dark Report explored payer claims denials, and it was acknowledged back then that automated systems were already reviewing claims.
And then there are the lawsuits. According to The Guardian, Cigna, Humana, and UnitedHealth all face class-action lawsuits concerning the use of AI to “deny lifesaving care.”
Can AI Coexist with Human-based Care?
Although at this time AI may not understand the nuanced complexities of healthcare claims, there seem to be plenty of uses for it in healthcare decision-making. It can analyze large sets of data for diagnosis, transcribe medical documents using automatic speech recognition, and streamline administrative tasks––all of which can help a workforce plagued by staff burnout and shortages, Los Angeles Pacific University noted.
And though its use in payer claims reviews and denials is being resisted, AI will likely continue to help doctors diagnose disease and make better treatment decisions. Nevertheless, clinical laboratory and pathology workers should be aware of how the tool is being used and keep an eye out for suspicious claims denials.
—Ashley Croce
