States Restrict AI Use in Health Insurance Denials

New laws prevent health insurers from relying solely on artificial intelligence to deny, delay, or modify patient care.

Updated on Oct. 16, 2026 in Artificial Intelligence

Bold flat-color editorial illustration depicting a porcelain anatomical heart balanced against a steel cogwheel, symbolizing insurance regulation. — Seven U.S. states have enacted laws requiring human review for health insurance denials, limiting the exclusive use of artificial intelligence algorithms. AI Illustration. Upload story photo >

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Should states restrict health insurance companies from using artificial intelligence to deny patient coverage claims?

Beginning with Washington SB 5395 on June 11, 2026, seven U.S. states have enacted statutes restricting the use of artificial intelligence in insurance coverage decisions. These laws prohibit insurers from using AI as the exclusive basis for denying medical necessity.

Why it matters

These state-level mandates provide medical practices with legal leverage to challenge automated claim denials by citing specific statutes. Practitioners can now demand the credentials of a human reviewer if they believe an AI tool unfairly influenced a coverage decision.

Seven states have enacted laws limiting AI insurance use, including specific requirements such as Utah's 7-day decision deadline for nonurgent cases. Alabama's SB 63 further mandates that insurers certify annually that their tools do not rely exclusively on group data.

The players

Alabama Department of Insurance

This state agency enforces the requirement for insurers to certify annually that AI tools do not rely solely on group data.

The details

Billing teams can now contest AI-driven denials by citing individual state statutes and requesting the name and credentials of the human reviewer responsible for the decision. However, these state-level regulations generally do not extend to self-funded employer plans governed by federal ERISA rules or Medicare Advantage plans.

Washington SB 5395 became effective on June 11, 2026.
Iowa HF 2635 became effective on July 1, 2026.
Alabama SB 63 became effective on October 1, 2026.
Colorado, Georgia, and Utah laws take effect on January 1, 2027.
Illinois SB 3114 takes effect in 2028.

The Tech Race

This wave of state legislation highlights a growing divide between modern automated decision-making and legacy federal regulatory frameworks. These laws replace opaque, algorithm-only denials with mandatory requirements for human accountability and documented clinical reasoning.

Patients may find it easier to appeal medical necessity denials if their health plan is regulated at the state level rather than being a self-funded employer plan. For providers, these laws offer a concrete path to demand human review of coverage decisions that were previously rejected by automated systems.

The takeaway

Advocates for patients should verify whether their specific insurance plan is subject to state law or federal ERISA rules before initiating an appeal. Understanding these regulatory boundaries can save significant time when challenging an automated claim denial.