The Illinois State Legislature has introduced a new bill, the Artificial Intelligence Systems Use in Health Insurance Act (AI Act), aimed at regulating the use of artificial intelligence by health insurers. This legislation seeks to provide oversight and transparency for AI-driven decisions that impact consumers. The Department of Insurance will be granted expanded authority to monitor and regulate insurers’ AI practices, ensuring compliance with state and federal laws.

Enhancing Oversight and Regulatory Authority

The AI Act empowers the Illinois Department of Insurance to oversee the implementation and utilization of AI systems by insurers operating within the state. This includes the ability to conduct investigations and take market conduct actions if necessary. Insurers must now adhere to stringent guidelines when using AI for coverage determinations, ensuring that these decisions are not solely based on automated processes.

To ensure robust oversight, the Department can request detailed information from insurers regarding their AI governance, risk management protocols, and compliance measures. This includes documentation on the development, monitoring, and auditing of AI models, as well as any third-party systems used. Such transparency aims to build consumer trust and prevent potential misuse of AI technologies. Furthermore, the Department has the power to establish rules requiring insurers to disclose their AI usage, promoting greater clarity and accountability in decision-making processes.

Promoting Transparency and Consumer Protection

The AI Act introduces significant protections for consumers by prohibiting insurers from making adverse decisions based solely on AI systems. Any denial, reduction, or termination of benefits must undergo meaningful human review, ensuring that AI is not the sole determinant of critical outcomes. This measure addresses concerns about the opacity of AI-driven decisions and promotes fairness in the insurance industry.

In addition to enhancing consumer protection, the AI Act aligns with broader regulatory trends. For instance, the Centers for Medicare & Medicaid Services (CMS) issued a Final Rule in 2023, emphasizing that Medicare Advantage plans must base medical necessity determinations on individual circumstances rather than algorithms. As more regulations emerge in the AI space, insurers must reassess their compliance programs to mitigate risks associated with AI usage. Public scrutiny and potential litigation underscore the importance of maintaining robust legal frameworks and policies to navigate this evolving landscape.