On November 25, 2024, the Illinois State Legislature launched Home Invoice 5918 IL HB5918, the Synthetic Intelligence Methods Use in Well being Insurance coverage Act (“AI Act”). It supplies the Illinois Division of Insurance coverage (the “Division”) regulatory oversight of insurers utilizing synthetic intelligence for determinations that have an effect on customers. The proposed invoice grants the Division the flexibility to undertake guidelines, together with emergency guidelines per the Illinois Administrative Process Act, to implement and administer the AI Act.
The AI Act requires regulatory oversight of using AI methods and disclosure of AI utilization. The main focus of the regulatory oversight of AI methods surrounds using AI in making or supporting antagonistic determinations that would have an effect on customers.
The AI Act permits the Division to watch the conduct of all insurers who function in Illinois, together with insurers’ improvement, implementation, and use of AI-driven fashions in protection determinations. Beneath the invoice, such conduct is topic to investigation or market conduct motion. The invoice expands the Division’s investigative instruments as they could (1) inquire additional on related inquiries to particular fashions, AI methods, or functions of a mannequin or AI system; and (2) additionally make requests for data and documentation of AI methods governance, danger administration, AI use protocols, data and documentation referring to the insurer’s preacquisition and pre-utilization diligence, monitoring, auditing of information or AI methods developed by a 3rd get together, and knowledge and documentation referring to implementation and compliance with the insurer’s AI methods program.
For insurers working in Illinois, the AI Act prevents insurers from issuing an antagonistic shopper end result on the denial, discount, or termination of advantages or insurance coverage the place the insurers solely use an AI system or predictive mannequin. Insurers should meaningfully overview such choices when using an AT system or predictive mannequin is concerned.
To reinforce transparency and promote shopper belief, the Division has the flexibility to undertake guidelines which will require the insurer to reveal its AI use. Whereas the AI Act itself doesn’t go into additional element on such guidelines, the Division has the authority to set guidelines that require full and honest disclosure on the style and content material of the insurers’ AI use.
Insurers licensed to conduct enterprise in Illinois should adjust to the AI Act. Any determination that impacts the patron that entails superior analytical and computational applied sciences (together with AI methods and machine studying), requires the insurers to adjust to relevant federal and State legal guidelines, laws, and guidelines, together with each insurance coverage legal guidelines and legal guidelines addressing unfair commerce practices and unfair discrimination.
Whereas the AI Act could also be a proposed invoice, the Facilities for Medicare & Medicaid Providers (“CMS”) took a stance on AI overview of denial, discount or termination of insurance coverage when it issued a Ultimate Rule in April 2023 that grew to become efficient in January 2024. CMS’ Ultimate Rule made clear that Medicare Benefit plans should make medical necessity determinations based mostly on the enrollee’s particular circumstances as an alternative of counting on algorithms. Moreover, such determinations have to be reviewed by a doctor or applicable healthcare skilled.
As extra legal guidelines and laws enter the insurance coverage AI area, insurers might want to take a better have a look at their compliance packages and insurance policies and regulate their operations. There are quite a few dangers when utilizing AI and its algorithms, and the rising use of AI within the healthcare and insurance coverage industries has raised important considerations in regards to the opacity of the AI-driven choices. Furthermore, the elevated reliance on AI fashions for claims adjudication, protection determinations, and pricing can result in conditions the place a shopper is denied protection or advantages based mostly on components which are unclear or obscure.
As public scrutiny of well being insurers is on the rise, the probability of AI-focused litigation may also enhance. In an ever-evolving and dynamic authorized panorama of AI in insurance coverage regulation, it will be significant for insurers to have their authorized groups help with the overview, upkeep, and maintenance of their AI insurance policies. For extra data on how your group can enhance its AI compliance or questions concerning the AI Act, please contact a member of the Sheppard Mullin Healthcare Workforce for help.
