Introduction
California SB 1120 [3], effective September 28, 2024 [1], introduces comprehensive regulations for the use of artificial intelligence (AI) in healthcare, particularly focusing on utilization review (UR) and utilization management (UM) processes. The legislation aims to ensure that AI-driven decisions in healthcare are individualized, transparent [2] [3], and compliant with anti-discrimination laws, while maintaining human oversight [2].
Description
California SB 1120 [3], effective September 28, 2024 [1], establishes comprehensive regulations governing the use of AI technologies, algorithms [1] [2] [4], and software tools in healthcare, specifically within utilization review (UR) and utilization management (UM) processes. The legislation mandates that health care service plans and disability insurers base their AI systems on specific clinical data derived from an enrollee’s medical history and individual circumstances [2], rather than relying on generalized datasets [2] [3]. This approach is designed to ensure that decision-making is individualized and reflective of each patient’s unique medical needs.
A qualified human individual must review all medical necessity and coverage determinations [1], ensuring that decisions affecting healthcare services are not solely reliant on automated systems [1]. AI tools are explicitly prohibited from autonomously denying [2] [3], delaying [2] [3], or modifying care; final determinations regarding medical necessity must be made by licensed healthcare professionals [3]. This requirement underscores the importance of human oversight in maintaining patient safety and ensuring that professional medical judgment prevails in critical healthcare decisions. Additionally, the algorithms used must be open to inspection for audit and compliance [4], and outcomes from AI usage must be periodically reviewed to ensure accuracy and adherence to the Act [4].
Transparency is a key component of SB 1120, requiring health care service plans and disability insurers to disclose the utilization of AI tools in their processes, including compliance records and written policies [2] [3]. These disclosures must be made available to providers [3], enrollees [2] [3] [4], and the public upon request [2] [3], reinforcing accountability in the use of AI technologies. Regulated parties are specifically required to outline the oversight of AI in their policies [4], particularly regarding the review and approval processes for healthcare service requests based on medical necessity [4].
The application of AI systems must adhere to state and federal anti-discrimination laws [3], ensuring fairness and equity in healthcare delivery. This includes a prohibition against discrimination against enrollees in violation of federal or state law. Regular audits and compliance reviews conducted by the California Department of Managed Health Care and the Department of Insurance are mandated to assess the accuracy [2] [3], reliability [2] [3], and legal compliance of these AI systems [2], including adherence to patient data protection laws such as California’s Confidentiality of Medical Information Act and HIPAA.
Penalties for willful violations of SB 1120 can result in significant administrative sanctions imposed by regulatory authorities [3], highlighting the necessity for health care providers and insurers to evaluate their AI systems for compliance with the new regulations. This evaluation may involve updates to AI models and a commitment to maintaining human oversight in medical necessity determinations [2], ensuring that AI tools do not cause harm to enrollees.
Furthermore, the Centers for Medicare & Medicaid Services have clarified that Medicare Advantage Organizations are permitted to utilize AI systems for coverage determinations [3], provided they comply with existing laws and take individual patient factors into account [2] [3]. Health care service plans and insurers must continuously assess their utilization review practices involving AI tools to ensure compliance with SB 1120 [3], while remaining vigilant in monitoring guidance from regulatory bodies. Legal and compliance teams should prepare for potential audits and ensure transparency [2] [3] in disclosures regarding the use of AI tools in healthcare decision-making.
Conclusion
The enactment of California SB 1120 marks a significant step towards integrating AI in healthcare with a focus on patient-centered care, transparency, and compliance with anti-discrimination laws. By mandating human oversight and regular audits, the legislation seeks to balance technological advancement with patient safety and equity. Health care providers and insurers must adapt to these regulations, ensuring their AI systems are compliant and that they maintain transparency and accountability in their operations.
References
[1] https://www.lexology.com/library/detail.aspx?g=3a9a54ce-e092-4480-be04-eea07285e82d
[2] https://www.fenwick.com/insights/publications/californias-sb-1120-regulates-ai-in-health-plan-utilization-review-and-management-activities-starting-in-january
[3] https://www.jdsupra.com/legalnews/california-s-sb-1120-regulates-ai-in-5062476/
[4] https://www.jdsupra.com/legalnews/california-limits-health-plan-use-of-ai-7360638/
