State legislatures are enacting laws that allow health insurers to use AI for prior authorization and utilization review tasks while explicitly requiring licensed healthcare professionals to make final medical necessity decisions. Four states-Georgia, Iowa, Utah, and Washington-have passed new laws since April, joining a wave of states that began regulating AI in health insurance coverage determinations in 2025.
According to an analysis from Sheppard Mullin's Healthcare Law Blog published July 2, the trend has accelerated. The analysis, which builds on an earlier April survey, finds an emerging consensus: AI can assist insurers with administrative functions, but algorithms cannot replace the clinical judgment of licensed professionals when patients' access to care is at stake.
Four new state laws take shape
Georgia's Senate Bill 444, effective January 1, 2027, authorizes insurers and utilization review entities to use AI systems for automating tasks and participating in decision-making. But the law prohibits AI from issuing an adverse determination until a qualified human reviewer conducts a utilization review involving a clinical peer. The legislation also specifies that AI cannot supersede that clinical peer's judgment. Georgia stops short of requiring insurers to disclose AI use to members or providers.
Iowa's House File 2635, effective July 1, 2026, permits AI in prior authorization only for initial reviews. The law bars AI from serving as the sole basis for denying, delaying, or downgrading requests involving medical necessity. Qualified reviewers or clinical peers must make those decisions and participate in consultations and appeals.
Utah's Senate Bill 319, which takes effect January 1, 2027, allows insurers to use AI during utilization management while requiring individuals making adverse preauthorization determinations to exercise independent medical judgment. The law prohibits reliance solely on recommendations from another source-a provision that encompasses AI-generated recommendations. Utah also requires insurers to disclose their AI use to the state Insurance Department and publicly on their websites.
Washington adopted the broadest framework among the newly enacted laws. Effective June 11, 2026, Senate Bill 5395 governs health carriers, health benefit managers, and public employee health plans. Only licensed physicians or other licensed health professionals may deny prior authorization requests based on medical necessity, and AI cannot be the sole basis for those decisions. Human reviewers must evaluate each enrollee's clinical history, provider recommendations, and individual circumstances. The law also requires AI systems to operate fairly, comply with privacy laws, undergo periodic accuracy reviews, and remain subject to audit by the state insurance commissioner.
A regulatory principle takes hold
The earlier Sheppard Mullin analysis, published in April, documented a first wave of legislative proposals. Pennsylvania lawmakers proposed requiring insurers to file annual AI compliance statements and disclose AI use to providers and members. Oklahoma advanced a more permissive proposal requiring human review but not necessarily independent human judgment. The analysis also noted that Arizona, Maryland, Nebraska, and Texas had enacted AI for Insurance legislation in 2025.
Indiana enacted restrictions preventing AI from serving as the sole basis for downcoding claims based on medical necessity and imposed parallel obligations on providers using AI to prepare claims. Alabama adopted disclosure, certification, and fairness requirements. Louisiana and New Hampshire considered measures emphasizing physician oversight and documentation before those bills ultimately failed.
While states take different approaches to disclosure, reporting, and auditing requirements, the analyses point to a common regulatory principle. AI may improve efficiency in utilization review, but final decisions affecting patient access to care must remain grounded in independent human clinical judgment rather than algorithmic recommendations alone. This principle is reshaping how AI for Healthcare tools are governed in coverage decisions.
Why this matters for healthcare professionals
For physicians, nurses, and utilization review clinicians, these laws affirm that your clinical judgment carries legal weight that algorithms cannot override. If you practice in a state with these protections, an adverse determination cannot stand on AI alone-a licensed peer must review the decision. Understanding the specific requirements in your state-whether disclosure rules in Utah, audit provisions in Washington, or the clinical peer mandates in Georgia and Iowa-will help you advocate for patients when coverage is denied. The legislative direction is clear: AI is a tool for the insurer's back office, not a substitute for the clinician's front-line decision.
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