In recent years, insurers have increasingly turned to AI to process claims and prior authorization requests. While these tools can improve efficiency, they also raise concerns about inaccuracies and bias in healthcare decision-making. Errors in algorithm-driven denials of care have, in some cases, resulted in severe health outcomes or even loss of life.
Under SB 1120, which went into effect on January 1, 2025, any denial, delay, or modification of care based on medical necessity must be reviewed and decided by a licensed physician or qualified health care provider with expertise in the specific clinical issues at hand. The law also establishes fair and equitable standards for companies using AI in their utilization review processes, preventing improper or unethical practices.
California State Senator Josh Becker, who authored Senate Bill 1120 that was signed into law by California Governor Gavin Newsom on September 30, 2024, stated: “Artificial intelligence has immense potential to enhance healthcare delivery, but it should never replace the expertise and judgment of physicians. An algorithm cannot fully understand a patient’s unique medical history or needs, and its misuse can lead to devastating consequences. SB 1120 ensures that human oversight remains at the heart of healthcare decisions, safeguarding Californians’ access to the quality care they deserve.”
What SB 1120 (Physicians Make Decisions Act) changes:
1) Requires a health plan or disability insurer, including a specialized plans that uses AI, algorithm, or other software tools for UR/UM for medical necessity, or that contracts with or otherwise works through an entity that provides this service, to comply with UR/UM law and ensure the following:
a) Requires the AI, algorithm, or other software tool to base its determination on the following, as applicable:
i) Medical or other clinical history;
ii) Individual clinical circumstances as presented by the requesting provider;
and,
iii)Other relevant clinical information contained in the medical or other clinical record;
b) Prohibits the AI, algorithm, or other software tool from basing its determination solely on a group dataset;
c) Prohibits the AI, algorithm, or other software tool from supplanting health care provider decision making;
d) Prohibits the use of the AI, algorithm, or other software tool from discriminating, directly or indirectly, against patients in violation of state or federal law;
e) Requires the AI, algorithm, or other software tool to be fairly and equitably applied, including in accordance with any applicable regulations and guidance issued by the federal DHHS;
f) Requires the AI, algorithm, or other software tool to be open to inspection for audit or compliance reviews and pursuant to applicable state and federal law;
g) Requires disclosures pertaining to the use and oversight of the AI, algorithm, or other software tool to be contained in written policies and procedures, as required in existing law;
h) Requires the AI, algorithm, or other software tool’s performance, use, and outcomes to be periodically reviewed and revised to maximize accuracy and reliability;
i) Prohibits patient data from being used beyond its intended and stated purpose, consistent with the Confidentiality of Medical Information Act and the federal Health Insurance Portability and Accountability Act of 1996, as applicable; and,
j) Prohibits the AI, algorithm, or other software tool from directly or indirectly causing harm to the patient.
2) Prohibits the AI, algorithm, or other software tool from denying, delaying, or modifying health care services based in whole or in part on medical necessity.
3) Requires a medical necessity determination to be made only by a licensed physician or other licensed health care professional competent to evaluate the specific clinical issues involved in the health care services requested by the
provider, as provided in existing law, by reviewing and considering the requesting provider’s recommendation and based on the patient’s medical history or other clinical history, as applicable, and individual clinical circumstances.
4) Defines AI as an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
If you or a family member were injured as a result of medical malpractice in California or in another U.S. state, you should promptly find a California medical malpractice lawyer, or a medical malpractice lawyer in your state, who may investigate your medical medical malpractice claim for you and represent you or your family member in a medical medical malpractice case, if appropriate.
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