Regulon — IL-SB-1425 · IL SB 1425 (AI Use in Health Insurance)

2025-01-31 introduced Filed with Secretary by Sen. Laura Fine

2025-01-31 introduced First Reading

2025-01-31 committee referral Referred to Assignments

2025-03-12 committee referral Assigned to Executive

2025-03-19 To AI and Social Media

2025-03-21 Rule 2-10 Committee Deadline Established As April 11, 2025 Rule 2-10 Committee Deadline Established As April 11, 2025

2025-04-11 committee referral Rule 3-9(a) / Re-referred to Assignments

Summary

Illinois SB 1425 regulates insurers authorized to do business in Illinois with respect to their use of AI systems and predictive models in coverage, claims, and benefits decisions. Insurers may not issue adverse consumer outcomes (denial, reduction, or termination of insurance plans or benefits) that result solely from AI or predictive model outputs; all such decisions must be meaningfully reviewed by a human with override authority, under procedures to be established by Department rules. The Department of Insurance is granted broad oversight and investigatory authority over insurers' AI use, including the ability to request documentation on AI governance, risk management, third-party due diligence, and AI systems programs. The Department may adopt rules, including emergency rules, for disclosure standards and implementation. The bill is currently pending (re-referred to Assignments).

Enforcement & Penalties

Enforcement Authority

The Illinois Department of Insurance has regulatory oversight authority, including investigation and market conduct actions regarding insurers' development, implementation, and use of AI systems or predictive models and the outcomes from such use. The Department may request information and documentation from insurers and compel compliance. The Department may adopt rules, including emergency rules, to implement and administer the Act. No private right of action is created by the statute. Enforcement is agency-initiated through the Department's existing investigatory and market conduct authority.

Penalties

The statute does not specify civil penalties, statutory damages, or private remedies. Enforcement is through the Department of Insurance's existing regulatory authority, which may include administrative penalties and corrective actions available under Illinois insurance law.

Who Is Covered

Compliance Obligations 6 obligations · click obligation ID to open requirement page

HC-01 Healthcare AI Decision Restrictions · HC-01.1 · Deployer · HealthcareFinancial Services

Section 10(b)

Plain Language

Insurers may not deny, reduce, or terminate insurance plans or benefits based solely on an AI system or predictive model output. Every decision-making process involving AI or predictive models that leads to a denial, reduction, or termination of plans or benefits must be meaningfully reviewed by a human individual who has the authority to override the AI system's determination. The review procedures themselves will be established by Department of Insurance rules. This is a dual obligation: (1) a categorical prohibition on sole-AI adverse outcomes, and (2) an affirmative human review requirement with override authority for all AI-informed adverse decisions.

Statutory Text

An insurer authorized to do business in this State shall not issue an adverse consumer outcome with regard to the denial, reduction, or termination of insurance plans or benefits that result solely from the use or application of any AI system or predictive model. Any decision-making process concerning the denial, reduction, or termination of insurance plans or benefits that results from the use of AI systems or predictive models shall be meaningfully reviewed, in accordance with review procedures established by Department rules, by an individual with authority to override the AI systems and their determinations.

R-02 Regulatory Disclosure & Submissions · R-02.2 · Deployer · HealthcareFinancial Services

Section 10(a)

Plain Language

Insurers must respond to Department of Insurance requests for information and documentation about their AI systems at any time during an investigation or market conduct action. The Department's authority is broad: it can ask about any specific AI model or system, AI governance and risk management protocols, due diligence and auditing of third-party AI vendors, and compliance with the insurer's own AI systems program. Insurers must comply with such requests. This creates an ongoing obligation to maintain documentation in a producible form, even though the statute does not specify a fixed production timeline.

Statutory Text

The Department's regulatory oversight of insurers includes oversight of an insurer's use of AI systems to make or support adverse determinations that affect consumers. Any insurer authorized to operate in the State is subject to review by the Department in an investigation or market conduct action regarding the development, implementation, and use of AI systems or predictive models and the outcomes from the use of those AI systems or predictive models. The Department may also request other information or documentation relevant to an investigation or market conduct action, and an insurer must comply with that request. The Department's inquiries may include, but are not limited to, questions regarding any specific model, AI system, or application of a model or AI system. The Department may also make requests for information and documentation relating to AI systems governance, risk management, and use protocols; information and documentation relating to the insurer's preacquisition and preutilization diligence, monitoring, and auditing of data or AI systems developed by a third party; and information and documentation relating to implementation and compliance with the insurer's AI systems program.

G-01 AI Governance Program & Documentation · G-01.1 · Deployer · HealthcareFinancial Services

Section 5 (definition of "AI systems program"), Section 10(a), Section 20

Plain Language

Every insurer authorized to do business in Illinois must develop, implement, and maintain a written AI systems program governing the responsible use of AI systems that make or support decisions related to regulated insurance practices. This is established by the definition of 'AI systems program' and reinforced by Section 10(a)'s reference to Department oversight of compliance with the insurer's AI systems program. The statute requires the program to be ongoing — developed, implemented, and maintained — not merely created once. The specifics of what the program must contain are likely to be fleshed out by Department rulemaking.

Statutory Text

"AI systems program" means a written program for the responsible use of AI systems that makes or supports decisions related to regulated insurance practices to be developed, implemented, and maintained by all insurers authorized to do business in the State.

HC-01 Healthcare AI Decision Restrictions · HC-01.7 · Deployer · HealthcareFinancial Services

Section 15

Plain Language

The Department of Insurance is authorized to adopt rules establishing disclosure standards for insurers' use of AI systems, including the manner, content, and specific disclosures required. This is a permissive rulemaking authorization rather than a self-executing disclosure obligation — insurers will not have specific disclosure duties until the Department promulgates rules. However, once rules are adopted, insurers must comply with whatever disclosure standards the Department establishes. This could encompass disclosures to consumers, providers, or regulators depending on the rules adopted.

Statutory Text

The Department of Insurance may adopt rules that include standards for the full and fair disclosure of an insurer's use of AI systems that set forth the manner, content, and required disclosures.

Other · HealthcareFinancial Services

Section 20

Plain Language

This provision confirms that AI-assisted decisions do not exempt insurers from existing insurance law obligations, including unfair trade practices and unfair discrimination laws. It creates no new affirmative AI-specific obligation — it is a compliance pass-through confirming that the use of AI does not create a regulatory gap. The first sentence also scopes the Act to decisions impacting consumers made or supported by AI systems.

Statutory Text

All insurers authorized to do business in Illinois shall comply with this Act regarding any decisions impacting consumers that are made or supported by advanced analytical and computational technologies, including AI systems and machine learning, and must comply with all applicable insurance laws and regulations, including laws addressing unfair trade practices and unfair discrimination. All decisions made and actions taken by authorized insurers using AI systems must comply with applicable federal and State laws, regulations, and rules.

Other · HealthcareFinancial Services

Section 25; 5 ILCS 100/5-45.65 (new)

Plain Language

The Department of Insurance is authorized to adopt rules, including emergency rules, to implement and administer this Act. A conforming amendment to the Illinois Administrative Procedure Act (new Section 5-45.65) deems such emergency rulemaking necessary for the public interest, safety, and welfare, and provides that the emergency rulemaking authorization is repealed one year after the Act's effective date. This is an enabling provision for the Department's rulemaking authority and creates no compliance obligation on insurers.

Statutory Text

The Department may adopt rules, including emergency rules, to implement and administer this Act.