Laws & Statutes › MT › MT-HB-556
HB-556
MT · State · USA
MT
USA
● Failed
Effective Date
2025-10-01
Montana HB 556 — An Act Revising Laws Related to the Use of Artificial Intelligence in Insurance; Applying Restrictions to the Use of Artificial Intelligence in Relation to Health Insurance Issuers; Providing a Definition; and Amending Section 33-18-201, MCA
Montana HB 556 restricts how health insurance issuers may use AI, algorithms, or software tools in utilization review and utilization management functions based on medical necessity. The bill requires that AI tools base determinations on individualized clinical data rather than solely on group datasets, prohibits AI from supplanting healthcare provider decision-making or making medical necessity determinations (which must be made by licensed physicians or competent health care professionals), and mandates non-discrimination, periodic performance review, patient data use limitations, and regulatory audit access. It also amends Montana's Unfair Claim Settlement Practices statute (MCA § 33-18-201) to make non-compliant use of AI in claims a prohibited practice. Enforcement is by the Commissioner of Securities and Insurance; no private right of action is created.
Legislative History
2024-12-15 (LC) Drafter Assigned (LC) Drafter Assigned
2025-02-11 (LC) Draft in Legal Review (LC) Draft in Legal Review
2025-02-11 (LC) Draft in Edit (LC) Draft in Edit
2025-02-14 (LC) Draft in Input/Proofing (LC) Draft in Input/Proofing
2025-02-15 (LC) Draft in Final Drafter Review (LC) Draft in Final Drafter Review
2025-02-16 (LC) Draft in Assembly (LC) Draft in Assembly
2025-02-17 (LC) Draft Ready for Delivery (LC) Draft Ready for Delivery
2025-02-18 introduced (H) Introduced
2025-02-18 (LC) Draft Delivered to Requester (LC) Draft Delivered to Requester
2025-02-18 (H) Fiscal Note Requested (H) Fiscal Note Requested
2025-02-19 committee referral (H) Referred to Committee (H) Business and Labor
2025-02-19 introduced (H) First Reading
2025-02-21 (H) Hearing (H) Business and Labor (H) Hearing (H) Business and Labor
2025-02-25 (H) Fiscal Note Received (H) Fiscal Note Received
2025-02-25 (H) Fiscal Note Signed (H) Fiscal Note Signed
2025-02-25 (H) Fiscal Note Printed (H) Fiscal Note Printed
2025-02-27 (H) Hearing (H) Business and Labor (H) Hearing (H) Business and Labor
2025-03-01 (H) Tabled in Committee (H) Business and Labor (H) Tabled in Committee (H) Business and Labor
2025-03-12 (H) Missed Deadline for General Bill Transmittal (H) Missed Deadline for General Bill Transmittal
2025-05-20 (H) Died in Process (H) Died in Process
Mapped Requirements
HC-01 Healthcare AI Decision Restrictions H-02 Non-Discrimination & Bias Assessment
Official Sources
Full Text ↗
Entry Last Reviewed
2026-04-02
AI generated
Summary

Montana HB 556 restricts how health insurance issuers may use AI, algorithms, or software tools in utilization review and utilization management functions based on medical necessity. The bill requires that AI tools base determinations on individualized clinical data rather than solely on group datasets, prohibits AI from supplanting healthcare provider decision-making or making medical necessity determinations (which must be made by licensed physicians or competent health care professionals), and mandates non-discrimination, periodic performance review, patient data use limitations, and regulatory audit access. It also amends Montana's Unfair Claim Settlement Practices statute (MCA § 33-18-201) to make non-compliant use of AI in claims a prohibited practice. Enforcement is by the Commissioner of Securities and Insurance; no private right of action is created.

Enforcement & Penalties
Enforcement Authority
Montana Commissioner of Securities and Insurance has enforcement authority. Violations are subject to penalties imposed by the commissioner, including but not limited to those under Title 33, chapter 18 (Unfair Trade Practices). Non-compliant use of AI in claims handling is added to the list of prohibited unfair claim settlement practices under MCA § 33-18-201, which may be enforced by the commissioner as a general business practice. No private right of action is created by this bill.
Penalties
Penalties imposed by the commissioner, including but not limited to those available under Title 33, chapter 18 (Unfair Trade Practices). The bill does not specify dollar amounts for penalties; existing commissioner penalty authority under Title 33 applies. No private damages remedy is created.
Who Is Covered
Compliance Obligations 12 obligations · click obligation ID to open requirement page
HC-01 Healthcare AI Decision Restrictions · HC-01.3 · Deployer · HealthcareFinancial Services
Section 1(1)(a)-(b)
Plain Language
Health insurance issuers using AI, algorithms, or software tools for utilization review or utilization management based on medical necessity must ensure those tools base their determinations on the individual enrollee's medical history, clinical circumstances as presented by the requesting provider, and other relevant clinical information from the enrollee's record. The tools may not base determinations solely on a group dataset. This requires individualized clinical analysis for every determination rather than reliance on population-level data alone.
Statutory Text
(1) A health insurance issuer as defined in 33-22-140 that uses artificial intelligence, an algorithm, or other software tool for the purpose of utilization review or utilization management functions, based in whole or in part on medical necessity, shall comply with this section and shall ensure all of the following: (a) the artificial intelligence, algorithm, or other software tool bases its determination on the following information, as applicable: (i) a covered person's medical or other clinical history; (ii) individual clinical circumstances as presented by the requesting provider; and (iii) other relevant clinical information contained in the covered person's medical or other clinical record; (b) the artificial intelligence, algorithm, or other software tool does not base its determination solely on a group dataset;
HC-01 Healthcare AI Decision Restrictions · HC-01.1HC-01.2 · Deployer · HealthcareFinancial Services
Section 1(2)
Plain Language
AI tools may not deny, delay, or modify health care services based on medical necessity — not even as a partial basis. Every medical necessity determination must be made by a licensed physician or a health care professional competent in the specific clinical area at issue. That professional must review the requesting provider's recommendation, the enrollee's clinical history, and individual clinical circumstances. This is an absolute prohibition on AI making adverse coverage decisions, not merely a requirement for human oversight — the AI tool cannot serve as even a partial basis for adverse determinations on medical necessity grounds.
Statutory Text
(2) Notwithstanding subsection (1), the artificial intelligence, algorithm, or other software tool may not deny, delay, or modify health care services based, in whole or in part, on medical necessity. A determination of medical necessity must be made only by a licensed physician or a licensed health care professional competent to evaluate the specific clinical issues involved in the health care services requested by the provider, as provided in subsection (1)(a)(ii), by reviewing and considering the requesting provider's recommendation, the enrollee's medical or other clinical history, as applicable, and individual clinical circumstances.
HC-01 Healthcare AI Decision Restrictions · HC-01.1 · Deployer · HealthcareFinancial Services
Section 1(1)(d)
Plain Language
AI tools used in utilization review may not replace or override healthcare provider decision-making. This is a separate obligation from the medical necessity prohibition in subsection (2) — it applies broadly to all utilization review functions, not just adverse medical necessity determinations. The AI tool must remain subordinate to provider clinical judgment across all utilization review contexts.
Statutory Text
(d) the artificial intelligence, algorithm, or other software tool does not supplant health care provider decisionmaking;
H-02 Non-Discrimination & Bias Assessment · Deployer · HealthcareFinancial Services
Section 1(1)(e)-(f)
Plain Language
Health insurance issuers must ensure their AI tools do not discriminate against enrollees — directly or indirectly — in violation of state or federal anti-discrimination law, including Montana's Human Rights Act (MCA § 49-2-309). The tools must also be fairly and equitably applied, consistent with applicable HHS regulations and guidance. This imposes both a non-discrimination obligation and an affirmative fair-application requirement, though the bill does not specify a particular testing or assessment methodology.
Statutory Text
(e) the use of the artificial intelligence, algorithm, or other software tool does not discriminate, directly or indirectly, against enrollees in violation of state or federal law, including 49-2-309; (f) the artificial intelligence, algorithm, or other software tool is fairly and equitably applied, including in accordance with any applicable regulations and guidance issued by the federal department of health and human services;
HC-01 Healthcare AI Decision Restrictions · HC-01.7 · Deployer · HealthcareFinancial Services
Section 1(1)(g)
Plain Language
Health insurance issuers must ensure their AI tools are accessible for audit or compliance review by the Montana Department of Insurance. This means the tools, their criteria, and their outputs must be available for regulatory inspection — issuers cannot claim proprietary secrecy to block department review. Access is governed by applicable state and federal law.
Statutory Text
(g) the artificial intelligence, algorithm, or other software tool is open to inspection for audit or compliance reviews by the department pursuant to applicable state and federal law;
HC-01 Healthcare AI Decision Restrictions · HC-01.6 · Deployer · HealthcareFinancial Services
Section 1(1)(h)
Plain Language
Health insurance issuers must include disclosures about their use and oversight of AI tools in their written utilization review policies and procedures. This is a documentation and disclosure obligation — the issuer's written policies must affirmatively address how AI is used, what oversight mechanisms are in place, and how the requirements of this section are satisfied.
Statutory Text
(h) disclosures pertaining to the use and oversight of the artificial intelligence, algorithm, or other software tool are contained in the written policies and procedures, as required by this section;
HC-01 Healthcare AI Decision Restrictions · HC-01.4 · Deployer · HealthcareFinancial Services
Section 1(1)(i)
Plain Language
Health insurance issuers must periodically review and revise their AI tools' performance, use, and outcomes to maximize accuracy and reliability. This is a continuing obligation — not a one-time pre-deployment check. The bill does not specify a review frequency, but the obligation is ongoing for as long as the tool is in use.
Statutory Text
(i) the artificial intelligence, algorithm, or other software tool's performance, use, and outcomes are periodically reviewed and revised to maximize accuracy and reliability;
HC-01 Healthcare AI Decision Restrictions · HC-01.5 · Deployer · HealthcareFinancial Services
Section 1(1)(j)
Plain Language
Patient data used by AI tools in utilization review must not be repurposed beyond its intended and stated use. This data use limitation aligns with HIPAA requirements and applicable Montana insurance law. Health insurance issuers must ensure their AI tools do not use patient clinical data collected for utilization review for secondary purposes such as marketing, underwriting, or model training beyond the stated purpose.
Statutory Text
(j) patient data is not used beyond its intended and stated purpose, consistent with the federal Health Insurance Portability and Accountability Act of 1996, Public Law 104-191, and this title, as applicable;
Other · Deployer · HealthcareFinancial Services
Section 1(1)(k)
Plain Language
AI tools used in utilization review must not directly or indirectly cause harm to enrollees. This is a broad residual safety obligation — a catch-all that supplements the more specific requirements in subsections (a) through (j). The term 'harm' is not defined, which leaves significant interpretive latitude to the commissioner and courts. This likely covers both physical harm from inappropriate care denials and financial or administrative harm from incorrect claims processing.
Statutory Text
(k) the artificial intelligence, algorithm, or other software tool does not directly or indirectly cause harm to the enrollee.
Other · HealthcareFinancial Services
MCA § 33-18-201(15)
Plain Language
This amendment adds a new prohibited practice to Montana's Unfair Claim Settlement Practices statute: using AI in a way that does not comply with the requirements of Section 1 when handling claims under a policy. This does not create a new compliance obligation — it makes non-compliance with Section 1 independently actionable as an unfair claim settlement practice, which carries its own enforcement consequences under Title 33, chapter 18.
Statutory Text
(15) use artificial intelligence in a way that is not prescribed under [section 1] relating to claims under a policy.
Other · HealthcareFinancial Services
Section 1(4)
Plain Language
Health insurance issuers must comply with any applicable federal HHS rules and guidance on AI use. The Montana Department of Insurance, in consultation with the Montana Department of Public Health and Human Services, may issue its own implementing guidance within one year of any federal HHS rulemaking or guidance on AI. This creates no new independent obligation — it cross-references existing and future federal requirements and authorizes state rulemaking.
Statutory Text
(4) A health insurance issuer subject to this section shall comply with applicable federal rules and guidance issued by the federal department of health and human services regarding the use of artificial intelligence, an algorithm, or other software tools. The department in consultation with the Montana department of public health and human services may issue guidance to implement this section within 1 year of the adoption of federal rules or the issuance of guidance by the federal department of health and human services regarding the use of artificial intelligence, an algorithm, or other software tools.
Other · HealthcareFinancial Services
Section 1(1)(c)
Plain Language
AI tools' criteria and guidelines must comply with Montana's insurance code (Title 33) and applicable federal law. This is a pass-through requiring that AI tools do not introduce criteria or guidelines that would violate existing regulatory requirements — it creates no new obligation beyond existing law compliance.
Statutory Text
(c) the artificial intelligence, algorithm, or other software tool's criteria and guidelines complies with this title and applicable federal law;