WHAT THIS BILL REGULATES · 1 REQUIREMENT TYPE
How Is This Bill Enforced
Verbatim statutory text on the left; plain-language analysis and a per-section checklist on the right. Numbered markers cross-link to the matching checklist row.
(a)(1)–(4) As used in this section, the following terms shall have the following meanings: (1) "Adverse determinationAdverse determination"Adverse determination" shall have the same meaning as such term is defined in section four thousand nine hundred of the public health law.Ins. Law § 338(a)(1)" shall have the same meaning as such term is defined in section four thousand nine hundred of the public health law. (2) "Artificial intelligence-based algorithmArtificial intelligence-based algorithm"Artificial intelligence-based algorithm" means any artificial system that performs tasks under varying and unpredictable circumstances without significant human oversight or that can learn from experience and improve performance when exposed to data sets.Ins. Law § 338(a)(2)" means any artificial system that performs tasks under varying and unpredictable circumstances without significant human oversight or that can learn from experience and improve performance when exposed to data sets. (3) "Clinical peer reviewerClinical peer reviewer"Clinical peer reviewer" shall have the same meaning as such term is defined in section four thousand nine hundred of the public health law.Ins. Law § 338(a)(3)" shall have the same meaning as such term is defined in section four thousand nine hundred of the public health law. (4) "Utilization reviewUtilization review"Utilization review" shall have the same meaning as such term is defined in section forty-nine hundred of the public health law.Ins. Law § 338(a)(4)" shall have the same meaning as such term is defined in section forty-nine hundred of the public health law.
Subsection (a) establishes the key defined terms for the section. It defines artificial intelligence-based algorithm broadly as any artificial system that performs tasks under varying and unpredictable circumstances without significant human oversight, or that can learn from experience and improve performance when exposed to data sets. Three other terms — adverse determination, clinical peer reviewer, and utilization review — are cross-referenced to existing definitions in Public Health Law § 4900.
(b) 1 The superintendent shall require all insurers authorized to write accident and health insurance in this state, corporations organized pursuant to article forty-three of this chapter, and a health maintenance organization certified pursuant to article forty-four of the public health law to notify insureds and enrollees about the use or lack of use of artificial intelligence-based algorithmsArtificial intelligence-based algorithm"Artificial intelligence-based algorithm" means any artificial system that performs tasks under varying and unpredictable circumstances without significant human oversight or that can learn from experience and improve performance when exposed to data sets.Ins. Law § 338(a)(2) in the utilization reviewUtilization review"Utilization review" shall have the same meaning as such term is defined in section forty-nine hundred of the public health law.Ins. Law § 338(a)(4) process on the accessible Internet website of such insurer authorized to write accident and health insurance in this state, corporation organized pursuant to article forty-three of this chapter, or health maintenance organization certified pursuant to article forty-four of the public health law.
Subsection (b) requires the Superintendent to mandate that all covered health insurers, Article 43 corporations, and Article 44 HMOs notify their insureds and enrollees about whether they use (or do not use) AI-based algorithms in the utilization review process. This disclosure must be posted on the entity's accessible internet website. The obligation is notable in that it requires disclosure of both the use and the lack of use of AI algorithms, ensuring affirmative confirmation regardless of AI adoption status.
(c) 2 Every insurer authorized to write accident and health insurance in this state, corporation organized pursuant to article forty-three of this chapter, and health maintenance organization certified pursuant to article forty-four of the public health law shall submit the artificial intelligence-based algorithmsArtificial intelligence-based algorithm"Artificial intelligence-based algorithm" means any artificial system that performs tasks under varying and unpredictable circumstances without significant human oversight or that can learn from experience and improve performance when exposed to data sets.Ins. Law § 338(a)(2) and training data sets that are being used or will be used in the utilization reviewUtilization review"Utilization review" shall have the same meaning as such term is defined in section forty-nine hundred of the public health law.Ins. Law § 338(a)(4) process to the department. The department shall implement a process that allows the department to certify that these artificial intelligence-based algorithmsArtificial intelligence-based algorithm"Artificial intelligence-based algorithm" means any artificial system that performs tasks under varying and unpredictable circumstances without significant human oversight or that can learn from experience and improve performance when exposed to data sets.Ins. Law § 338(a)(2) and training data sets have minimized the risk of bias based on the covered person's race, color, religious creed, ancestry, age, sex, gender, national origin, handicap or disability and adhere to evidence-based clinical guidelines.
Subsection (c) imposes a dual obligation. First, covered insurers, corporations, and HMOs must submit their AI-based algorithms and training data sets — both those currently in use and those planned for use — to the Department of Financial Services. Second, the Department must implement a certification process to verify that the submitted algorithms and training data have minimized the risk of bias based on enumerated protected characteristics (race, color, religious creed, ancestry, age, sex, gender, national origin, handicap, or disability) and that they adhere to evidence-based clinical guidelines. This effectively creates a pre-market or concurrent-market regulatory review process for AI tools used in utilization review.
(d) 3 A clinical peer reviewerClinical peer reviewer"Clinical peer reviewer" shall have the same meaning as such term is defined in section four thousand nine hundred of the public health law.Ins. Law § 338(a)(3) who participates in a utilization reviewUtilization review"Utilization review" shall have the same meaning as such term is defined in section forty-nine hundred of the public health law.Ins. Law § 338(a)(4) process for an insurer authorized to write accident and health insurance in this state, a corporation organized pursuant to article forty-three of this chapter, and a health maintenance organization certified pursuant to article forty-four of the public health law that initially uses artificial intelligence-based algorithmsArtificial intelligence-based algorithm"Artificial intelligence-based algorithm" means any artificial system that performs tasks under varying and unpredictable circumstances without significant human oversight or that can learn from experience and improve performance when exposed to data sets.Ins. Law § 338(a)(2) for a utilization reviewUtilization review"Utilization review" shall have the same meaning as such term is defined in section forty-nine hundred of the public health law.Ins. Law § 338(a)(4) shall open and document the utilization review of the individual clinical records or data prior to issuing an adverse determinationAdverse determination"Adverse determination" shall have the same meaning as such term is defined in section four thousand nine hundred of the public health law.Ins. Law § 338(a)(1).
Subsection (d) requires that when an insurer, corporation, or HMO initially uses AI-based algorithms in a utilization review, the clinical peer reviewer participating in that review must open and document the review of the individual's clinical records or data before issuing an adverse determination. This establishes a mandatory human review step — ensuring that no AI-driven adverse determination proceeds without documented, individualized clinical record review by a licensed peer reviewer. The provision targets the specific handoff point where AI output informs an adverse clinical decision.
(e)(1)(i) A violation of the provisions of this section shall be subject to one or more of the following penalties at the discretion of the superintendent, in consultation with the commissioner of health and the commissioner of education as applicable: (i) Where a violation is made by an insurer authorized to write accident and health insurance in this state, a corporation organized pursuant to article forty-three of this chapter, or a health maintenance organization certified pursuant to article forty-four of the public health law: (A) Suspension or revocation of license; (B) Refusal, for a period not to exceed one year, to issue a new license; (C) A fine of not more than $5,000 for each violation of this section; or (D) A fine of not more than $10,000 for each willful violation of this section. Fines imposed pursuant to the provisions of this subparagraph on a single insurer authorized to write accident and health insurance in this state, a corporation organized pursuant to article forty-three of this chapter, or a health maintenance organization certified pursuant to article forty-four of the public health law shall not exceed five hundred thousand dollars in aggregate during a calendar year.
(e)(1)(ii) Where a violation is made by a clinical peer reviewerClinical peer reviewer"Clinical peer reviewer" shall have the same meaning as such term is defined in section four thousand nine hundred of the public health law.Ins. Law § 338(a)(3): (A) Suspension or revocation of license; (B) Refusal, for a period not to exceed one year, to issue a new license; (C) A fine of not more than $5,000 for each violation of this section; or (D) A fine of not more than $10,000 for each willful violation of this section. Fines imposed pursuant to the provisions of this subparagraph on a single clinical peer reviewerClinical peer reviewer"Clinical peer reviewer" shall have the same meaning as such term is defined in section four thousand nine hundred of the public health law.Ins. Law § 338(a)(3) shall not exceed one hundred thousand dollars in aggregate during a calendar year.
(e)(2) Penalties pursuant to the provisions of this subsection shall be in addition to any other remedies or penalties that may be imposed under any other applicable law.
Subsection (e) establishes the penalty framework for violations of Section 338, at the Superintendent's discretion in consultation with the Commissioner of Health and Commissioner of Education. Penalties for insurers, Article 43 corporations, and HMOs include license suspension or revocation, refusal to issue a new license for up to one year, fines of up to $5,000 per violation or $10,000 per willful violation, with an aggregate annual cap of $500,000. The same penalty menu applies to clinical peer reviewers, but with a lower aggregate annual cap of $100,000. Penalties are expressly cumulative with any other remedies or penalties under other applicable law.
(f) The superintendent shall promulgate all rules and regulations necessary for the implementation of this section.
Subsection (f) grants the Superintendent broad rulemaking authority to promulgate all rules and regulations necessary for implementing Section 338. This is a standard delegation provision that enables the Department of Financial Services to flesh out the operational requirements of the notification, submission, certification, and documentation obligations established in subsections (b) through (d).
This act shall take effect on the sixtieth day after it shall have become a law. Effective immediately, the addition, amendment and/or repeal of any rule or regulation necessary for the implementation of this act on its effective date are authorized to be made and completed on or before such effective date.
Section 2 provides that the act takes effect on the sixtieth day after it becomes law. It also authorizes the immediate addition, amendment, or repeal of any rule or regulation necessary for implementation, so that rulemaking may proceed in advance of the operative date.