Regulon.AI — SD-SB-169 · SD SB 169 (Health Carrier AI Utilization Review)

Summary

Regulates South Dakota health carriers that use AI, algorithms, or other software tools for utilization review of healthcare services, including carriers that contract with third-party entities using such tools. Requires that AI-based utilization review determinations be grounded in individualized patient clinical data rather than solely group-level datasets, and mandates equal and consistent application across all patients and subscriber groups. Prohibits AI tools from independently making adverse determinations — denials, delays, or modifications must be made by a licensed physician or competent healthcare professional after individualized clinical review. Requires annual reporting to the Legislative Research Council on AI use and human oversight in utilization review. Grants the Division of Insurance inspection authority and empowers the Attorney General to issue cease-and-desist orders for noncompliance.

Enforcement & Penalties

Enforcement Authority

The Division of Insurance may inspect a health carrier's automated system at any time to ensure compliance. If the Division determines noncompliance, it notifies the Attorney General, who may direct the health carrier to cease and desist from further noncompliant activities. No private right of action is created. Enforcement is agency-initiated through Division inspection and Attorney General cease-and-desist authority.

Penalties

The statute specifies only cease-and-desist authority directed by the Attorney General. No monetary penalties, civil damages, injunctive relief, or attorney fees provisions are included in the bill text.

Who Is Covered

Compliance Obligations 5 obligations · click obligation ID to open requirement page

HC-01 Healthcare AI Decision Restrictions · HC-01.3 · Deployer · Healthcare

Section 1(1)-(2)

Plain Language

Health carriers using AI tools for utilization review — whether directly or through contracted entities — must ensure those tools base their determinations on individualized patient clinical data: the patient's medical history, the individual clinical circumstances presented by the requesting provider, and other relevant clinical information in the patient's record. The AI tool may not base its determination solely on group-level or aggregate datasets. This means carriers must configure and validate their AI utilization review tools to ingest and weigh individual enrollee data, not just population-level benchmarks.

Statutory Text

Any health carrier that makes determinations or provides advice about third-party payment for any health care services using an artificial intelligence, algorithm, or other software tool, for the purpose of utilization review and any health carrier that contracts with or otherwise works through an entity that uses an artificial intelligence, algorithm, or other software tool, for the purpose of utilization review, shall ensure the following: (1) The artificial intelligence, algorithm, or other software tool bases its determination on the following information, as applicable: (a) A patient's medical or other clinical history; (b) Individual clinical circumstances, as presented by the requesting provider; and (c) Other relevant clinical information contained in the patient's medical or other clinical record; (2) The artificial intelligence, algorithm, or other software tool does not base its determination solely on a group dataset;

HC-01 Healthcare AI Decision Restrictions · Deployer · Healthcare

Section 1(3)-(4)

Plain Language

Health carriers must ensure their AI utilization review tools are applied equally to all patients and configured consistently across all subscriber groups and individuals covered by a health benefit plan. The tool must produce the same results for patients with similar clinical presentations and considerations — no subscriber group or individual may receive differential AI-driven review outcomes. Carriers must also ensure the tool complies with applicable HHS regulations and guidance. This is a non-discrimination and consistency obligation specific to AI-driven utilization review, distinct from the individualized-data requirement in Section 1(1)-(2).

Statutory Text

(3) The artificial intelligence, algorithm, or other software tool is applied equally for all patients, including in accordance with any applicable regulations and guidance issued by the United States Department of Health and Human Services; and (4) The artificial intelligence, algorithm, or other software tool is configured and applied in a standard consistent manner for all subscriber groups and individuals covered by a health benefit plan, as defined in § 58-17-66, so that the resulting decisions are the same for all patients with similar clinical presentations and considerations.

HC-01 Healthcare AI Decision Restrictions · HC-01.1 HC-01.2 · Deployer · Healthcare

Section 2

Plain Language

AI tools used for utilization review are categorically prohibited from independently denying, delaying, or modifying a healthcare coverage determination. Every adverse determination must be made by a licensed physician or a licensed healthcare professional who is competent to evaluate the specific clinical issues at hand. That professional must review and consider the requesting provider's recommendation, the patient's medical history, and the patient's individual clinical circumstances before making the determination. This means the AI tool may inform the process, but the final adverse decision must be made by a qualified human clinician — the AI cannot serve as the sole or primary basis for any denial, delay, or modification.

Statutory Text

An artificial intelligence, algorithm, or other software tool used for the purpose of utilization review pursuant to section 1 of this Act may not deny, delay, or modify a determination to provide health care services. Any adverse determination may be made only by a licensed physician or a licensed healthcare professional competent to evaluate the specific clinical issues involved in the requested services, and only after reviewing and considering the requesting provider's recommendation, the patient's medical or other clinical history as applicable, and individual clinical circumstances.

R-02 Regulatory Disclosure & Submissions · R-02.1 · Deployer · Healthcare

Section 3

Plain Language

Health carriers using AI for utilization review — directly or through contracted entities — must compile and submit an annual report to the Executive Board of the Legislative Research Council by December 1 each year. The report must detail how AI tools were used in the utilization review process during the preceding fiscal year and describe the nature and degree of human review and oversight applied to affirm or negate determinations. This is a proactive, scheduled legislative reporting obligation — not triggered by an incident or regulatory request. Note the report goes to a legislative body, not a regulatory agency.

Statutory Text

Any health carrier that makes determinations or provides advice about third-party payment for any health care services using an artificial intelligence, algorithm, or other software tool for the purpose of utilization review or that contracts with or otherwise works through an entity that uses an artificial intelligence, algorithm, or other software tool for the purpose of utilization review shall compile an annual report detailing how, during the preceding fiscal year, the artificial intelligence, algorithm, or other software tool was used in the utilization review process and the nature and degree of human review and oversight that was used to afform or negate any determinations. The report must be forwarded to the Executive Board of the Legislative Research Council on or before December first of each year.

R-02 Regulatory Disclosure & Submissions · R-02.2 · Deployer · Healthcare

Section 4

Plain Language

The Division of Insurance has unrestricted authority to inspect a health carrier's AI-based utilization review system at any time to verify compliance with the individualized-data and human-review requirements of this Act. Health carriers must therefore maintain their AI systems and related documentation in a state of inspection-readiness. If the Division finds noncompliance, it notifies the Attorney General, who may order the carrier to cease and desist from further noncompliant activities. There is no cure period or pre-inspection notice requirement specified.

Statutory Text

The Division of Insurance may, at any time, inspect a health carrier's automated system to ensure that the health carrier's use of artificial intelligence, algorithms, or other software tools is in compliance with sections 1 and 2 of this Act. If the division determines that the automated system is not in compliance, the division shall notify the attorney general who may direct the health carrier to cease and desist from engaging in further noncompliant activities.