WHAT THIS BILL REGULATES · 2 REQUIREMENT TYPES
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.
(1) "Adverse determinationAdverse determination"Adverse determination" means a determination by a utilization review agent that health care services provided or proposed to be provided to a patient are not medically necessary or appropriate or are experimental or investigational.Ins. Code § 4201.002(1)" means a determination by a utilization review agentUtilization review agentAs defined in existing Chapter 4201, Insurance Code — the entity conducting utilization review on behalf of a health benefit plan. The bill imposes obligations on utilization review agents regarding use of automated decision systems.Ins. Code § 4201.002 that health care services provided or proposed to be provided to a patient are not medically necessary or appropriate or are experimental or investigational.
(1-a) "AlgorithmAlgorithm"Algorithm" means a computerized procedure consisting of a set of steps used to accomplish a determined task.Ins. Code § 4201.002(1-a)" means a computerized procedure consisting of a set of steps used to accomplish a determined task.
(1-b) "Artificial intelligence systemArtificial intelligence system"Artificial intelligence system" means any machine learning-based system that, for any explicit or implicit objective, infers from the inputs the system receives how to generate outputs, including content, decisions, predictions, and recommendations, that can influence physical or virtual environments.Ins. Code § 4201.002(1-b)" means any machine learning-based system that, for any explicit or implicit objective, infers from the inputs the system receives how to generate outputs, including content, decisions, predictions, and recommendations, that can influence physical or virtual environments.
(1-c) "Automated decision systemAutomated decision system"Automated decision system" means an algorithm, including an algorithm incorporating an artificial intelligence system, that uses data-based analytics to make, suggest, or recommend certain determinations, decisions, judgments, or conclusions.Ins. Code § 4201.002(1-c)" means an algorithmAlgorithm"Algorithm" means a computerized procedure consisting of a set of steps used to accomplish a determined task.Ins. Code § 4201.002(1-a), including an algorithmAlgorithm"Algorithm" means a computerized procedure consisting of a set of steps used to accomplish a determined task.Ins. Code § 4201.002(1-a) incorporating an artificial intelligence systemArtificial intelligence system"Artificial intelligence system" means any machine learning-based system that, for any explicit or implicit objective, infers from the inputs the system receives how to generate outputs, including content, decisions, predictions, and recommendations, that can influence physical or virtual environments.Ins. Code § 4201.002(1-b), that uses data-based analytics to make, suggest, or recommend certain determinations, decisions, judgments, or conclusions.
Section 1 of the Act amends the definitions section of Chapter 4201 of the Insurance Code. It broadens the existing definition of adverse determination to include determinations that services are not "appropriate" — previously the trigger was limited to "not medically necessary" or "experimental or investigational." It also adds three new defined terms: algorithm, artificial intelligence system, and automated decision system. The automated decision system definition is particularly broad, encompassing any algorithm that uses data-based analytics to make, suggest, or recommend determinations, and explicitly includes algorithms that incorporate AI. These definitions set the scope for the operative prohibition in new Section 4201.156.
(a) 1 A utilization review agentUtilization review agentAs defined in existing Chapter 4201, Insurance Code — the entity conducting utilization review on behalf of a health benefit plan. The bill imposes obligations on utilization review agents regarding use of automated decision systems.Ins. Code § 4201.002 may not use an automated decision systemAutomated decision system"Automated decision system" means an algorithm, including an algorithm incorporating an artificial intelligence system, that uses data-based analytics to make, suggest, or recommend certain determinations, decisions, judgments, or conclusions.Ins. Code § 4201.002(1-c) to make, wholly or partly, an adverse determinationAdverse determination"Adverse determination" means a determination by a utilization review agent that health care services provided or proposed to be provided to a patient are not medically necessary or appropriate or are experimental or investigational.Ins. Code § 4201.002(1).
(b) 2 The commissioner may audit and inspect at any time a utilization review agentUtilization review agentAs defined in existing Chapter 4201, Insurance Code — the entity conducting utilization review on behalf of a health benefit plan. The bill imposes obligations on utilization review agents regarding use of automated decision systems.Ins. Code § 4201.002's use of an automated decision systemAutomated decision system"Automated decision system" means an algorithm, including an algorithm incorporating an artificial intelligence system, that uses data-based analytics to make, suggest, or recommend certain determinations, decisions, judgments, or conclusions.Ins. Code § 4201.002(1-c) for utilization review.
(c) This section does not prohibit the use of an algorithmAlgorithm"Algorithm" means a computerized procedure consisting of a set of steps used to accomplish a determined task.Ins. Code § 4201.002(1-a), artificial intelligence systemArtificial intelligence system"Artificial intelligence system" means any machine learning-based system that, for any explicit or implicit objective, infers from the inputs the system receives how to generate outputs, including content, decisions, predictions, and recommendations, that can influence physical or virtual environments.Ins. Code § 4201.002(1-b), or automated decision systemAutomated decision system"Automated decision system" means an algorithm, including an algorithm incorporating an artificial intelligence system, that uses data-based analytics to make, suggest, or recommend certain determinations, decisions, judgments, or conclusions.Ins. Code § 4201.002(1-c) for administrative support or fraud-detection functions.
New Section 4201.156 is the operative heart of the bill. Subsection (a) flatly prohibits utilization review agents from using an automated decision system to make an adverse determination, whether wholly or partly. This goes further than many state AI-in-healthcare laws, which require human review of AI-informed denials but do not categorically bar AI from participating in the decision at all. The "wholly or partly" language forecloses the argument that AI may contribute to a denial so long as a human signs off.
Subsection (b) grants the Commissioner of Insurance standing authority to audit and inspect any utilization review agent's use of automated decision systems for utilization review at any time — a regulatory inspection power not limited to adverse determinations. Subsection (c) carves out administrative support and fraud-detection functions from the prohibition, preserving routine operational uses of AI and algorithms in those contexts.
(a) 3 Notice of an adverse determinationAdverse determination"Adverse determination" means a determination by a utilization review agent that health care services provided or proposed to be provided to a patient are not medically necessary or appropriate or are experimental or investigational.Ins. Code § 4201.002(1) must include: (1) the principal reasons for the adverse determinationAdverse determination"Adverse determination" means a determination by a utilization review agent that health care services provided or proposed to be provided to a patient are not medically necessary or appropriate or are experimental or investigational.Ins. Code § 4201.002(1); (2) the clinical basis for the adverse determinationAdverse determination"Adverse determination" means a determination by a utilization review agent that health care services provided or proposed to be provided to a patient are not medically necessary or appropriate or are experimental or investigational.Ins. Code § 4201.002(1); (3) a description of and the source of the screening criteria and review procedures used as guidelines in making the adverse determinationAdverse determination"Adverse determination" means a determination by a utilization review agent that health care services provided or proposed to be provided to a patient are not medically necessary or appropriate or are experimental or investigational.Ins. Code § 4201.002(1); and (4) a description of the procedure for the complaint and appeal process, including notice to the enrollee of the enrollee's right to appeal an adverse determinationAdverse determination"Adverse determination" means a determination by a utilization review agent that health care services provided or proposed to be provided to a patient are not medically necessary or appropriate or are experimental or investigational.Ins. Code § 4201.002(1) to an independent review organization and of the procedures to obtain that review.
Section 3 of the Act amends existing adverse determination notice requirements in Section 4201.303(a) by strengthening the disclosure that must accompany each adverse determination. The prior law required either a description or the source of screening criteria; the amendment requires both a description and the source. It also adds a new requirement to disclose the review procedures used as guidelines in making the adverse determination, in addition to the screening criteria already required. These changes ensure that patients and providers receive a more complete picture of how the adverse determination was reached.
Chapter 4201, Insurance Code, as amended by this Act, applies only to utilization review conducted for a health benefit plan delivered, issued for delivery, or renewed on or after January 1, 2026. Utilization review conducted for a health benefit plan delivered, issued for delivery, or renewed before January 1, 2026, is governed by the law as it existed immediately before the effective date of this Act, and that law is continued in effect for that purpose.
Section 4 limits the applicability of the Act's amendments to utilization review conducted for health benefit plans delivered, issued for delivery, or renewed on or after January 1, 2026. Plans delivered or renewed before that date remain governed by prior law. This creates a rolling implementation window — the prohibition on automated decision systems in adverse determinations will not apply universally until all pre-2026 plans have expired or renewed.
This Act takes effect September 1, 2025.
The Act takes effect September 1, 2025. However, the operative provisions apply only to health benefit plans delivered, issued, or renewed on or after January 1, 2026, per Section 4.