On November 25, 2024, the Illinois State Legislature launched Home Invoice 5918 IL HB5918, the Artificial Intelligence Techniques Use in Well being Insurance coverage Act (“AI Act”). It gives the Illinois Division of Insurance coverage (the “Division”) regulatory oversight of insurers utilizing synthetic intelligence for determinations that have an effect on shoppers. The proposed invoice grants the Division the flexibility to undertake guidelines, together with emergency guidelines per the Illinois Administrative Process Act, to implement and administer the AI Act.
The AI Act requires regulatory oversight of the usage of AI programs and disclosure of AI utilization. The main focus of the regulatory oversight of AI programs surrounds the usage of AI in making or supporting antagonistic determinations that would have an effect on shoppers.
The AI Act permits the Division to observe the conduct of all insurers who function in Illinois, together with insurers’ growth, implementation, and use of AI-driven fashions in protection determinations. Below the invoice, such conduct is topic to investigation or market conduct motion. The invoice expands the Division’s investigative instruments as they might (1) inquire additional on related inquiries to particular fashions, AI programs, or purposes of a mannequin or AI system; and (2) additionally make requests for data and documentation of AI programs governance, danger administration, AI use protocols, data and documentation regarding the insurer’s preacquisition and pre-utilization diligence, monitoring, auditing of information or AI programs developed by a 3rd celebration, and data and documentation regarding implementation and compliance with the insurer’s AI programs program.
For insurers working in Illinois, the AI Act prevents insurers from issuing an antagonistic shopper consequence on the denial, discount, or termination of advantages or insurance policy the place the insurers solely use an AI system or predictive mannequin. Insurers should meaningfully evaluation such choices when the usage of an AT system or predictive mannequin is concerned.
To reinforce transparency and promote shopper belief, the Division has the flexibility to undertake guidelines which will require the insurer to reveal its AI use. Whereas the AI Act itself doesn’t go into additional element on such guidelines, the Division has the authority to set guidelines that require full and truthful disclosure on the way and content material of the insurers’ AI use.
Insurers licensed to conduct enterprise in Illinois should adjust to the AI Act. Any choice that impacts the patron that entails superior analytical and computational applied sciences (together with AI programs and machine studying), requires the insurers to adjust to relevant federal and State legal guidelines, rules, and guidelines, together with each insurance coverage legal guidelines and legal guidelines addressing unfair commerce practices and unfair discrimination.
Whereas the AI Act could also be a proposed invoice, the Facilities for Medicare & Medicaid Companies (“CMS”) took a stance on AI evaluation of denial, discount or termination of insurance policy when it issued a Final Rule in April 2023 that turned efficient in January 2024. CMS’ Ultimate Rule made clear that Medicare Benefit plans should make medical necessity determinations based mostly on the enrollee’s particular circumstances as an alternative of relying on algorithms. Moreover, such determinations should be reviewed by a doctor or applicable healthcare skilled.
As extra legal guidelines and rules enter the insurance coverage AI area, insurers might want to take a more in-depth have a look at their compliance packages and insurance policies and regulate their operations. There are quite a few dangers when utilizing AI and its algorithms, and the rising use of AI in the healthcare and insurance coverage industries has raised vital considerations concerning the opacity of the AI-driven choices. Furthermore, the elevated reliance on AI fashions for claims adjudication, protection determinations, and pricing can result in conditions the place a shopper is denied protection or advantages based mostly on components which can be unclear or obscure.
As public scrutiny of well being insurers is on the rise, the probability of AI-focused litigation may also improve. In an ever-evolving and dynamic authorized panorama of AI in insurance coverage regulation, it is vital for insurers to have their authorized groups help with the evaluation, upkeep, and maintenance of their AI insurance policies.