SB 63

An Act, SB63 Relating to health insurance; to impose limitations on the use of artificial intelligence by health benefit plan providers in making determinations of coverage under health benefit plans; and to authorize the Department of Insurance of the State of Alabama to investigate and impose disciplinary action for violations. 

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA: 

Section 1. 

(a) For the purposes of this section, the following terms have the following meanings: 

(1) ARTIFICIAL INTELLIGENCE. A machine-based system that may include software or physical hardware that performs tasks, based upon data set inputs, which require human-like perception, cognition, planning, learning, communication, or physical action and which is capable of improving performance based upon learned experience without significant human oversight toward influencing real or virtual environments. 

(2) DEPARTMENT. The Department of Insurance of the State of Alabama. 

(3) ENROLLEE. An individual to whom a health benefit plan provider is contractually obligated to pay for or provide medical benefits under a health benefit plan. 

(4) GROUP PLAN. A health benefit plan that is sponsored by an employer or other entity on behalf of group members. 

(5) HEALTH BENEFIT PLAN. 

a. Any plan, policy, or contract issued, delivered, or renewed in this state that provides medical benefits that include payment for hospitalization, physician care, treatment, surgery, therapy, drugs, equipment, and any other medical expense, regardless of whether the plan is for a group or individual. 

b. The term does not include accident-only, specified disease, individual hospital indemnity, credit, dental-only, Medicare supplement, long-term care, disability income, or other limited benefit health insurance policies, or coverage issued as supplemental to liability insurance, workers' compensation, or automobile medical payment insurance. 

(6) HEALTH BENEFIT PLAN PROVIDER. The term includes all of the following: 

a. Any entity that issues, delivers, or renews a health benefit plan, including a person as defined in Section 27-1-2, Code of Alabama 1975; a health maintenance organization established under Chapter 21A of Title 27, Code of Alabama 1975; a nonprofit health care services plan established under Article 6, Chapter 20 of Title 10A, Code of Alabama 1975; or a nonprofit agricultural organization that offers health care benefits pursuant to Chapter 33 of Title 2, Code of Alabama 1975. 

b. Any department or office internal to an entity described in paragraph a. which performs utilization review. 

c. Any separate entity that performs utilization review as a contractor or agent of an entity described in paragraph a. 

(7) HEALTH CARE SERVICE. Diagnosing, testing, monitoring, or treating a human disease, disorder, syndrome, illness, or injury that may include, but not be limited to, hospitalization, physician care, treatment, surgery, therapy, drugs, or medical equipment. 

(8) INDIVIDUAL PLAN. A health benefit plan that is purchased directly by an individual. 

(9) PRIOR AUTHORIZATION. A written or oral determination made by a health benefit plan provider that a health care service is a benefit covered under the applicable health benefit plan which, under the enrollee's clinical circumstances, is medically necessary or satisfies another requirement imposed by the health benefit plan provider or law and thus satisfies the requirements for payment or reimbursement. 

(10) UTILIZATION REVIEW. The determination of requests for prior authorization under a health benefit plan according to the rules, health care service policies, and guidelines adopted by a health benefit plan provider, or requirements imposed by law, and applicable to a health benefit plan. 

(b)(1) A health benefit plan provider that uses artificial intelligence to make determinations of medical necessity on requests for prior authorization under health benefit plans shall base determinations on all of the following: 

a. The enrollee's medical history. 

b. Any clinical circumstances unique to the enrollee which are presented by the requesting health care provider. 

c. Additional clinical information about the enrollee which may be present in the enrollee's medical record. 

(2) A health benefit plan provider shall certify annually to the department that the artificial intelligence used to make determinations of medical necessity on requests for prior authorization complies with all of the following: 

a. The artificial intelligence does not rely on a group dataset to make determinations. 

b. The artificial intelligence is fairly and equitably applied, including in accordance with any applicable regulations and guidance issued by the U.S. Department of Health and Human Services. 

c. The artificial intelligence does not discriminate, directly or indirectly, against any subscriber group or enrollee in violation of state or federal law, including any regulation or guidance issued by the U.S. Department of Health and Human Services. 

(3) In addition to the requirements listed in subdivisions (1) and (2), a determination to deny, delay, or modify a request for prior authorization based on medical necessity shall always be made by a licensed physician or other health care professional who is competent to evaluate any recommendation or conclusion of artificial intelligence in the light of the specific clinical issues involved in the health care service requested which are unique to the enrollee's circumstances or as recommended by the treating health care provider. 

(c) A health benefit plan provider shall do all of the following: 

(1) Make prominent written disclosure regarding its use of artificial intelligence in utilization review in its policies and procedures. 

(2) Ensure that its use of artificial intelligence and the outcomes that it generates are reviewed on a periodic basis to maximize accuracy and reliability to ensure its use of artificial intelligence in utilization review complies with the requirements of subsection (b). 

(3) Ensure that patient data used in utilization review functions by artificial intelligence is not used beyond its intended and stated purpose consistent with the federal Health Insurance Portability and Accountability Act (HIPAA), 42 U.S.C. § 1320d et seq. 

(4) The requirements under subsection (b) and this subsection shall be satisfied by an attestation by an authorized representative of the health benefit plan provider based on reasonable reliance upon internal policies, procedures, and third-party vendors. 

(d)(1) When the department has reasonable grounds to believe that a health benefit plan provider has or is engaged in conduct that violates subsection (b), including making determinations of prior authorization adverse to an enrollee without taking into consideration the enrollee's medical history and relevant clinical circumstances, the department may notify the health benefit plan provider of the alleged violation and the health benefit plan provider shall respond to the notice within 30 days. 

(2) If the department finds the response required in subdivision (1) to be unsatisfactory, the department may hold a hearing as provided in Article 1, Chapter 2 of Title 27, Code of Alabama 1975. 

(3)a. If, upon hearing the case, the department determines that the health benefit plan provider has or is engaged in conduct that violates subsection (b), including making determinations of prior authorization adverse to an enrollee without taking into consideration the enrollee's medical history and relevant clinical circumstances, the department may impose a plan upon the health benefit plan provider to correct procedures, policies, and guidelines to bring the health benefit plan provider's utilization review into compliance with this section. 

b. For repeat violations of subsection (b), the department may also exercise either or both of the following disciplinary powers: 

1. Impose an administrative fine of not more than five thousand dollars ($5,000) for a violation that occurred with such frequency as to indicate a general business pattern or practice. Administrative fines collected by the department shall be deposited in the State Treasury to the credit of the State General Fund. 

2. Suspend or revoke the certificate of authority of the health benefit plan provider for a violation that occurred with such frequency as to indicate a general business pattern or practice. 

(4) The department shall require the health benefit plan provider to reimburse the department the administrative expenses incurred by the department in the investigation and enforcement pursuant to this subsection. Administrative expenses collected by the department shall be deposited in the State Treasury to the credit of the Special Examination Revolving Fund. 

(e) The department shall adopt rules to enforce this section. 

Section 2. This act shall become effective on October 1, 2026.

See https://alison.legislature.state.al.us/files/pdf/SearchableInstruments/2026RS/SB63-enr.pdf