California’s new law, SB 1120, set to take effect on January 1, 2025, regulates how health care service plans (HCSPs) and disability insurers use automated decision-making tools, such as artificial intelligence, to analyze medical necessity in utilization reviews affecting California enrollees. Compared to federal guidelines, this law is more prescriptive, requiring HCSPs and disability insurers that use automated decision-making tools to base decisions on individual clinical data, and ensure only health care professionals – not the tools – deny, delay, or modify provision of health care based on medical necessity determinations, among other requirements.

In this Reed Smith Client Alert, we highlight the new California law’s requirements, potential risks, and considerations for health plans and disability insurers. Compliance may take time, pose significant challenges, and be subject to periodic audits or compliance reviews by regulators.

Reed Smith will continue to track developments in the regulation of AI in health care. If you have any questions about the contents of this client alert or about the use of AI in your business, do not hesitate to reach out to us.