In 2024, nearly a quarter of all health insurance claims were denied last year in California. This is an issue that reflects a growing nationwide problem. The frustration and pain around these denials has led to widespread public outcry. Many accuse healthcare companies of lacking compassion. To address this, California has introduced new legislation aimed at ensuring that human judgment remains a key factor in healthcare decisions.
Senate Bill 1120: The Physicians Make Decisions Act
Signed by Governor Gavin Newsom in September 2024, Senate Bill 1120, also known as the “Physicians Make Decisions Act,” was created in response to increasing concerns about the role of artificial intelligence (AI) in health insurance decisions. This new law ensures that insurance companies cannot make coverage decisions based solely on algorithms. It requires human oversight in all decisions related to the approval or denial of healthcare services.
According to data from the California Nurses Association, approximately 26% of insurance claims in the state were denied in 2024. This has become a key issue for lawmakers like State Senator Josh Becker, who authored the bill. Becker pointed out that in 2021 alone, health insurance companies across the U.S. denied more than 49 million claims, with fewer than 0.2% of customers appealing those denials.
While the misuse of AI in healthcare decision-making became a focal point in November 2023, when a lawsuit against UnitedHealthcare accused the company of using AI to deny claims, SB 1120 directly addresses these concerns.
Human Oversight Remains Key
Under SB 1120, AI can still be used to assist in healthcare decision-making, but it cannot be the sole basis for denying, delaying, or altering healthcare services deemed medically necessary by doctors. This law ensures that AI cannot replace the human touch or expertise that is vital for making complex healthcare decisions.
“An algorithm cannot fully understand a patient’s unique medical history or needs, and its misuse can lead to devastating consequences,” said Senator Becker. He added that the law would help balance technological innovation with the essential role of human oversight in healthcare.
Ensuring Transparency and Accountability
The new law also outlines strict timelines for insurance companies to make decisions regarding care. Standard cases must be resolved within five business days, urgent cases within 72 hours, and retrospective reviews within 30 days. These guidelines aim to provide timely access to necessary healthcare services.
The California Department of Managed Health Care (DMHC) will be responsible for enforcing SB 1120, ensuring that insurance companies adhere to these deadlines and that AI is not misused. The DMHC also has the authority to impose fines on insurance companies for violations, such as missed deadlines or improper use of AI.
The Importance of the Doctor-Patient Relationship
Erin Mellon, a spokesperson for the California Medical Association, which co-sponsored the bill, highlighted the importance of protecting the doctor-patient relationship. “Artificial intelligence has the potential to improve patient care, but it should not harm or supplant that relationship,” Mellon said. She pointed out that while physicians generally support the use of AI to enhance care, it should always respect the judgment and needs of both doctors and patients.
Addressing the Stress of Insurance Denials
The law also responds to the challenges faced by individuals and families dealing with the emotional and financial stress of insurance denials. Paula Wolfson, a manager at Avenidas Care Partners, a nonprofit that serves older adults, described the toll insurance denials take on families, especially when they prevent access to vital healthcare services. “It causes enormous stress,” Wolfson shared. “Families are often left in high-risk situations because they can’t access the care they need.”
Wolfson welcomed the new law, calling it a “glimmer of hope” that lawmakers are finally taking a commonsense approach to regulating AI in healthcare decisions.
Conclusion: A Step Toward Fairer Healthcare
Senate Bill 1120 marks an important step in ensuring that California residents receive the medical care they deserve, without the risk of an algorithm overriding essential human judgment.
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