The tragic death of UnitedHealthcare CEO Brian Thompson on December 4, 2024, has intensified scrutiny of the health insurance industry’s practices, including the use of artificial intelligence (AI) in decision-making processes.

In this fraught period, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule on December 10, 2024, introducing technical changes to the Medicare Advantage (MA) Program and the Medicare Prescription Drug Benefit Program for Calendar Year 2026. This proposal includes provisions addressing the use of AI in health insurance decision-making, aiming to establish guardrails to ensure transparency and fairness.

The integration of AI into health insurance decisions presents both opportunities and challenges. On one hand, AI has the potential to enhance efficiency, reduce costs, and improve accuracy in claims processing and patient care management. On the other hand, it raises significant concerns regarding ethical implications, potential biases, and the transparency of decision-making processes.

A critical risk associated with AI in health insurance is the potential for algorithmic bias. If AI systems are trained on biased data, they may perpetuate existing disparities in healthcare access and outcomes, disproportionately affecting marginalized communities. Ensuring that AI algorithms are developed and tested with diverse and representative data sets is essential to mitigate this risk.

Transparency is another major concern. AI-driven decisions can often be opaque, making it difficult for policyholders to understand the rationale behind claim approvals or denials. This lack of clarity can erode trust between insurers and insureds, potentially leading to disputes and dissatisfaction. Implementing explainable AI models that provide clear and understandable reasons for decisions is crucial to maintaining transparency and trust.

The political risks of deploying AI in health insurance are becoming increasingly apparent. Policymakers and regulators may face pressure to impose stricter regulations on the use of AI to ensure ethical standards are upheld and to address public concerns. Failure to adequately regulate AI applications could lead to public backlash, legal challenges, and further erosion of trust in the health insurance system.

Accordingly, CMS has proposed several significant measures to regulate the use of artificial intelligence (AI) in Medicare Advantage (MA) plans:

• Ensuring Equitable Access: CMS proposes that services provided by MA organizations must be equitable, regardless of whether they are delivered through human or automated systems. This aims to prevent AI-driven processes from creating disparities in service access.
• Defining Internal Coverage Criteria: The proposal seeks to define “internal coverage criteria” as any policies, measures, tools, or guidelines not explicitly stated in statutes, regulations, or CMS manuals, which are adopted by MA organizations for medical necessity determinations. This definition is intended to bring clarity to the use of AI in coverage decisions.
• Establishing Guardrails for AI Usage: CMS intends to implement specific guardrails to ensure that AI and automated systems do not lead to inequitable treatment or hinder access to necessary care. This includes potential program audits and enforcement actions against MA organizations that fail to comply.

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