Insurance Companies, Agents, Brokers, Policies

AN ACT to amend Tennessee Code Annotated, Title 8, Chapter 27; Title 56 and Title 71, relative to health insurance.

Healthcare Technology

Active

The official status still shows this bill as active or still awaiting another formal step.

Sponsor: Harris, Yarbro
Last action: 2025-02-12
Official status: Assigned to s/c Insurance Subcommittee
Effective date: Not listed

Plain English Breakdown

It is unclear how the implementation of these regulations will affect costs or savings for the state.

Health Insurance Rules for AI Tools

This bill sets rules for health insurance companies using artificial intelligence (AI) tools in deciding whether to cover medical treatments.

What This Bill Does

Requires health insurance companies to use AI tools fairly and safely when reviewing requests for medical coverage.
Forbids AI tools from denying, delaying, or changing healthcare based on medical need without a doctor's approval.
Needs insurance companies to explain how they use AI in their policies.
Allows the state department of commerce and insurance to make rules about using AI in health insurance.

Who It Names or Affects

Health insurance companies that use AI tools.
People covered by these insurance plans.

Terms To Know

Artificial Intelligence (AI): A computer system that can make decisions or recommendations without much human help, often improving over time with more data.
Utilization Review: Checking if medical treatments are necessary and should be covered by insurance.

Limits and Unknowns

The bill does not apply if following it would cause the loss of federal funding.
It's unclear how much this will cost or save the state.
The exact rules about using AI in health insurance are yet to be made by the department.

Bill History

2025-02-12 Tennessee General Assembly
Assigned to s/c Insurance Subcommittee
2025-02-12 Tennessee General Assembly
P2C, ref. to Insurance Committee - Government Operations for Review
2025-02-12 Tennessee General Assembly
Passed on Second Consideration, refer to Senate Commerce and Labor Committee
2025-02-10 Tennessee General Assembly
Intro., P1C.
2025-02-10 Tennessee General Assembly
Introduced, Passed on First Consideration
2025-02-06 Tennessee General Assembly
Filed for introduction
2025-02-06 Tennessee General Assembly
Filed for introduction

Official Summary Text

This bill requires a
health insurance issuer that uses an artificial intelligence, algorithm, or other software tool for the purpose of utilization review or utilization management functions, based in whole or in part on medical necessity, or that contract
s with or otherwise works through an entity that uses an artificial intelligence, algorithm, or other software tool for the purpose of utilization review or utilization management functions, based in whole or in part on medical necessity,
to
ensure that th
e artificial intelligence, algorithm, or other software tool
adheres to all of the following:



Bases its determination on the following information, as applicable
:
(i) an enrollee's medical or other clinical history;

(ii) individual clinical circumstances as presented by the requesting provider; and

(iii) other relevant clinical information contained in the enrollee's medical or other clinical record
.



Does not base its determination solely on a group dataset
.



Uses criteria and guidelines that comply with th
e insurance laws of this state
and
other
applicable state and federal law
.



Does not supplant healthcare provider decision-making
.



Does not discriminate, or is not used to discriminate, directly or indirectly, against an enrollee in violation of state or federal law, and is otherwise fairly and equitably applied, including in accordance with regulations and guidance issued by the federal department of health and human services
.



Does not directly or indirectly cause harm to an enrollee.

This bill requi
res a
health insurance issuer
to do all of the following:



I
nclude disclosures pertaining to the use and oversight of the artificial intelligence, algorithm, or other software tool in the health insurance issuer's written policies and procedures.



P
eriodically review its use of the artificial intelligence, algorithm, or other software tool, as well as the artificial intelligence, algorithm, or other software tool's performance and outcomes, and revise the uses, performance, and outcomes to maximize accuracy and reliability.



If the artificial intelligence, algorithm, or other software tool is used for the purpose of utilization review or utilization management functions, ensure that patient data is not used beyond its intended and stated purpose, consistent with the federal Health Insurance Portability and Accountability Act of 1996
(HIPAA)
, as applicable.



C
omply with applicable federal rules and guidance issued by the federal department of health and human services regarding the use of artificial intelligence, algorithms, or other software tools.

As used in this bill, a "health insurance issuer" includes
the TennCare program
or
another plan managed by the health care finance and administration division of the department of finance and administrat
ion
, and
the group insurance plans offered
to state and local governmental employees
.

This bill prohibits
the artificial intelligence, algorithm, or other software tool
from
deny
ing
, delay
ing
, or modify
ing
healthcare services based, in whole or in part,
on medical necessity. A determination of medical necessity must be made only by a licensed physician or a licensed healthcare professional competent to evaluate the specific clinical issues involved in the healthcare services requested by the provider by

reviewing and considering the requesting provider's recommendation, the enrollee's medical or other clinical history, as applicable, and individual clinical circumstances.

This bill
applies to utilization review or utilization management functions that p
rospectively, retrospectively, or concurrently review requests for covered health care services.
However, if
compliance by a health insurance issuer would result in the loss of federal funding, then this
bill
does not apply to the extent that the complian
ce would result in the loss of federal funding.

This bill provides that a violation constitutes
an unfair claims practice
, punishable pursuant to the insurance laws of this state.
In addition to the remed
ies
provided
in such laws
, an individual aggrieve
d by a
violation
may bring a private cause of action in a court of competent jurisdiction. If the court finds that a health insurance issuer violated this
bill
, then the court
must
award to the plaintiff
a
ctual damage
s, p
unitive damages
, and r
easonable co
urt costs and attorneys' fees.

RULEMAKING

This bill authorizes the department of commerce and insurance to promulgate rules to effectuate this bill.

Current Bill Text

Read the full stored bill text

SENATE BILL 1261
By Yarbro

HOUSE BILL 1382
By Harris

HB1382
001420
- 1 -

AN ACT to amend Tennessee Code Annotated, Title 8,
Chapter 27; Title 56 and Title 71, relative to health
insurance.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Title 56, Chapter 6, Part 7, is amended by
adding the following as a new section:
(a) As used in this section:
(1) "Artificial intelligence":
(A) Means a machine-based system that:
(i) Can, for a given set of human-defined objectives, make
predictions, recommendations, or decisions; influence real and
virtual environments without significant human oversight; or that
can learn from experience in an automated manner and improve
such performance when exposed to data sets; or
(ii) Is developed in any context, including software or
physical hardware, and solves tasks requiring human-like
perception, cognition, planning, learning, communication, or
physical action;
(2) "Department" means the department of commerce and insurance;
and
(3) "Health insurance issuer":
(A) Means an entity subject to the insurance laws of this state, or
subject to the jurisdiction of the commissioner of commerce and

- 2 - 001420

insurance, that contracts or offers to contract to provide health insurance
coverage, including an insurance company, a health maintenance
organization, a nonprofit hospital and medical service corporation, or a
pharmacy benefits manager, third-party administrator, or an entity
described in § 56-2-121; and
(B) Includes the TennCare program or a successor medicaid
program provided for in title 71, chapter 5; the CoverKids Act of 2006,
compiled in title 71, chapter 3, part 11; the Access Tennessee Act of
2006, compiled in title 56, chapter 7, part 29; another plan managed by
the health care finance and administration division of the department of
finance and administration or a successor division or department; or the
group insurance plans offered under title 8, chapter 27.
(b) A health insurance issuer that uses an artificial intelligence, algorithm, or
other software tool for the purpose of utilization review or utilization management
functions, based in whole or in part on medical necessity, or that contracts with or
otherwise works through an entity that uses an artificial intelligence, algorithm, or other
software tool for the purpose of utilization review or utilization management functions,
based in whole or in part on medical necessity, shall ensure that the artificial intelligence,
algorithm, or other software tool:
(1) Bases its determination on the following information, as applicable:
(A) An enrollee's medical or other clinical history;
(B) Individual clinical circumstances as presented by the
requesting provider; and
(C) Other relevant clinical information contained in the enrollee's
medical or other clinical record;

- 3 - 001420

(2) Does not base its determination solely on a group dataset;
(3) Uses criteria and guidelines that comply with this chapter and
applicable state and federal law;
(4) Does not supplant healthcare provider decision-making;
(5) Does not discriminate, or is not used to discriminate, directly or
indirectly, against an enrollee in violation of state or federal law, and is otherwise
fairly and equitably applied, including in accordance with regulations and
guidance issued by the federal department of health and human services; and
(6) Does not directly or indirectly cause harm to an enrollee.
(c) A health insurance issuer shall include disclosures pertaining to the use and
oversight of the artificial intelligence, algorithm, or other software tool in the health
insurance issuer's written policies and procedures.
(d) The health insurance issuer shall periodically review its use of the artificial
intelligence, algorithm, or other software tool, as well as the artificial intelligence,
algorithm, or other software tool's performance and outcomes, and revise the uses,
performance, and outcomes to maximize accuracy and reliability.
(e) A health insurance issuer that uses an artificial intelligence, algorithm, or
other software tool for the purpose of utilization review or utilization management
functions shall ensure that patient data is not used beyond its intended and stated
purpose, consistent with the federal Health Insurance Portability and Accountability Act
of 1996 (Pub. L. No. 104-191), as applicable.
(f) Notwithstanding subsections (a)-(e), the artificial intelligence, algorithm, or
other software tool shall not deny, delay, or modify healthcare services based, in whole
or in part, on medical necessity. A determination of medical necessity must be made
only by a licensed physician or a licensed healthcare professional competent to evaluate

- 4 - 001420

the specific clinical issues involved in the healthcare services requested by the provider
by reviewing and considering the requesting provider's recommendation, the enrollee's
medical or other clinical history, as applicable, and individual clinical circumstances.
(g) This section applies to utilization review or utilization management functions
that prospectively, retrospectively, or concurrently review requests for covered health
care services.
(h) A health insurance issuer subject to this section shall comply with applicable
federal rules and guidance issued by the federal department of health and human
services regarding the use of artificial intelligence, algorithms, or other software tools.
(i) If compliance with this section by a health insurance issuer would result in the
loss of federal funding, then this section does not apply to the extent that the compliance
would result in the loss of federal funding.
(j)
(1) A violation of this section is an unfair claims practice, punishable as
provided under chapter 8, part 1, of this title.
(2) In addition to the remedy provided under subdivision (j)(1), an
individual aggrieved by a violation of this section may bring a private cause of
action in a court of competent jurisdiction. If the court finds that a health
insurance issuer violated this section, then the court shall award to the plaintiff:
(A) Actual damages;
(B) Punitive damages; and
(C) Reasonable court costs and attorneys' fees.
(k) The department may promulgate rules to effectuate this section. The rules
must be promulgated in accordance with the Uniform Administrative Procedures Act,
compiled in title 4, chapter 5.

- 5 - 001420

SECTION 2. For purposes of promulgating rules, this act takes effect upon becoming a
law, the public welfare requiring it. For all other purposes, this act takes effect July 1, 2025, the
public welfare requiring it, and applies to conduct occurring on or after that date.