SB 1120: Health care coverage: utilization review.
- Session Year: 2023-2024
- House: Senate
- Latest Version Date: 2024-09-28
Current Status:
Passed
(2024-09-28: Chaptered by Secretary of State. Chapter 879, Statutes of 2024.)
Introduced
In Committee
First Chamber
In Committee
Second Chamber
Enacted
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of the act a crime. Existing law provides for the regulation of disability insurers by the Department of Insurance. Existing law generally authorizes a health care service plan or disability insurer to use prior authorization and other utilization review or utilization management functions, under which a licensed physician or a licensed health care professional who is competent to evaluate specific clinical issues may approve, modify, delay, or deny requests for health care services based on medical necessity. Existing law requires a health care service plan or disability insurer, including those plans or insurers that delegate utilization review or utilization management functions to medical groups, independent practice associations, or to other contracting providers, to comply with specified requirements and limitations on their utilization review or utilization management functions. Existing law authorizes the Director of the Department of Managed Health Care or the Insurance Commissioner to assess an administrative penalty to a health care service plan or disability insurer, as applicable, for failure to comply with those requirements.
This bill would require a health care service plan or disability insurer, including a specialized health care service plan or specialized health insurer, that uses an artificial intelligence, algorithm, or other software tool for the purpose of utilization review or utilization management functions, or that contracts with or otherwise works through an entity that uses that type of tool, to ensure compliance with specified requirements, including that the artificial intelligence, algorithm, or other software tool bases its determination on specified information and is fairly and equitably applied, as specified. Because a willful violation of these provisions by a health care service plan would be a crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of the act a crime. Existing law provides for the regulation of disability insurers by the Department of Insurance. Existing law generally authorizes a health care service plan or disability insurer to use prior authorization and other utilization review or utilization management functions, under which a licensed physician or a licensed health care professional who is competent to evaluate specific clinical issues may approve, modify, delay, or deny requests for health care services based on medical necessity. Existing law requires a health care service plan or disability insurer, including those plans or insurers that delegate utilization review or utilization management functions to medical groups, independent practice associations, or to other contracting providers, to comply with specified requirements and limitations on their utilization review or utilization management functions. Existing law authorizes the Director of the Department of Managed Health Care or the Insurance Commissioner to assess an administrative penalty to a health care service plan or disability insurer, as applicable, for failure to comply with those requirements.
This bill would require a health care service plan or disability insurer, including a specialized health care service plan or specialized health insurer, that uses an artificial intelligence, algorithm, or other software tool for the purpose of utilization review or utilization management functions, or that contracts with or otherwise works through an entity that uses that type of tool, to ensure compliance with specified requirements, including that the artificial intelligence, algorithm, or other software tool bases its determination on specified information and is fairly and equitably applied, as specified. Because a willful violation of these provisions by a health care service plan would be a crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of the act a crime. Existing law provides for the regulation of disability insurers by the Department of Insurance. Existing law generally authorizes a health care service plan or disability insurer to use prior authorization and other utilization review or utilization management functions, under which a licensed physician or a licensed health care professional who is competent to evaluate specific clinical issues may approve, modify, delay, or deny requests for health care services based on medical necessity. Existing law requires a health care service plan or disability insurer, including those plans or insurers that delegate utilization review or utilization management functions to medical groups, independent practice associations, or to other contracting providers, to comply with specified requirements and limitations on their utilization review or utilization management functions. Existing law authorizes the Director of the Department of Managed Health Care or the Insurance Commissioner to assess an administrative penalty to a health care service plan or disability insurer, as applicable, for failure to comply with those requirements.
This bill would require a health care service plan or disability insurer, including a specialized health care service plan or specialized health insurer, that uses an artificial intelligence, algorithm, or other software tool for the purpose of utilization review or utilization management functions, or that contracts with or otherwise works through an entity that uses that type of tool, to ensure compliance with specified requirements, including that the artificial intelligence, algorithm, or other software tool bases its determination on specified information and is fairly and equitably applied, as specified. Because a willful violation of these provisions by a health care service plan would be a crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of the act a crime. Existing law provides for the regulation of disability insurers by the Department of Insurance. Existing law generally authorizes a health care service plan or disability insurer to use prior authorization and other utilization review or utilization management functions, under which a licensed physician or a licensed health care professional who is competent to evaluate specific clinical issues may approve, modify, delay, or deny requests for health care services based on medical necessity. Existing law requires a health care service plan or disability insurer, including those plans or insurers that delegate utilization review or utilization management functions to medical groups, independent practice associations, or to other contracting providers, to comply with specified requirements and limitations on their utilization review or utilization management functions. Existing law authorizes the Director of the Department of Managed Health Care or the Insurance Commissioner to assess an administrative penalty to a health care service plan or disability insurer, as applicable, for failure to comply with those requirements.
This bill would require a health care service plan or disability insurer, including a specialized health care service plan or specialized health insurer, that uses an artificial intelligence, algorithm, or other software tool for the purpose of utilization review or utilization management functions, or that contracts with or otherwise works through an entity that uses that type of tool, to ensure compliance with specified requirements, including that the artificial intelligence, algorithm, or other software tool bases its determination on specified information and is fairly and equitably applied. applied, as specified. Because a willful violation of these provisions by a health care service plan would be a crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of the act a crime. Existing law provides for the regulation of disability insurers by the Department of Insurance. Existing law generally authorizes a health care service plan or disability insurer to use prior authorization and other utilization review or utilization management functions, under which a licensed physician or a licensed health care professional who is competent to evaluate specific clinical issues may approve, modify, delay, or deny requests for health care services based on medical necessity. Existing law requires a health care service plan or disability insurer, including those plans or insurers that delegate utilization review or utilization management functions to medical groups, independent practice associations, or to other contracting providers, to comply with specified requirements and limitations on their utilization review or utilization management functions. Existing law authorizes the Director of the Department of Managed Health Care or the Insurance Commissioner to assess an administrative penalty to a health care service plan or disability insurer, as applicable, for failure to comply with those requirements.
This bill would require algorithms, artificial intelligence, and other software tools used for utilization review or utilization management decisions of a health care service plan, plan or disability insurer, including a specialized health care service plan covering dental services, or disability insurer to comply or specialized health insurer, that uses an artificial intelligence, algorithm, or other software tool for the purpose of utilization review or utilization management functions, or that contracts with or otherwise works through an entity that uses that type of tool, to ensure compliance with specified requirements, including that they be the tool bases its determination on specified information and is fairly and equitably applied. Because a willful violation of these provisions by a health care service plan would be a crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of the act a crime. Existing law provides for the regulation of disability insurers by the Department of Insurance. Existing law generally authorizes a health care service plan or disability insurer to use prior authorization and other utilization review or utilization management functions, under which a licensed physician or a licensed health care professional who is competent to evaluate specific clinical issues may approve, modify, delay, or deny requests for health care services based on medical necessity. Existing law requires a health care service plan or disability insurer, including those plans or insurers that delegate utilization review or utilization management functions to medical groups, independent practice associations, or to other contracting providers, to comply with specified requirements and limitations on their utilization review or utilization management functions. Existing law authorizes the Director of the Department of Managed Health Care or the Insurance Commissioner to assess an administrative penalty to a health care service plan or disability insurer, as applicable, for failure to comply with those requirements.
This bill would require algorithms, artificial intelligence, and other software tools used for utilization review or utilization management decisions of a health care service plan, including a specialized health care service plan covering dental services, or disability insurer to comply with specified requirements, including that they be fairly and equitably applied. Because a willful violation of these provisions by a health care service plan would be a crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of the act a crime. Existing law provides for the regulation of health disability insurers by the Department of Insurance. Existing law generally authorizes a health care service plan or health disability insurer to use prior authorization and other utilization review or utilization management functions, under which a licensed physician or a licensed health care professional who is competent to evaluate specific clinical issues may approve, modify, delay, or deny requests for health care services based on medical necessity. Existing law requires a health care service plan or health disability insurer, including those plans or insurers that delegate utilization review or utilization management functions to medical groups, independent practice associations, or to other contracting providers, to comply with specified requirements and limitations on their utilization review or utilization management functions. Existing law authorizes the Director of the Department of Managed Health Care or the Insurance Commissioner to assess an administrative penalty to a health care service plan or health disability insurer, as applicable, for failure to comply with those requirements.
This bill would require algorithms, artificial intelligence, and other software tools used for utilization review or utilization management decisions of a health care service plan, including a specialized health care service plan covering dental services, or disability insurer to comply with specified requirements, including that they be fairly and equitably applied. Because a willful violation of these provisions by a health care service plan would be a crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of the act a crime. Existing law provides for the regulation of health insurers by the Department of Insurance. Existing law generally authorizes a health care service plan or health insurer to use prior authorization and other utilization review or utilization management functions, under which a licensed physician or a licensed health care professional who is competent to evaluate specific clinical issues may approve, modify, delay, or deny requests for health care services based on medical necessity. Existing law requires a health care service plan or health insurer, including those plans or insurers that delegate utilization review or utilization management functions to medical groups, independent practice associations, or to other contracting providers, to comply with specified requirements and limitations on their utilization review or utilization management functions. Existing law authorizes the Director of the Department of Managed Health Care or the Insurance Commissioner to assess an administrative penalty to a health care service plan or health insurer, as applicable, for failure to comply with those requirements.
This bill would require a health care service plan or health insurer to ensure that a licensed physician supervises the use of artificial intelligence decisionmaking tools when those tools are used to inform decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees or insureds. The This bill would require algorithms, artificial intelligence, and other software tools used for utilization review or utilization management decisions to comply with specified requirements, including that they be fairly and equitably applied. Because a willful violation of these provisions by a health care service plan would be a crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of the act a crime. Existing law provides for the regulation of health insurers by the Department of Insurance. Existing law generally authorizes a health care service plan or health insurer to use prior authorization and other utilization review or utilization management functions, under which a licensed physician or a licensed health care professional who is competent to evaluate specific clinical issues may approve, modify, delay, or deny requests for health care services based on medical necessity. Existing law requires a health care service plan or health insurer, including those plans or insurers that delegate utilization review or utilization management functions to medical groups, independent practice associations, or to other contracting providers, to comply with specified requirements and limitations on their utilization review or utilization management functions. Existing law authorizes the Director of the Department of Managed Health Care or the Insurance Commissioner to assess an administrative penalty to a health care service plan or health insurer, as applicable, for failure to comply with those requirements.
This bill would require a health care service plan or health insurer to ensure that a licensed physician supervises the use of artificial intelligence decisionmaking tools when those tools are used to inform decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees or insureds. The bill would require algorithms, artificial intelligence, and other software tools used for utilization review or utilization management decisions to comply with specified requirements, including that they be fairly and equitably applied. Because a willful violation of these provisions by a health care service plan would be a crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of the act a crime. Existing law provides for the regulation of health insurers by the Department of Insurance. Existing law generally authorizes a health care service plan or health insurer to use prior authorization and other utilization review or utilization management functions, under which a licensed physician or a licensed health care professional who is competent to evaluate specific clinical issues may approve, modify, delay, or deny requests for health care services based on medical necessity. Existing law requires a health care service plan or health insurer, including those plans or insurers that delegate utilization review or utilization management functions to medical groups, independent practice associations, or to other contracting providers, to comply with specified requirements and limitations on their utilization review or utilization management functions. Existing law authorizes the Director of the Department of Managed Health Care or the Insurance Commissioner to assess an administrative penalty to a health care service plan or health insurer, as applicable, for failure to comply with those requirements.
This bill would require a health care service plan or health insurer to ensure that a licensed physician supervises the use of artificial intelligence decisionmaking tools when those tools are used to inform decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees or insureds. Because a willful violation of these provisions by a health care service plan would be a crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
(a)A health care service plan and any entity with which it contracts for services that include utilization review or utilization management functions, that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A health care service plan that is subject to this section shall have written policies and procedures establishing the process by which the plan prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for plan enrollees. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to Section 1363.5. These policies and procedures, and a description of the process by which the plan reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, shall be filed with the director for review and approval, and shall be disclosed by the plan to providers and enrollees upon request, and by the plan to the public upon request.
(c)A health care service plan subject to this section, except a plan that meets the requirements of Section 1351.2, shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or pursuant to the Osteopathic Act, or, if the plan is a specialized health care service plan, a clinical director with California licensure in a clinical area appropriate to the type of care provided by the specialized health care service plan. The medical director or clinical director shall ensure that the process by which the plan reviews and approves, modifies, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, complies with the requirements of this section.
(d)If health plan personnel, or individuals under contract to the plan to review requests by providers, approve the providers request, pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)No individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may deny or modify requests for authorization of health care services for an enrollee for reasons of medical necessity. The decision of the physician or other health care professional shall be communicated to the provider and the enrollee pursuant to subdivision (h).
(f)The criteria or guidelines used by the health care service plan to determine whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall be consistent with clinical principles and processes. These criteria and guidelines shall be developed pursuant to the requirements of Section 1363.5.
(g)If the health care service plan requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the plan shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, based in whole or in part on medical necessity, a health care service plan subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with the provision of health care services to enrollees that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed five business days from the plans receipt of the information reasonably necessary and requested by the plan to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the enrollees condition is such that the enrollee faces an imminent and serious threat to the enrollees health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the enrollees life or health or could jeopardize the enrollees ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to enrollees, shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the plans receipt of the information reasonably necessary and requested by the plan to make the determination. Nothing in this section shall be construed to alter the requirements of subdivision (b) of Section 1371.4. Notwithstanding Section 1371.4, the requirements of this division shall be applicable to all health plans and other entities conducting utilization review or utilization management.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the enrollees treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the enrollee in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the enrollees treating provider has been notified of the plans decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall be communicated to the enrollee in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the plans decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification of a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the enrollee may file a grievance with the plan pursuant to Section 1368, and in the case of Medi-Cal enrollees, shall explain how to request an administrative hearing and aid paid pending under Sections 51014.1 and 51014.2 of Title 22 of the California Code of Regulations.
(5)If the health care service plan cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the plan is not in receipt of all of the information reasonably necessary and requested, or because the plan requires consultation by an expert reviewer, or because the plan has asked that an additional examination or test be performed upon the enrollee, provided the examination or test is reasonable and consistent with good medical practice, the plan shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2) or as soon as the plan becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the enrollee, in writing, that the plan cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The plan shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the plan, the plan shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)If the director determines that a health care service plan has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the director may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected, in accordance with subdivision (a) of Section 1397. The administrative penalties shall not be deemed an exclusive remedy for the director. These penalties shall be paid to the Managed Care Administrative Fines and Penalties Fund and shall be used for the purposes specified in Section 1341.45.
(i)A health care service plan subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)A health care service plan subject to this section that reviews requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall establish, as part of the quality assurance program required by Section 1370, a process by which the plans compliance with this section is assessed and evaluated. The process shall include provisions for evaluation of complaints, assessment of trends, implementation of actions to correct identified problems, mechanisms to communicate actions and results to the appropriate health plan employees and contracting providers, and provisions for evaluation of any corrective action plan and measurements of performance.
(k)(1)A health care service plan, including a specialized health care service plan 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 comply with this section and shall ensure all of the following:
(A)The artificial intelligence, algorithm, or other software tool bases its determination on the following information, as applicable:
(i)An enrollees medical or other clinical history.
(ii)Individual clinical circumstances as presented by the requesting provider.
(iii)Other relevant clinical information contained in the enrollees medical or other clinical record.
(B)The artificial intelligence, algorithm, or other software tool does not base its determination solely on a group dataset.
(C)The artificial intelligence, algorithm, or other software tools criteria and guidelines complies with this chapter, including, but not limited to, Section 1363.5 and applicable state and federal law.
(D)The artificial intelligence, algorithm, or other software tool does not supplant health care provider decisionmaking.
(E)The use of the artificial intelligence, algorithm, or other software tool does not discriminate, directly or indirectly, against enrollees in violation of state or federal law.
(F)The artificial intelligence, algorithm, or other software tool is fairly and equitably applied, including in accordance with any applicable regulations and guidance issued by the federal Department of Health and Human Services.
(G)The artificial intelligence, algorithm, or other software tool is open to inspection for audit or compliance reviews by the department pursuant to Section 1381 and by the State Department of Health Care Services pursuant to applicable state and federal law.
(H)Disclosures pertaining to the use and oversight of the artificial intelligence, algorithm, or other software tool are contained in the written policies and procedures, as required by subdivision (b).
(I)The artificial intelligence, algorithm, or other software tools performance, use, and outcomes are periodically reviewed and revised to maximize accuracy and reliability.
(J)Patient data is not used beyond its intended and stated purpose, consistent with the Confidentiality of Medical Information Act (Part 2.6 (commencing with Section 56) of Division 1 of the Civil Code) and the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), as applicable.
(K)The artificial intelligence, algorithm, or other software tool does not directly or indirectly cause harm to the enrollee.
(2)Notwithstanding paragraph (1), the artificial intelligence, algorithm, or other software tool shall not deny, delay, or modify health care services based, in whole or in part, on medical necessity. A determination of medical necessity shall be made only by a licensed physician or a licensed health care professional competent to evaluate the specific clinical issues involved in the health care services requested by the provider, as provided in subdivision (e), by reviewing and considering the requesting providers recommendation, the enrollees medical or other clinical history, as applicable, and individual clinical circumstances.
(3)For purposes of this subdivision, artificial intelligence means an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
(4)This subdivision shall apply to utilization review or utilization management functions that prospectively, retrospectively, or concurrently review requests for covered health care services.
(5)A health care service plan subject to this subdivision shall comply with applicable federal rules and guidance issued by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. The department and the State Department of Health Care Services may issue guidance to implement this paragraph within one year of the adoption of federal rules or the issuance of guidance by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. Such guidance shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(6)For purposes of implementing this subdivision, the department and the State Department of Health Care Services may enter into exclusive or nonexclusive contracts, or amend existing contracts, on a bid or negotiated basis. Contracts entered into or amended pursuant to this subdivision shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Section 19130 of the Government Code, and Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and shall be exempt from the review or approval of any division of the Department of General Services.
(7)This subdivision applies to a Medi-Cal managed care plan only to the extent that the State Department of Health Care Services obtains any necessary federal approvals, and federal financial participation is not otherwise jeopardized.
(l)The director shall review a health care service plans compliance with this section as part of its periodic onsite medical survey of each plan undertaken pursuant to Section 1380, and shall include a discussion of compliance with this section as part of its report issued pursuant to that section.
(m)This section shall not apply to decisions made for the care or treatment of the sick who depend upon prayer or spiritual means for healing in the practice of religion as set forth in subdivision (a) of Section 1270.
(n)Nothing in this section shall cause a health care service plan to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 2.Section 10123.135 of the Insurance Code is amended to read:10123.135.(a)Every disability insurer, or an entity with which it contracts for services that include utilization review or utilization management functions, that covers hospital, medical, or surgical expenses and that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A disability insurer that is subject to this section, or any entity with which an insurer contracts for services that include utilization review or utilization management functions, shall have written policies and procedures establishing the process by which the insurer prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for insureds. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to subdivision (f). These policies and procedures, and a description of the process by which an insurer, or an entity with which an insurer contracts for services that include utilization review or utilization management functions, reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, shall be filed with the commissioner, and shall be disclosed by the insurer to insureds and providers upon request, and by the insurer to the public upon request.
(c)If the number of insureds covered under health benefit plans in this state that are issued by an insurer subject to this section constitute at least 50 percent of the number of insureds covered under health benefit plans issued nationwide by that insurer, the insurer shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or the Osteopathic Initiative Act, or the insurer may employ a clinical director licensed in California whose scope of practice under California law includes the right to independently perform all those services covered by the insurer. The medical director or clinical director shall ensure that the process by which the insurer reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, complies with the requirements of this section. Nothing in this subdivision shall be construed as restricting the existing authority of the Medical Board of California.
(d)If an insurer subject to this section, or individuals under contract to the insurer to review requests by providers, approve the providers request pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)An individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may not deny or modify requests for authorization of health care services for an insured for reasons of medical necessity. The decision of the physician or other health care provider shall be communicated to the provider and the insured pursuant to subdivision (h).
(f)(1)An insurer shall disclose, or provide for the disclosure, to the commissioner and to network providers, the process the insurer, its contracting provider groups, or any entity with which it contracts for services that include utilization review or utilization management functions, uses to authorize, delay, modify, or deny health care services under the benefits provided by the insurance contract, including coverage for subacute care, transitional inpatient care, or care provided in skilled nursing facilities. An insurer shall also disclose those processes to policyholders or persons designated by a policyholder, or to any other person or organization, upon request.
(2)The criteria or guidelines used by an insurer, or an entity with which an insurer contracts for utilization review or utilization management functions, to determine whether to authorize, modify, delay, or deny health care services, shall comply with all of the following:
(A)Be developed with involvement from actively practicing health care providers.
(B)Be consistent with sound clinical principles and processes.
(C)Be evaluated, and updated if necessary, at least annually.
(D)If used as the basis of a decision to modify, delay, or deny services in a specified case under review, be disclosed to the provider and the policyholder in that specified case.
(E)Be available to the public upon request. An insurer shall only be required to disclose the criteria or guidelines for the specific procedures or conditions requested. An insurer may charge reasonable fees to cover administrative expenses related to disclosing criteria or guidelines pursuant to this paragraph that are limited to copying and postage costs. The insurer may also make the criteria or guidelines available through electronic communication means.
(3)The disclosure required by subparagraph (E) of paragraph (2) shall be accompanied by the following notice: The materials provided to you are guidelines used by this insurer to authorize, modify, or deny health care benefits for persons with similar illnesses or conditions. Specific care and treatment may vary depending on individual need and the benefits covered under your insurance contract.
(g)If an insurer subject to this section requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the insurer shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, based in whole or in part on medical necessity, every insurer subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with, the provision of health care services to insureds that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the insureds condition, not to exceed five business days from the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the insureds condition is such that the insured faces an imminent and serious threat to the insureds health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the insureds life or health or could jeopardize the insureds ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to insureds shall be made in a timely fashion, appropriate for the nature of the insureds condition, but not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to insureds shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the insureds treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the insured in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the insureds treating provider has been notified of the insurers decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall be communicated to insureds in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the insurers decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification or a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the provider or the insured may file an appeal with the insurer or seek department review under the unfair practices provisions of Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 and the regulations adopted thereunder.
(5)If the insurer cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the insurer is not in receipt of all of the information reasonably necessary and requested, or because the insurer requires consultation by an expert reviewer, or because the insurer has asked that an additional examination or test be performed upon the insured, provided that the examination or test is reasonable and consistent with good medical practice, the insurer shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2), or as soon as the insurer becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the insured, in writing, that the insurer cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The insurer shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the insurer, the insurer shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)If the commissioner determines that an insurer has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the commissioner may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected. The administrative penalties shall not be deemed an exclusive remedy for the commissioner. These penalties shall be paid to the Insurance Fund.
(i)Every insurer subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)(1)A disability insurer, including a specialized health insurer 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 comply with this section and shall ensure all of the following:
(A)The artificial intelligence, algorithm, or other software tool bases its determination on the following information, as applicable:
(i)An insureds medical or other clinical history.
(ii)Individual clinical circumstances as presented by the requesting provider.
(iii)Other relevant clinical information contained in the insureds medical or other clinical record.
(B)The artificial intelligence, algorithm, or other software tool does not base its determination solely on a group dataset.
(C)The artificial intelligence, algorithm, or other software tools criteria and guidelines complies with this chapter and applicable state and federal law.
(D)The artificial intelligence, algorithm, or other software tool does not supplant health care provider decisionmaking.
(E)The use of the artificial intelligence, algorithm, or other software tool does not discriminate, directly or indirectly, against insureds in violation of state or federal law.
(F)The artificial intelligence, algorithm, or other software tool is fairly and equitably applied, including in accordance with any applicable regulations and guidance issued by the federal Department of Health and Human Services.
(G)The artificial intelligence, algorithm, or other software tool is open to inspection for audit or compliance reviews by the department pursuant to applicable state and federal law.
(H)Disclosures pertaining to the use and oversight of the artificial intelligence, algorithm, or other software tool are contained in the written policies and procedures, as required by subdivision (b).
(I)The artificial intelligence, algorithm, or other software tools performance, use, and outcomes are periodically reviewed and revised to maximize accuracy and reliability.
(J)Patient data is not used beyond its intended and stated purpose, consistent with the Confidentiality of Medical Information Act (Part 2.6 (commencing with Section 56) of Division 1 of the Civil Code) and the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), as applicable.
(K)The artificial intelligence, algorithm, or other software tool does not directly or indirectly cause harm to the insured.
(2)Notwithstanding paragraph (1), the artificial intelligence, algorithm, or other software tool shall not deny, delay, or modify health care services based, in whole or in part, on medical necessity. A determination of medical necessity shall be made only by a licensed physician or licensed health care professional competent to evaluate the specific clinical issues involved in the health care services requested by the provider, as provided in subdivision (e), by reviewing and considering the requesting providers recommendation, the insureds medical or other clinical history, as applicable, and individual clinical circumstances.
(3)For purposes of this subdivision, artificial intelligence means an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
(4)This subdivision shall apply to utilization review or utilization management functions that prospectively, retrospectively, or concurrently review requests for covered health care services.
(5)A disability insurer subject to this subdivision shall comply with applicable federal rules and guidance issued by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. The department may issue guidance to implement this paragraph within one year of the adoption of federal rules or the issuance of guidance by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. Such guidance shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(6)For purposes of implementing this subdivision, the department may enter into exclusive or nonexclusive contracts, or amend existing contracts, on a bid or negotiated basis. Contracts entered into or amended pursuant to this subdivision shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Section 19130 of the Government Code, and Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and shall be exempt from the review or approval of any division of the Department of General Services.
(k)Nothing in this section shall cause a disability insurer to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 3.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)A health care service plan and any entity with which it contracts for services that include utilization review or utilization management functions, that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A health care service plan that is subject to this section shall have written policies and procedures establishing the process by which the plan prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for plan enrollees. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to Section 1363.5. These policies and procedures, and a description of the process by which the plan reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, shall be filed with the director for review and approval, and shall be disclosed by the plan to providers and enrollees upon request, and by the plan to the public upon request.
(c)A health care service plan subject to this section, except a plan that meets the requirements of Section 1351.2, shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or pursuant to the Osteopathic Act, or, if the plan is a specialized health care service plan, a clinical director with California licensure in a clinical area appropriate to the type of care provided by the specialized health care service plan. The medical director or clinical director shall ensure that the process by which the plan reviews and approves, modifies, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, complies with the requirements of this section.
(d)If health plan personnel, or individuals under contract to the plan to review requests by providers, approve the providers request, pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)No individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may deny or modify requests for authorization of health care services for an enrollee for reasons of medical necessity. The decision of the physician or other health care professional shall be communicated to the provider and the enrollee pursuant to subdivision (h).
(f)The criteria or guidelines used by the health care service plan to determine whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall be consistent with clinical principles and processes. These criteria and guidelines shall be developed pursuant to the requirements of Section 1363.5.
(g)If the health care service plan requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the plan shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, based in whole or in part on medical necessity, a health care service plan subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with the provision of health care services to enrollees that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed five business days from the plans receipt of the information reasonably necessary and requested by the plan to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the enrollees condition is such that the enrollee faces an imminent and serious threat to the enrollees health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the enrollees life or health or could jeopardize the enrollees ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to enrollees, shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the plans receipt of the information reasonably necessary and requested by the plan to make the determination. Nothing in this section shall be construed to alter the requirements of subdivision (b) of Section 1371.4. Notwithstanding Section 1371.4, the requirements of this division shall be applicable to all health plans and other entities conducting utilization review or utilization management.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the enrollees treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the enrollee in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the enrollees treating provider has been notified of the plans decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall be communicated to the enrollee in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the plans decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification of a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the enrollee may file a grievance with the plan pursuant to Section 1368, and in the case of Medi-Cal enrollees, shall explain how to request an administrative hearing and aid paid pending under Sections 51014.1 and 51014.2 of Title 22 of the California Code of Regulations.
(5)If the health care service plan cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the plan is not in receipt of all of the information reasonably necessary and requested, or because the plan requires consultation by an expert reviewer, or because the plan has asked that an additional examination or test be performed upon the enrollee, provided the examination or test is reasonable and consistent with good medical practice, the plan shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2) or as soon as the plan becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the enrollee, in writing, that the plan cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The plan shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the plan, the plan shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)If the director determines that a health care service plan has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the director may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected, in accordance with subdivision (a) of Section 1397. The administrative penalties shall not be deemed an exclusive remedy for the director. These penalties shall be paid to the Managed Care Administrative Fines and Penalties Fund and shall be used for the purposes specified in Section 1341.45.
(i)A health care service plan subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)A health care service plan subject to this section that reviews requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall establish, as part of the quality assurance program required by Section 1370, a process by which the plans compliance with this section is assessed and evaluated. The process shall include provisions for evaluation of complaints, assessment of trends, implementation of actions to correct identified problems, mechanisms to communicate actions and results to the appropriate health plan employees and contracting providers, and provisions for evaluation of any corrective action plan and measurements of performance.
(k)(1)A health care service plan, including a specialized health care service plan 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 comply with this section and shall ensure all of the following:
(A)The artificial intelligence, algorithm, or other software tool bases its determination on the following information, as applicable:
(i)An enrollees medical or other clinical history.
(ii)Individual clinical circumstances as presented by the requesting provider.
(iii)Other relevant clinical information contained in the enrollees medical or other clinical record.
(B)The artificial intelligence, algorithm, or other software tool does not base its determination solely on a group dataset.
(C)The artificial intelligence, algorithm, or other software tools criteria and guidelines complies with this chapter, including, but not limited to, Section 1363.5 and applicable state and federal law.
(D)The artificial intelligence, algorithm, or other software tool does not supplant health care provider decisionmaking.
(E)The use of the artificial intelligence, algorithm, or other software tool does not discriminate, directly or indirectly, against enrollees in violation of state or federal law.
(F)The artificial intelligence, algorithm, or other software tool is fairly and equitably applied, including in accordance with any applicable regulations and guidance issued by the federal Department of Health and Human Services.
(G)The artificial intelligence, algorithm, or other software tool is open to inspection for audit or compliance reviews by the department pursuant to Section 1381 and by the State Department of Health Care Services pursuant to applicable state and federal law.
(H)Disclosures pertaining to the use and oversight of the artificial intelligence, algorithm, or other software tool are contained in the written policies and procedures, as required by subdivision (b).
(I)The artificial intelligence, algorithm, or other software tools performance, use, and outcomes are periodically reviewed and revised to maximize accuracy and reliability.
(J)Patient data is not used beyond its intended and stated purpose, consistent with the Confidentiality of Medical Information Act (Part 2.6 (commencing with Section 56) of Division 1 of the Civil Code) and the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), as applicable.
(K)The artificial intelligence, algorithm, or other software tool does not directly or indirectly cause harm to the enrollee.
(2)Notwithstanding paragraph (1), the artificial intelligence, algorithm, or other software tool shall not deny, delay, or modify health care services based, in whole or in part, on medical necessity. A determination of medical necessity shall be made only by a licensed physician or a licensed health care professional competent to evaluate the specific clinical issues involved in the health care services requested by the provider, as provided in subdivision (e), by reviewing and considering the requesting providers recommendation, the enrollees medical or other clinical history, as applicable, and individual clinical circumstances.
(3)For purposes of this subdivision, artificial intelligence means an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
(4)This subdivision shall apply to utilization review or utilization management functions that prospectively, retrospectively, or concurrently review requests for covered health care services.
(5)A health care service plan subject to this subdivision shall comply with applicable federal rules and guidance issued by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. The department and the State Department of Health Care Services may issue guidance to implement this paragraph within one year of the adoption of federal rules or the issuance of guidance by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. Such guidance shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(6)For purposes of implementing this subdivision, the department and the State Department of Health Care Services may enter into exclusive or nonexclusive contracts, or amend existing contracts, on a bid or negotiated basis. Contracts entered into or amended pursuant to this subdivision shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Section 19130 of the Government Code, and Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and shall be exempt from the review or approval of any division of the Department of General Services.
(7)This subdivision applies to a Medi-Cal managed care plan only to the extent that the State Department of Health Care Services obtains any necessary federal approvals, and federal financial participation is not otherwise jeopardized.
(l)The director shall review a health care service plans compliance with this section as part of its periodic onsite medical survey of each plan undertaken pursuant to Section 1380, and shall include a discussion of compliance with this section as part of its report issued pursuant to that section.
(m)This section shall not apply to decisions made for the care or treatment of the sick who depend upon prayer or spiritual means for healing in the practice of religion as set forth in subdivision (a) of Section 1270.
(n)Nothing in this section shall cause a health care service plan to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 2.Section 10123.135 of the Insurance Code is amended to read:10123.135.(a)Every disability insurer, or an entity with which it contracts for services that include utilization review or utilization management functions, that covers hospital, medical, or surgical expenses and that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A disability insurer that is subject to this section, or any entity with which an insurer contracts for services that include utilization review or utilization management functions, shall have written policies and procedures establishing the process by which the insurer prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for insureds. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to subdivision (f). These policies and procedures, and a description of the process by which an insurer, or an entity with which an insurer contracts for services that include utilization review or utilization management functions, reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, shall be filed with the commissioner, and shall be disclosed by the insurer to insureds and providers upon request, and by the insurer to the public upon request.
(c)If the number of insureds covered under health benefit plans in this state that are issued by an insurer subject to this section constitute at least 50 percent of the number of insureds covered under health benefit plans issued nationwide by that insurer, the insurer shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or the Osteopathic Initiative Act, or the insurer may employ a clinical director licensed in California whose scope of practice under California law includes the right to independently perform all those services covered by the insurer. The medical director or clinical director shall ensure that the process by which the insurer reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, complies with the requirements of this section. Nothing in this subdivision shall be construed as restricting the existing authority of the Medical Board of California.
(d)If an insurer subject to this section, or individuals under contract to the insurer to review requests by providers, approve the providers request pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)An individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may not deny or modify requests for authorization of health care services for an insured for reasons of medical necessity. The decision of the physician or other health care provider shall be communicated to the provider and the insured pursuant to subdivision (h).
(f)(1)An insurer shall disclose, or provide for the disclosure, to the commissioner and to network providers, the process the insurer, its contracting provider groups, or any entity with which it contracts for services that include utilization review or utilization management functions, uses to authorize, delay, modify, or deny health care services under the benefits provided by the insurance contract, including coverage for subacute care, transitional inpatient care, or care provided in skilled nursing facilities. An insurer shall also disclose those processes to policyholders or persons designated by a policyholder, or to any other person or organization, upon request.
(2)The criteria or guidelines used by an insurer, or an entity with which an insurer contracts for utilization review or utilization management functions, to determine whether to authorize, modify, delay, or deny health care services, shall comply with all of the following:
(A)Be developed with involvement from actively practicing health care providers.
(B)Be consistent with sound clinical principles and processes.
(C)Be evaluated, and updated if necessary, at least annually.
(D)If used as the basis of a decision to modify, delay, or deny services in a specified case under review, be disclosed to the provider and the policyholder in that specified case.
(E)Be available to the public upon request. An insurer shall only be required to disclose the criteria or guidelines for the specific procedures or conditions requested. An insurer may charge reasonable fees to cover administrative expenses related to disclosing criteria or guidelines pursuant to this paragraph that are limited to copying and postage costs. The insurer may also make the criteria or guidelines available through electronic communication means.
(3)The disclosure required by subparagraph (E) of paragraph (2) shall be accompanied by the following notice: The materials provided to you are guidelines used by this insurer to authorize, modify, or deny health care benefits for persons with similar illnesses or conditions. Specific care and treatment may vary depending on individual need and the benefits covered under your insurance contract.
(g)If an insurer subject to this section requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the insurer shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, based in whole or in part on medical necessity, every insurer subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with, the provision of health care services to insureds that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the insureds condition, not to exceed five business days from the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the insureds condition is such that the insured faces an imminent and serious threat to the insureds health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the insureds life or health or could jeopardize the insureds ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to insureds shall be made in a timely fashion, appropriate for the nature of the insureds condition, but not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to insureds shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the insureds treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the insured in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the insureds treating provider has been notified of the insurers decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall be communicated to insureds in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the insurers decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification or a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the provider or the insured may file an appeal with the insurer or seek department review under the unfair practices provisions of Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 and the regulations adopted thereunder.
(5)If the insurer cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the insurer is not in receipt of all of the information reasonably necessary and requested, or because the insurer requires consultation by an expert reviewer, or because the insurer has asked that an additional examination or test be performed upon the insured, provided that the examination or test is reasonable and consistent with good medical practice, the insurer shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2), or as soon as the insurer becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the insured, in writing, that the insurer cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The insurer shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the insurer, the insurer shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)If the commissioner determines that an insurer has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the commissioner may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected. The administrative penalties shall not be deemed an exclusive remedy for the commissioner. These penalties shall be paid to the Insurance Fund.
(i)Every insurer subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)(1)A disability insurer, including a specialized health insurer 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 comply with this section and shall ensure all of the following:
(A)The artificial intelligence, algorithm, or other software tool bases its determination on the following information, as applicable:
(i)An insureds medical or other clinical history.
(ii)Individual clinical circumstances as presented by the requesting provider.
(iii)Other relevant clinical information contained in the insureds medical or other clinical record.
(B)The artificial intelligence, algorithm, or other software tool does not base its determination solely on a group dataset.
(C)The artificial intelligence, algorithm, or other software tools criteria and guidelines complies with this chapter and applicable state and federal law.
(D)The artificial intelligence, algorithm, or other software tool does not supplant health care provider decisionmaking.
(E)The use of the artificial intelligence, algorithm, or other software tool does not discriminate, directly or indirectly, against insureds in violation of state or federal law.
(F)The artificial intelligence, algorithm, or other software tool is fairly and equitably applied, including in accordance with any applicable regulations and guidance issued by the federal Department of Health and Human Services.
(G)The artificial intelligence, algorithm, or other software tool is open to inspection for audit or compliance reviews by the department pursuant to applicable state and federal law.
(H)Disclosures pertaining to the use and oversight of the artificial intelligence, algorithm, or other software tool are contained in the written policies and procedures, as required by subdivision (b).
(I)The artificial intelligence, algorithm, or other software tools performance, use, and outcomes are periodically reviewed and revised to maximize accuracy and reliability.
(J)Patient data is not used beyond its intended and stated purpose, consistent with the Confidentiality of Medical Information Act (Part 2.6 (commencing with Section 56) of Division 1 of the Civil Code) and the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), as applicable.
(K)The artificial intelligence, algorithm, or other software tool does not directly or indirectly cause harm to the insured.
(2)Notwithstanding paragraph (1), the artificial intelligence, algorithm, or other software tool shall not deny, delay, or modify health care services based, in whole or in part, on medical necessity. A determination of medical necessity shall be made only by a licensed physician or licensed health care professional competent to evaluate the specific clinical issues involved in the health care services requested by the provider, as provided in subdivision (e), by reviewing and considering the requesting providers recommendation, the insureds medical or other clinical history, as applicable, and individual clinical circumstances.
(3)For purposes of this subdivision, artificial intelligence means an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
(4)This subdivision shall apply to utilization review or utilization management functions that prospectively, retrospectively, or concurrently review requests for covered health care services.
(5)A disability insurer subject to this subdivision shall comply with applicable federal rules and guidance issued by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. The department may issue guidance to implement this paragraph within one year of the adoption of federal rules or the issuance of guidance by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. Such guidance shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(6)For purposes of implementing this subdivision, the department may enter into exclusive or nonexclusive contracts, or amend existing contracts, on a bid or negotiated basis. Contracts entered into or amended pursuant to this subdivision shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Section 19130 of the Government Code, and Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and shall be exempt from the review or approval of any division of the Department of General Services.
(k)Nothing in this section shall cause a disability insurer to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 3.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)A health care service plan and any entity with which it contracts for services that include utilization review or utilization management functions, that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A health care service plan that is subject to this section shall have written policies and procedures establishing the process by which the plan prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for plan enrollees. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to Section 1363.5. These policies and procedures, and a description of the process by which the plan reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, shall be filed with the director for review and approval, and shall be disclosed by the plan to providers and enrollees upon request, and by the plan to the public upon request.
(c)A health care service plan subject to this section, except a plan that meets the requirements of Section 1351.2, shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or pursuant to the Osteopathic Act, or, if the plan is a specialized health care service plan, a clinical director with California licensure in a clinical area appropriate to the type of care provided by the specialized health care service plan. The medical director or clinical director shall ensure that the process by which the plan reviews and approves, modifies, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, complies with the requirements of this section.
(d)If health plan personnel, or individuals under contract to the plan to review requests by providers, approve the providers request, pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)No individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may deny or modify requests for authorization of health care services for an enrollee for reasons of medical necessity. The decision of the physician or other health care professional shall be communicated to the provider and the enrollee pursuant to subdivision (h).
(f)The criteria or guidelines used by the health care service plan to determine whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall be consistent with clinical principles and processes. These criteria and guidelines shall be developed pursuant to the requirements of Section 1363.5.
(g)If the health care service plan requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the plan shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, based in whole or in part on medical necessity, a health care service plan subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with the provision of health care services to enrollees that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed five business days from the plans receipt of the information reasonably necessary and requested by the plan to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the enrollees condition is such that the enrollee faces an imminent and serious threat to the enrollees health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the enrollees life or health or could jeopardize the enrollees ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to enrollees, shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the plans receipt of the information reasonably necessary and requested by the plan to make the determination. Nothing in this section shall be construed to alter the requirements of subdivision (b) of Section 1371.4. Notwithstanding Section 1371.4, the requirements of this division shall be applicable to all health plans and other entities conducting utilization review or utilization management.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the enrollees treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the enrollee in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the enrollees treating provider has been notified of the plans decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall be communicated to the enrollee in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the plans decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification of a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the enrollee may file a grievance with the plan pursuant to Section 1368, and in the case of Medi-Cal enrollees, shall explain how to request an administrative hearing and aid paid pending under Sections 51014.1 and 51014.2 of Title 22 of the California Code of Regulations.
(5)If the health care service plan cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the plan is not in receipt of all of the information reasonably necessary and requested, or because the plan requires consultation by an expert reviewer, or because the plan has asked that an additional examination or test be performed upon the enrollee, provided the examination or test is reasonable and consistent with good medical practice, the plan shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2) or as soon as the plan becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the enrollee, in writing, that the plan cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The plan shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the plan, the plan shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)If the director determines that a health care service plan has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the director may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected, in accordance with subdivision (a) of Section 1397. The administrative penalties shall not be deemed an exclusive remedy for the director. These penalties shall be paid to the Managed Care Administrative Fines and Penalties Fund and shall be used for the purposes specified in Section 1341.45.
(i)A health care service plan subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)A health care service plan subject to this section that reviews requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall establish, as part of the quality assurance program required by Section 1370, a process by which the plans compliance with this section is assessed and evaluated. The process shall include provisions for evaluation of complaints, assessment of trends, implementation of actions to correct identified problems, mechanisms to communicate actions and results to the appropriate health plan employees and contracting providers, and provisions for evaluation of any corrective action plan and measurements of performance.
(k)(1)A health care service plan, including a specialized health care service plan 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 comply with this section and shall ensure all of the following:
(A)The artificial intelligence, algorithm, or other software tool bases its determination on the following information, as applicable:
(i)An enrollees medical or other clinical history.
(ii)Individual clinical circumstances as presented by the requesting provider.
(iii)Other relevant clinical information contained in the enrollees medical or other clinical record.
(B)The artificial intelligence, algorithm, or other software tool does not base its determination solely on a group dataset.
(C)The artificial intelligence, algorithm, or other software tools criteria and guidelines complies with this chapter, including, but not limited to, Section 1363.5 and applicable state and federal law.
(D)The artificial intelligence, algorithm, or other software tool does not supplant health care provider decisionmaking.
(E)The use of the artificial intelligence, algorithm, or other software tool does not discriminate, directly or indirectly, against enrollees in violation of state or federal law.
(F)The artificial intelligence, algorithm, or other software tool is fairly and equitably applied, including in accordance with any applicable regulations and guidance issued by the federal Department of Health and Human Services.
(G)The artificial intelligence, algorithm, or other software tool is open to inspection for audit or compliance reviews by the department pursuant to Section 1381 and by the State Department of Health Care Services pursuant to applicable state and federal law.
(H)Disclosures pertaining to the use and oversight of the artificial intelligence, algorithm, or other software tool are contained in the written policies and procedures, as required by subdivision (b).
(I)The artificial intelligence, algorithm, or other software tools performance, use, and outcomes are periodically reviewed and revised to maximize accuracy and reliability.
(J)Patient data is not used beyond its intended and stated purpose, consistent with the Confidentiality of Medical Information Act (Part 2.6 (commencing with Section 56) of Division 1 of the Civil Code) and the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), as applicable.
(K)The artificial intelligence, algorithm, or other software tool does not directly or indirectly cause harm to the enrollee.
(2)Notwithstanding paragraph (1), a decision to deny, delay, or modify health care services based in whole or in part on medical necessity shall be made the artificial intelligence, algorithm, or other software tool shall not deny, delay, or modify health care services based, in whole or in part, on medical necessity. A determination of medical necessity shall be made only by a licensed physician or a licensed health care professional competent to evaluate the specific clinical issues involved in the health care services requested by the provider, as provided in subdivision (e), by reviewing and considering the requesting providers recommendation, the enrollees medical or other clinical history, as applicable, and individual clinical circumstances.
(3)For purposes of this subdivision, artificial intelligence means an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
(4)This subdivision shall apply to utilization review or utilization management functions that prospectively, retrospectively, or concurrently review requests for covered health care services.
(5)A health care service plan subject to this subdivision shall comply with applicable federal rules and guidance issued by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. The department and the State Department of Health Care Services may issue guidance to implement this paragraph within one year of the adoption of federal rules or the issuance of guidance by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. Such guidance shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(6)For purposes of implementing this subdivision, the department and the State Department of Health Care Services may enter into exclusive or nonexclusive contracts, or amend existing contracts, on a bid or negotiated basis. Contracts entered into or amended pursuant to this subdivision shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Section 19130 of the Government Code, and Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and shall be exempt from the review or approval of any division of the Department of General Services.
(7)This subdivision applies to a Medi-Cal managed care plan only to the extent that the State Department of Health Care Services obtains any necessary federal approvals, and federal financial participation is not otherwise jeopardized.
(l)The director shall review a health care service plans compliance with this section as part of its periodic onsite medical survey of each plan undertaken pursuant to Section 1380, and shall include a discussion of compliance with this section as part of its report issued pursuant to that section.
(m)This section shall not apply to decisions made for the care or treatment of the sick who depend upon prayer or spiritual means for healing in the practice of religion as set forth in subdivision (a) of Section 1270.
(n)Nothing in this section shall cause a health care service plan to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 2.Section 10123.135 of the Insurance Code is amended to read:10123.135.(a)Every disability insurer, or an entity with which it contracts for services that include utilization review or utilization management functions, that covers hospital, medical, or surgical expenses and that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A disability insurer that is subject to this section, or any entity with which an insurer contracts for services that include utilization review or utilization management functions, shall have written policies and procedures establishing the process by which the insurer prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for insureds. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to subdivision (f). These policies and procedures, and a description of the process by which an insurer, or an entity with which an insurer contracts for services that include utilization review or utilization management functions, reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, shall be filed with the commissioner, and shall be disclosed by the insurer to insureds and providers upon request, and by the insurer to the public upon request.
(c)If the number of insureds covered under health benefit plans in this state that are issued by an insurer subject to this section constitute at least 50 percent of the number of insureds covered under health benefit plans issued nationwide by that insurer, the insurer shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or the Osteopathic Initiative Act, or the insurer may employ a clinical director licensed in California whose scope of practice under California law includes the right to independently perform all those services covered by the insurer. The medical director or clinical director shall ensure that the process by which the insurer reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, complies with the requirements of this section. Nothing in this subdivision shall be construed as restricting the existing authority of the Medical Board of California.
(d)If an insurer subject to this section, or individuals under contract to the insurer to review requests by providers, approve the providers request pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)An individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may not deny or modify requests for authorization of health care services for an insured for reasons of medical necessity. The decision of the physician or other health care provider shall be communicated to the provider and the insured pursuant to subdivision (h).
(f)(1)An insurer shall disclose, or provide for the disclosure, to the commissioner and to network providers, the process the insurer, its contracting provider groups, or any entity with which it contracts for services that include utilization review or utilization management functions, uses to authorize, delay, modify, or deny health care services under the benefits provided by the insurance contract, including coverage for subacute care, transitional inpatient care, or care provided in skilled nursing facilities. An insurer shall also disclose those processes to policyholders or persons designated by a policyholder, or to any other person or organization, upon request.
(2)The criteria or guidelines used by an insurer, or an entity with which an insurer contracts for utilization review or utilization management functions, to determine whether to authorize, modify, delay, or deny health care services, shall comply with all of the following:
(A)Be developed with involvement from actively practicing health care providers.
(B)Be consistent with sound clinical principles and processes.
(C)Be evaluated, and updated if necessary, at least annually.
(D)If used as the basis of a decision to modify, delay, or deny services in a specified case under review, be disclosed to the provider and the policyholder in that specified case.
(E)Be available to the public upon request. An insurer shall only be required to disclose the criteria or guidelines for the specific procedures or conditions requested. An insurer may charge reasonable fees to cover administrative expenses related to disclosing criteria or guidelines pursuant to this paragraph that are limited to copying and postage costs. The insurer may also make the criteria or guidelines available through electronic communication means.
(3)The disclosure required by subparagraph (E) of paragraph (2) shall be accompanied by the following notice: The materials provided to you are guidelines used by this insurer to authorize, modify, or deny health care benefits for persons with similar illnesses or conditions. Specific care and treatment may vary depending on individual need and the benefits covered under your insurance contract.
(g)If an insurer subject to this section requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the insurer shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, based in whole or in part on medical necessity, every insurer subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with, the provision of health care services to insureds that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the insureds condition, not to exceed five business days from the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the insureds condition is such that the insured faces an imminent and serious threat to the insureds health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the insureds life or health or could jeopardize the insureds ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to insureds shall be made in a timely fashion, appropriate for the nature of the insureds condition, but not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to insureds shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the insureds treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the insured in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the insureds treating provider has been notified of the insurers decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall be communicated to insureds in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the insurers decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification or a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the provider or the insured may file an appeal with the insurer or seek department review under the unfair practices provisions of Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 and the regulations adopted thereunder.
(5)If the insurer cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the insurer is not in receipt of all of the information reasonably necessary and requested, or because the insurer requires consultation by an expert reviewer, or because the insurer has asked that an additional examination or test be performed upon the insured, provided that the examination or test is reasonable and consistent with good medical practice, the insurer shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2), or as soon as the insurer becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the insured, in writing, that the insurer cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The insurer shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the insurer, the insurer shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)If the commissioner determines that an insurer has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the commissioner may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected. The administrative penalties shall not be deemed an exclusive remedy for the commissioner. These penalties shall be paid to the Insurance Fund.
(i)Every insurer subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)(1)A disability insurer, including a specialized health insurer 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 comply with this section and shall ensure all of the following:
(A)The artificial intelligence, algorithm, or other software tool bases its determination on the following information, as applicable:
(i)An insureds medical or other clinical history.
(ii)Individual clinical circumstances as presented by the requesting provider.
(iii)Other relevant clinical information contained in the insureds medical or other clinical record.
(B)The artificial intelligence, algorithm, or other software tool does not base its determination solely on a group dataset.
(C)The artificial intelligence, algorithm, or other software tools criteria and guidelines complies with this chapter and applicable state and federal law.
(D)The artificial intelligence, algorithm, or other software tool does not supplant health care provider decisionmaking.
(E)The use of the artificial intelligence, algorithm, or other software tool does not discriminate, directly or indirectly, against insureds in violation of state or federal law.
(F)The artificial intelligence, algorithm, or other software tool is fairly and equitably applied, including in accordance with any applicable regulations and guidance issued by the federal Department of Health and Human Services.
(G)The artificial intelligence, algorithm, or other software tool is open to inspection for audit or compliance reviews by the department pursuant to applicable state and federal law.
(H)Disclosures pertaining to the use and oversight of the artificial intelligence, algorithm, or other software tool are contained in the written policies and procedures, as required by subdivision (b).
(I)The artificial intelligence, algorithm, or other software tools performance, use, and outcomes are periodically reviewed and revised to maximize accuracy and reliability.
(J)Patient data is not used beyond its intended and stated purpose, consistent with the Confidentiality of Medical Information Act (Part 2.6 (commencing with Section 56) of Division 1 of the Civil Code) and the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191), as applicable.
(K)The artificial intelligence, algorithm, or other software tool does not directly or indirectly cause harm to the insured.
(2)Notwithstanding paragraph (1), a decision to deny, delay, or modify health care services based in whole or in part on medical necessity shall be made the artificial intelligence, algorithm, or other software tool shall not deny, delay, or modify health care services based, in whole or in part, on medical necessity. A determination of medical necessity shall be made only by a licensed physician or licensed health care professional competent to evaluate the specific clinical issues involved in the health care services requested by the provider, as provided in subdivision (e), by reviewing and considering the requesting providers recommendation, the insureds medical or other clinical history, as applicable, and individual clinical circumstances.
(3)For purposes of this subdivision, artificial intelligence means an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
(4)This subdivision shall apply to utilization review or utilization management functions that prospectively, retrospectively, or concurrently review requests for covered health care services.
(5)A disability insurer subject to this subdivision shall comply with applicable federal rules and guidance issued by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. The department may issue guidance to implement this paragraph within one year of the adoption of federal rules or the issuance of guidance by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. Such guidance shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(6)For purposes of implementing this subdivision, the department may enter into exclusive or nonexclusive contracts, or amend existing contracts, on a bid or negotiated basis. Contracts entered into or amended pursuant to this subdivision shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Section 19130 of the Government Code, and Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and shall be exempt from the review or approval of any division of the Department of General Services.
(k)Nothing in this section shall cause a disability insurer to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 3.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)A health care service plan and any entity with which it contracts for services that include utilization review or utilization management functions, that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A health care service plan that is subject to this section shall have written policies and procedures establishing the process by which the plan prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for plan enrollees. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to Section 1363.5. These policies and procedures, and a description of the process by which the plan reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, shall be filed with the director for review and approval, and shall be disclosed by the plan to providers and enrollees upon request, and by the plan to the public upon request.
(c)A health care service plan subject to this section, except a plan that meets the requirements of Section 1351.2, shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or pursuant to the Osteopathic Act, or, if the plan is a specialized health care service plan, a clinical director with California licensure in a clinical area appropriate to the type of care provided by the specialized health care service plan. The medical director or clinical director shall ensure that the process by which the plan reviews and approves, modifies, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, complies with the requirements of this section.
(d)If health plan personnel, or individuals under contract to the plan to review requests by providers, approve the providers request, pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)No individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may deny or modify requests for authorization of health care services for an enrollee for reasons of medical necessity. The decision of the physician or other health care professional shall be communicated to the provider and the enrollee pursuant to subdivision (h).
(f)The criteria or guidelines used by the health care service plan to determine whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall be consistent with clinical principles and processes. These criteria and guidelines shall be developed pursuant to the requirements of Section 1363.5.
(g)If the health care service plan requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the plan shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, based in whole or in part on medical necessity, a health care service plan subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with the provision of health care services to enrollees that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed five business days from the plans receipt of the information reasonably necessary and requested by the plan to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the enrollees condition is such that the enrollee faces an imminent and serious threat to the enrollees health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the enrollees life or health or could jeopardize the enrollees ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to enrollees, shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the plans receipt of the information reasonably necessary and requested by the plan to make the determination. Nothing in this section shall be construed to alter the requirements of subdivision (b) of Section 1371.4. Notwithstanding Section 1371.4, the requirements of this division shall be applicable to all health plans and other entities conducting utilization review or utilization management.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the enrollees treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the enrollee in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the enrollees treating provider has been notified of the plans decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall be communicated to the enrollee in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the plans decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification of a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the enrollee may file a grievance with the plan pursuant to Section 1368, and in the case of Medi-Cal enrollees, shall explain how to request an administrative hearing and aid paid pending under Sections 51014.1 and 51014.2 of Title 22 of the California Code of Regulations.
(5)If the health care service plan cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the plan is not in receipt of all of the information reasonably necessary and requested, or because the plan requires consultation by an expert reviewer, or because the plan has asked that an additional examination or test be performed upon the enrollee, provided the examination or test is reasonable and consistent with good medical practice, the plan shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2) or as soon as the plan becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the enrollee, in writing, that the plan cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The plan shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the plan, the plan shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)If the director determines that a health care service plan has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the director may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected, in accordance with subdivision (a) of Section 1397. The administrative penalties shall not be deemed an exclusive remedy for the director. These penalties shall be paid to the Managed Care Administrative Fines and Penalties Fund and shall be used for the purposes specified in Section 1341.45.
(i)A health care service plan subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)A health care service plan subject to this section that reviews requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall establish, as part of the quality assurance program required by Section 1370, a process by which the plans compliance with this section is assessed and evaluated. The process shall include provisions for evaluation of complaints, assessment of trends, implementation of actions to correct identified problems, mechanisms to communicate actions and results to the appropriate health plan employees and contracting providers, and provisions for evaluation of any corrective action plan and measurements of performance.
(k)(1)A health care service plan or plan, including a specialized health care service plan 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 comply with this section and shall ensure all of the following:
(A)The artificial intelligence, algorithm, or other software tool bases its determination on the following information, as applicable:
(i)An enrollees medical or dental other clinical history.
(ii)Individual clinical circumstances as presented by the requesting provider.
(iii)Other relevant clinical information contained in the enrollees medical or dental other clinical record.
(B)The artificial intelligence, algorithm, or other software tool does not base its determination solely on a group dataset.
(C)The artificial intelligence, algorithm, or other software tools criteria and guidelines complies with this chapter, including, but not limited to, Section 1363.5 and applicable state and federal law.
(B)(D)The artificial intelligence, algorithm, or other software tool does not supplant health care provider decisionmaking.
(C)(E)The use of the artificial intelligence, algorithm, or other software tool does not adversely discriminate, directly or indirectly, against an individual on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions. enrollees in violation of state or federal law.
(D)(F)The artificial intelligence, algorithm, or other software tool is fairly and equitably applied. applied, including in accordance with any applicable regulations and guidance issued by the federal Department of Health and Human Services.
(E)(G)The artificial intelligence, algorithm, or other software tool is open to inspection. inspection for audit or compliance reviews by the department pursuant to Section 1381 and by the State Department of Health Care Services pursuant to applicable state and federal law.
(F)(H)Disclosures pertaining to the use and oversight of the artificial intelligence, algorithm, or other software tool are contained in the written policies and procedures, as required by subdivision (b).
(G)(I)The artificial intelligence, algorithm, or other software tools performance, use, and outcomes are periodically reviewed and revised to maximize accuracy and reliability.
(H)(J)Patient data is not used beyond its intended and stated purpose, consistent with the Confidentiality of Medical Information Act (Part 2.6 (commencing with Section 56) of Division 1 of the Civil Code) and the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191). 104-191), as applicable.
(I)(K)The artificial intelligence, algorithm, or other software tool does not directly or indirectly cause harm to the enrollee.
(2)Notwithstanding paragraph (1), a denial, decision to deny, delay, or modification of modify health care services based in whole or in part on medical necessity shall be made by a licensed physician or other a licensed health care provider professional competent to evaluate the specific clinical issues involved in the health care services requested by the provider, as provided in subdivision (e), by reviewing and considering the requesting providers recommendation, the enrollees medical or dental other clinical history, as applicable, and individual clinical circumstances.
(3)For purposes of this subdivision, artificial intelligence means an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
(4)This subdivision shall apply to utilization review or utilization management functions that prospectively, retrospectively, or concurrently review requests for covered health care services.
(5)A health care service plan subject to this subdivision shall comply with applicable federal rules and guidance issued by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. The department and the State Department of Health Care Services may issue guidance to implement this paragraph within one year of the adoption of federal rules or the issuance of guidance by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. Such guidance shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(6)For purposes of implementing this subdivision, the department and the State Department of Health Care Services may enter into exclusive or nonexclusive contracts, or amend existing contracts, on a bid or negotiated basis. Contracts entered into or amended pursuant to this subdivision shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Section 19130 of the Government Code, and Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and shall be exempt from the review or approval of any division of the Department of General Services.
(7)This subdivision applies to a Medi-Cal managed care plan only to the extent that the State Department of Health Care Services obtains any necessary federal approvals, and federal financial participation is not otherwise jeopardized.
(l)The director shall review a health care service plans compliance with this section as part of its periodic onsite medical survey of each plan undertaken pursuant to Section 1380, and shall include a discussion of compliance with this section as part of its report issued pursuant to that section.
(m)This section shall not apply to decisions made for the care or treatment of the sick who depend upon prayer or spiritual means for healing in the practice of religion as set forth in subdivision (a) of Section 1270.
(n)Nothing in this section shall cause a health care service plan to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 2.Section 10123.135 of the Insurance Code is amended to read:10123.135.(a)Every disability insurer, or an entity with which it contracts for services that include utilization review or utilization management functions, that covers hospital, medical, or surgical expenses and that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A disability insurer that is subject to this section, or any entity with which an insurer contracts for services that include utilization review or utilization management functions, shall have written policies and procedures establishing the process by which the insurer prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for insureds. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to subdivision (f). These policies and procedures, and a description of the process by which an insurer, or an entity with which an insurer contracts for services that include utilization review or utilization management functions, reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, shall be filed with the commissioner, and shall be disclosed by the insurer to insureds and providers upon request, and by the insurer to the public upon request.
(c)If the number of insureds covered under health benefit plans in this state that are issued by an insurer subject to this section constitute at least 50 percent of the number of insureds covered under health benefit plans issued nationwide by that insurer, the insurer shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or the Osteopathic Initiative Act, or the insurer may employ a clinical director licensed in California whose scope of practice under California law includes the right to independently perform all those services covered by the insurer. The medical director or clinical director shall ensure that the process by which the insurer reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, complies with the requirements of this section. Nothing in this subdivision shall be construed as restricting the existing authority of the Medical Board of California.
(d)If an insurer subject to this section, or individuals under contract to the insurer to review requests by providers, approve the providers request pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)An individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may not deny or modify requests for authorization of health care services for an insured for reasons of medical necessity. The decision of the physician or other health care provider shall be communicated to the provider and the insured pursuant to subdivision (h).
(f)(1)An insurer shall disclose, or provide for the disclosure, to the commissioner and to network providers, the process the insurer, its contracting provider groups, or any entity with which it contracts for services that include utilization review or utilization management functions, uses to authorize, delay, modify, or deny health care services under the benefits provided by the insurance contract, including coverage for subacute care, transitional inpatient care, or care provided in skilled nursing facilities. An insurer shall also disclose those processes to policyholders or persons designated by a policyholder, or to any other person or organization, upon request.
(2)The criteria or guidelines used by an insurer, or an entity with which an insurer contracts for utilization review or utilization management functions, to determine whether to authorize, modify, delay, or deny health care services, shall comply with all of the following:
(A)Be developed with involvement from actively practicing health care providers.
(B)Be consistent with sound clinical principles and processes.
(C)Be evaluated, and updated if necessary, at least annually.
(D)If used as the basis of a decision to modify, delay, or deny services in a specified case under review, be disclosed to the provider and the policyholder in that specified case.
(E)Be available to the public upon request. An insurer shall only be required to disclose the criteria or guidelines for the specific procedures or conditions requested. An insurer may charge reasonable fees to cover administrative expenses related to disclosing criteria or guidelines pursuant to this paragraph that are limited to copying and postage costs. The insurer may also make the criteria or guidelines available through electronic communication means.
(3)The disclosure required by subparagraph (E) of paragraph (2) shall be accompanied by the following notice: The materials provided to you are guidelines used by this insurer to authorize, modify, or deny health care benefits for persons with similar illnesses or conditions. Specific care and treatment may vary depending on individual need and the benefits covered under your insurance contract.
(g)If an insurer subject to this section requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the insurer shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, based in whole or in part on medical necessity, every insurer subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with, the provision of health care services to insureds that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the insureds condition, not to exceed five business days from the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the insureds condition is such that the insured faces an imminent and serious threat to the insureds health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the insureds life or health or could jeopardize the insureds ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to insureds shall be made in a timely fashion, appropriate for the nature of the insureds condition, but not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to insureds shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the insureds treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the insured in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the insureds treating provider has been notified of the insurers decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall be communicated to insureds in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the insurers decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification or a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the provider or the insured may file an appeal with the insurer or seek department review under the unfair practices provisions of Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 and the regulations adopted thereunder.
(5)If the insurer cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the insurer is not in receipt of all of the information reasonably necessary and requested, or because the insurer requires consultation by an expert reviewer, or because the insurer has asked that an additional examination or test be performed upon the insured, provided that the examination or test is reasonable and consistent with good medical practice, the insurer shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2), or as soon as the insurer becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the insured, in writing, that the insurer cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The insurer shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the insurer, the insurer shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)If the commissioner determines that an insurer has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the commissioner may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected. The administrative penalties shall not be deemed an exclusive remedy for the commissioner. These penalties shall be paid to the Insurance Fund.
(i)Every insurer subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)(1)A disability insurer or insurer, including a specialized health insurer 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 comply with this section and shall ensure all of the following:
(A)The artificial intelligence, algorithm, or other software tool bases its determination on the following information, as applicable:
(i)An insureds medical or dental other clinical history.
(ii)Individual clinical circumstances as presented by the requesting provider.
(iii)Other relevant clinical information contained in the insureds medical or dental other clinical record.
(B)The artificial intelligence, algorithm, or other software tool does not base its determination solely on a group dataset.
(C)The artificial intelligence, algorithm, or other software tools criteria and guidelines complies with this chapter and applicable state and federal law.
(B)(D)The artificial intelligence, algorithm, or other software tool does not supplant health care provider decisionmaking.
(C)(E)The use of the artificial intelligence, algorithm, or other software tool does not adversely discriminate, directly or indirectly, against an individual on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions. insureds in violation of state or federal law.
(D)(F)The artificial intelligence, algorithm, or other software tool is fairly and equitably applied. applied, including in accordance with any applicable regulations and guidance issued by the federal Department of Health and Human Services.
(E)(G)The artificial intelligence, algorithm, or other software tool is open to inspection. inspection for audit or compliance reviews by the department pursuant to applicable state and federal law.
(F)(H)Disclosures pertaining to the use and oversight of the artificial intelligence, algorithm, or other software tool are contained in the written policies and procedures, as required by subdivision (b).
(G)(I)The artificial intelligence, algorithm, or other software tools performance, use, and outcomes are periodically reviewed and revised to maximize accuracy and reliability.
(H)(J)Patient data is not used beyond its intended and stated purpose, consistent with the Confidentiality of Medical Information Act (Part 2.6 (commencing with Section 56) of Division 1 of the Civil Code) and the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191). 104-191), as applicable.
(I)(K)The artificial intelligence, algorithm, or other software tool does not directly or indirectly cause harm to the insured.
(2)Notwithstanding paragraph (1), a denial, decision to deny, delay, or modification of modify health care services based in whole or in part on medical necessity shall be made by a licensed physician or other licensed health care provider professional competent to evaluate the specific clinical issues involved in the health care services requested by the provider, as provided in subdivision (e), by reviewing and considering the requesting providers recommendation, the insureds medical or dental other clinical history, as applicable, and individual clinical circumstances.
(3)For purposes of this subdivision, artificial intelligence means an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
(4)This subdivision shall apply to utilization review or utilization management functions that prospectively, retrospectively, or concurrently review requests for covered health care services.
(5)A disability insurer subject to this subdivision shall comply with applicable federal rules and guidance issued by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. The department may issue guidance to implement this paragraph within one year of the adoption of federal rules or the issuance of guidance by the federal Department of Health and Human Services regarding the use of artificial intelligence, algorithm, or other software tools. Such guidance shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
(6)For purposes of implementing this subdivision, the department may enter into exclusive or nonexclusive contracts, or amend existing contracts, on a bid or negotiated basis. Contracts entered into or amended pursuant to this subdivision shall be exempt from Chapter 6 (commencing with Section 14825) of Part 5.5 of Division 3 of Title 2 of the Government Code, Section 19130 of the Government Code, and Part 2 (commencing with Section 10100) of Division 2 of the Public Contract Code, and shall be exempt from the review or approval of any division of the Department of General Services.
(k)Nothing in this section shall cause a disability insurer to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 3.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)A health care service plan and any entity with which it contracts for services that include utilization review or utilization management functions, that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A health care service plan that is subject to this section shall have written policies and procedures establishing the process by which the plan prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for plan enrollees. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to Section 1363.5. These policies and procedures, and a description of the process by which the plan reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, shall be filed with the director for review and approval, and shall be disclosed by the plan to providers and enrollees upon request, and by the plan to the public upon request.
(c)A health care service plan subject to this section, except a plan that meets the requirements of Section 1351.2, shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or pursuant to the Osteopathic Act, or, if the plan is a specialized health care service plan, a clinical director with California licensure in a clinical area appropriate to the type of care provided by the specialized health care service plan. The medical director or clinical director shall ensure that the process by which the plan reviews and approves, modifies, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, complies with the requirements of this section.
(d)If health plan personnel, or individuals under contract to the plan to review requests by providers, approve the providers request, pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)No individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may deny or modify requests for authorization of health care services for an enrollee for reasons of medical necessity. The decision of the physician or other health care professional shall be communicated to the provider and the enrollee pursuant to subdivision (h).
(f)The criteria or guidelines used by the health care service plan to determine whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall be consistent with clinical principles and processes. These criteria and guidelines shall be developed pursuant to the requirements of Section 1363.5.
(g)If the health care service plan requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the plan shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, based in whole or in part on medical necessity, a health care service plan subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with the provision of health care services to enrollees that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed five business days from the plans receipt of the information reasonably necessary and requested by the plan to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the enrollees condition is such that the enrollee faces an imminent and serious threat to the enrollees health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the enrollees life or health or could jeopardize the enrollees ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to enrollees, shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the plans receipt of the information reasonably necessary and requested by the plan to make the determination. Nothing in this section shall be construed to alter the requirements of subdivision (b) of Section 1371.4. Notwithstanding Section 1371.4, the requirements of this division shall be applicable to all health plans and other entities conducting utilization review or utilization management.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the enrollees treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the enrollee in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the enrollees treating provider has been notified of the plans decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall be communicated to the enrollee in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the plans decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification of a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the enrollee may file a grievance with the plan pursuant to Section 1368, and in the case of Medi-Cal enrollees, shall explain how to request an administrative hearing and aid paid pending under Sections 51014.1 and 51014.2 of Title 22 of the California Code of Regulations.
(5)If the health care service plan cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the plan is not in receipt of all of the information reasonably necessary and requested, or because the plan requires consultation by an expert reviewer, or because the plan has asked that an additional examination or test be performed upon the enrollee, provided the examination or test is reasonable and consistent with good medical practice, the plan shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2) or as soon as the plan becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the enrollee, in writing, that the plan cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The plan shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the plan, the plan shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)If the director determines that a health care service plan has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the director may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected, in accordance with subdivision (a) of Section 1397. The administrative penalties shall not be deemed an exclusive remedy for the director. These penalties shall be paid to the Managed Care Administrative Fines and Penalties Fund and shall be used for the purposes specified in Section 1341.45.
(i)A health care service plan subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)A health care service plan subject to this section that reviews requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall establish, as part of the quality assurance program required by Section 1370, a process by which the plans compliance with this section is assessed and evaluated. The process shall include provisions for evaluation of complaints, assessment of trends, implementation of actions to correct identified problems, mechanisms to communicate actions and results to the appropriate health plan employees and contracting providers, and provisions for evaluation of any corrective action plan and measurements of performance.
(k)(1)Use of algorithms or artificial intelligence by or on behalf of a health care service plan or a specialized health care service plan covering dental services for the purpose of utilization review or utilization management functions shall comply with this section.(2)Algorithms, artificial intelligence, and other software tools used by or on behalf of a health care service plan or a specialized health care service plan covering dental services for the purpose of utilization review or utilization management functions for health care services shall comply with all of the following:(A)Be based upon an enrollees medical or dental history, as applicable, and individual clinical circumstances as presented by the requesting provider, as well as other relevant clinical information contained in the enrollees medical or dental record, and not supplant health care provider decisionmaking.(B)Not directly or indirectly discriminate against an individual on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions.(C)Be fairly and equitably applied.(D)Be open to inspection and disclosed in the written policies and procedures required by subdivision (b).(E)Be governed by policies that establish accountability for performance, use, and outcomes that are reviewed and revised for accuracy and reliability.(F)Not allow data to be used beyond its intended and stated purpose.(G)Not directly or indirectly cause harm to the enrollee.(3)Notwithstanding paragraphs (1) and (2), a(k)(1)A health care service plan or specialized health care service plan that uses an artificial intelligence, algorithm, or other software tool for the purpose of utilization review or utilization management functions, 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, shall comply with this section and shall ensure all of the following:
(A)The tool bases its determination on the following information, as applicable:
(i)An enrollees medical or dental history.
(ii)Individual clinical circumstances as presented by the requesting provider.
(iii)Other relevant clinical information contained in the enrollees medical or dental record.
(B)The tool does not supplant health care provider decisionmaking.
(C)The use of the tool does not adversely discriminate, directly or indirectly, against an individual on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions.
(D)The tool is fairly and equitably applied.
(E)The tool is open to inspection.
(F)Disclosures pertaining to the use and oversight of the tool are contained in the written policies and procedures, as required by subdivision (b).
(G)The tools performance, use, and outcomes are periodically reviewed and revised to maximize accuracy and reliability.
(H)Patient data is not used beyond its intended and stated purpose, consistent with the Confidentiality of Medical Information Act (Part 2.6 (commencing with Section 56) of Division 1 of the Civil Code) and the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191).
(I)The tool does not directly or indirectly cause harm to the enrollee.
(2)Notwithstanding paragraph (1), a denial, delay, or modification of health care services based on medical necessity shall be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider, as provided in subdivision (e), by considering the requesting providers recommendation and based on recommendation, the enrollees medical or dental history, as applicable, and individual clinical circumstances.
(4)(3)For purposes of this subdivision, artificial intelligence means an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
(l)The director shall review a health care service plans compliance with this section as part of its periodic onsite medical survey of each plan undertaken pursuant to Section 1380, and shall include a discussion of compliance with this section as part of its report issued pursuant to that section.
(m)This section shall not apply to decisions made for the care or treatment of the sick who depend upon prayer or spiritual means for healing in the practice of religion as set forth in subdivision (a) of Section 1270.
(n)Nothing in this section shall cause a health care service plan to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 2.Section 10123.135 of the Insurance Code is amended to read:10123.135.(a)Every disability insurer, or an entity with which it contracts for services that include utilization review or utilization management functions, that covers hospital, medical, or surgical expenses and that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A disability insurer that is subject to this section, or any entity with which an insurer contracts for services that include utilization review or utilization management functions, shall have written policies and procedures establishing the process by which the insurer prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for insureds. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to subdivision (f). These policies and procedures, and a description of the process by which an insurer, or an entity with which an insurer contracts for services that include utilization review or utilization management functions, reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, shall be filed with the commissioner, and shall be disclosed by the insurer to insureds and providers upon request, and by the insurer to the public upon request.
(c)If the number of insureds covered under health benefit plans in this state that are issued by an insurer subject to this section constitute at least 50 percent of the number of insureds covered under health benefit plans issued nationwide by that insurer, the insurer shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or the Osteopathic Initiative Act, or the insurer may employ a clinical director licensed in California whose scope of practice under California law includes the right to independently perform all those services covered by the insurer. The medical director or clinical director shall ensure that the process by which the insurer reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, complies with the requirements of this section. Nothing in this subdivision shall be construed as restricting the existing authority of the Medical Board of California.
(d)If an insurer subject to this section, or individuals under contract to the insurer to review requests by providers, approve the providers request pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)An individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may not deny or modify requests for authorization of health care services for an insured for reasons of medical necessity. The decision of the physician or other health care provider shall be communicated to the provider and the insured pursuant to subdivision (h).
(f)(1)An insurer shall disclose, or provide for the disclosure, to the commissioner and to network providers, the process the insurer, its contracting provider groups, or any entity with which it contracts for services that include utilization review or utilization management functions, uses to authorize, delay, modify, or deny health care services under the benefits provided by the insurance contract, including coverage for subacute care, transitional inpatient care, or care provided in skilled nursing facilities. An insurer shall also disclose those processes to policyholders or persons designated by a policyholder, or to any other person or organization, upon request.
(2)The criteria or guidelines used by an insurer, or an entity with which an insurer contracts for utilization review or utilization management functions, to determine whether to authorize, modify, delay, or deny health care services, shall comply with all of the following:
(A)Be developed with involvement from actively practicing health care providers.
(B)Be consistent with sound clinical principles and processes.
(C)Be evaluated, and updated if necessary, at least annually.
(D)If used as the basis of a decision to modify, delay, or deny services in a specified case under review, be disclosed to the provider and the policyholder in that specified case.
(E)Be available to the public upon request. An insurer shall only be required to disclose the criteria or guidelines for the specific procedures or conditions requested. An insurer may charge reasonable fees to cover administrative expenses related to disclosing criteria or guidelines pursuant to this paragraph that are limited to copying and postage costs. The insurer may also make the criteria or guidelines available through electronic communication means.
(3)The disclosure required by subparagraph (E) of paragraph (2) shall be accompanied by the following notice: The materials provided to you are guidelines used by this insurer to authorize, modify, or deny health care benefits for persons with similar illnesses or conditions. Specific care and treatment may vary depending on individual need and the benefits covered under your insurance contract.
(g)If an insurer subject to this section requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the insurer shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, based in whole or in part on medical necessity, every insurer subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with, the provision of health care services to insureds that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the insureds condition, not to exceed five business days from the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the insureds condition is such that the insured faces an imminent and serious threat to the insureds health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the insureds life or health or could jeopardize the insureds ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to insureds shall be made in a timely fashion, appropriate for the nature of the insureds condition, but not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to insureds shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the insureds treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the insured in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the insureds treating provider has been notified of the insurers decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall be communicated to insureds in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the insurers decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification or a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the provider or the insured may file an appeal with the insurer or seek department review under the unfair practices provisions of Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 and the regulations adopted thereunder.
(5)If the insurer cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the insurer is not in receipt of all of the information reasonably necessary and requested, or because the insurer requires consultation by an expert reviewer, or because the insurer has asked that an additional examination or test be performed upon the insured, provided that the examination or test is reasonable and consistent with good medical practice, the insurer shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2), or as soon as the insurer becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the insured, in writing, that the insurer cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The insurer shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the insurer, the insurer shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)If the commissioner determines that an insurer has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the commissioner may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected. The administrative penalties shall not be deemed an exclusive remedy for the commissioner. These penalties shall be paid to the Insurance Fund.
(i)Every insurer subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)(1)Use of algorithms or artificial intelligence by or on behalf of an insurer for the purpose of utilization review or utilization management functions shall comply with this section.(2)Algorithms, artificial intelligence, and other software tools used by or on behalf of an insurer for the purpose of utilization review or utilization management functions for health care services shall comply with all of the following:(A)Be based upon an insureds medical or dental history, as applicable, and individual clinical circumstances as presented by the requesting provider, as well as other relevant clinical information contained in the insureds medical or dental record, and not supplant health care provider decisionmaking.(B)Not directly or indirectly discriminate against an individual on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions.(C)Be fairly and equitably applied.(D)Be open to inspection and disclosed in the written policies and procedures required by subdivision (b).(E)Be governed by policies that establish accountability for performance, use, and outcomes that are reviewed and revised for accuracy and reliability.(F)Not allow data to be used beyond its intended and stated purpose.(G)Not directly or indirectly cause harm to the insured.(3)Notwithstanding paragraphs (1) and (2), a(j)(1)A disability insurer or specialized health insurer that uses an artificial intelligence, algorithm, or other software tool for the purpose of utilization review or utilization management functions, 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, shall comply with this section and shall ensure all of the following:
(A)The tool bases its determination on the following information, as applicable:
(i)An insureds medical or dental history.
(ii)Individual clinical circumstances as presented by the requesting provider.
(iii)Other relevant clinical information contained in the insureds medical or dental record.
(B)The tool does not supplant health care provider decisionmaking.
(C)The use of the tool does not adversely discriminate, directly or indirectly, against an individual on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions.
(D)The tool is fairly and equitably applied.
(E)The tool is open to inspection.
(F)Disclosures pertaining to the use and oversight of the tool are contained in the written policies and procedures, as required by subdivision (b).
(G)The tools performance, use, and outcomes are periodically reviewed and revised to maximize accuracy and reliability.
(H)Patient data is not used beyond its intended and stated purpose, consistent with the Confidentiality of Medical Information Act (Part 2.6 (commencing with Section 56) of Division 1 of the Civil Code) and the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191).
(I)The tool does not directly or indirectly cause harm to the insured.
(2)Notwithstanding paragraph (1), a denial, delay, or modification of health care services based on medical necessity shall be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider, as provided in subdivision (e), by considering the requesting providers recommendation and based on recommendation, the insureds medical or dental history, as applicable, and individual clinical circumstances.
(4)(3)For purposes of this subdivision, artificial intelligence means an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
(k)Nothing in this section shall cause a disability insurer to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 3.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)A health care service plan and any entity with which it contracts for services that include utilization review or utilization management functions, that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A health care service plan that is subject to this section shall have written policies and procedures establishing the process by which the plan prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for plan enrollees. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to Section 1363.5. These policies and procedures, and a description of the process by which the plan reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, shall be filed with the director for review and approval, and shall be disclosed by the plan to providers and enrollees upon request, and by the plan to the public upon request.
(c)A health care service plan subject to this section, except a plan that meets the requirements of Section 1351.2, shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or pursuant to the Osteopathic Act, or, if the plan is a specialized health care service plan, a clinical director with California licensure in a clinical area appropriate to the type of care provided by the specialized health care service plan. The medical director or clinical director shall ensure that the process by which the plan reviews and approves, modifies, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, complies with the requirements of this section.
(d)If health plan personnel, or individuals under contract to the plan to review requests by providers, approve the providers request, pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)No individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may deny or modify requests for authorization of health care services for an enrollee for reasons of medical necessity. The decision of the physician or other health care professional shall be communicated to the provider and the enrollee pursuant to subdivision (h).
(f)The criteria or guidelines used by the health care service plan to determine whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall be consistent with clinical principles and processes. These criteria and guidelines shall be developed pursuant to the requirements of Section 1363.5.
(g)If the health care service plan requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the plan shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, based in whole or in part on medical necessity, a health care service plan subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with the provision of health care services to enrollees that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed five business days from the plans receipt of the information reasonably necessary and requested by the plan to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the enrollees condition is such that the enrollee faces an imminent and serious threat to the enrollees health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the enrollees life or health or could jeopardize the enrollees ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to enrollees, shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the plans receipt of the information reasonably necessary and requested by the plan to make the determination. Nothing in this section shall be construed to alter the requirements of subdivision (b) of Section 1371.4. Notwithstanding Section 1371.4, the requirements of this division shall be applicable to all health plans and other entities conducting utilization review or utilization management.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the enrollees treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the enrollee in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the enrollees treating provider has been notified of the plans decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall be communicated to the enrollee in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the plans decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification of a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the enrollee may file a grievance with the plan pursuant to Section 1368, and in the case of Medi-Cal enrollees, shall explain how to request an administrative hearing and aid paid pending under Sections 51014.1 and 51014.2 of Title 22 of the California Code of Regulations.
(5)If the health care service plan cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the plan is not in receipt of all of the information reasonably necessary and requested, or because the plan requires consultation by an expert reviewer, or because the plan has asked that an additional examination or test be performed upon the enrollee, provided the examination or test is reasonable and consistent with good medical practice, the plan shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2) or as soon as the plan becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the enrollee, in writing, that the plan cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The plan shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the plan, the plan shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)If the director determines that a health care service plan has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the director may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected, in accordance with subdivision (a) of Section 1397. The administrative penalties shall not be deemed an exclusive remedy for the director. These penalties shall be paid to the Managed Care Administrative Fines and Penalties Fund and shall be used for the purposes specified in Section 1341.45.
(i)A health care service plan subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)A health care service plan subject to this section that reviews requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall establish, as part of the quality assurance program required by Section 1370, a process by which the plans compliance with this section is assessed and evaluated. The process shall include provisions for evaluation of complaints, assessment of trends, implementation of actions to correct identified problems, mechanisms to communicate actions and results to the appropriate health plan employees and contracting providers, and provisions for evaluation of any corrective action plan and measurements of performance.
(k)(1)Use of algorithms or artificial intelligence by or on behalf of a health care service plan or a specialized health care service plan covering dental services for the purpose of utilization review or utilization management functions shall comply with this section.
(2)Algorithms, artificial intelligence, and other software tools used by or on behalf of a health care service plan or a specialized health care service plan covering dental services for the purpose of utilization review or utilization management functions for health care services shall comply with all of the following:
(A)Be based upon an enrollees medical or dental history, as applicable, and individual clinical circumstances as presented by the requesting provider, as well as other relevant clinical information contained in the enrollees medical or dental record, and not supplant health care provider decisionmaking.
(B)Not directly or indirectly discriminate against an individual on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions.
(C)Be fairly and equitably applied.
(D)Be open to inspection and disclosed in the written policies and procedures required by subdivision (b).
(E)Be governed by policies that establish accountability for performance, use, and outcomes that are reviewed and revised for accuracy and reliability.
(F)Not allow data to be used beyond its intended and stated purpose.
(G)Be protected from risk that may Not directly or indirectly cause harm to the enrollee.
(3)Notwithstanding paragraphs (1) and (2), a denial, delay, or modification of health care services based on medical necessity shall be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider and with the same or similar specialty as the requesting provider, as provided in subdivision (e), by considering the requesting providers recommendation and based on the enrollees medical or dental history, as applicable, and individual clinical circumstances.
(4)For purposes of this subdivision, artificial intelligence means an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
(l)The director shall review a health care service plans compliance with this section as part of its periodic onsite medical survey of each plan undertaken pursuant to Section 1380, and shall include a discussion of compliance with this section as part of its report issued pursuant to that section.
(m)This section shall not apply to decisions made for the care or treatment of the sick who depend upon prayer or spiritual means for healing in the practice of religion as set forth in subdivision (a) of Section 1270.
(n)Nothing in this section shall cause a health care service plan to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 2.Section 10123.135 of the Insurance Code is amended to read:10123.135.(a)Every disability insurer, or an entity with which it contracts for services that include utilization review or utilization management functions, that covers hospital, medical, or surgical expenses and that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A disability insurer that is subject to this section, or any entity with which an insurer contracts for services that include utilization review or utilization management functions, shall have written policies and procedures establishing the process by which the insurer prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for insureds. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to subdivision (f). These policies and procedures, and a description of the process by which an insurer, or an entity with which an insurer contracts for services that include utilization review or utilization management functions, reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, shall be filed with the commissioner, and shall be disclosed by the insurer to insureds and providers upon request, and by the insurer to the public upon request.
(c)If the number of insureds covered under health benefit plans in this state that are issued by an insurer subject to this section constitute at least 50 percent of the number of insureds covered under health benefit plans issued nationwide by that insurer, the insurer shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or the Osteopathic Initiative Act, or the insurer may employ a clinical director licensed in California whose scope of practice under California law includes the right to independently perform all those services covered by the insurer. The medical director or clinical director shall ensure that the process by which the insurer reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, complies with the requirements of this section. Nothing in this subdivision shall be construed as restricting the existing authority of the Medical Board of California.
(d)If an insurer subject to this section, or individuals under contract to the insurer to review requests by providers, approve the providers request pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)An individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may not deny or modify requests for authorization of health care services for an insured for reasons of medical necessity. The decision of the physician or other health care provider shall be communicated to the provider and the insured pursuant to subdivision (h).
(f)(1)An insurer shall disclose, or provide for the disclosure, to the commissioner and to network providers, the process the insurer, its contracting provider groups, or any entity with which it contracts for services that include utilization review or utilization management functions, uses to authorize, delay, modify, or deny health care services under the benefits provided by the insurance contract, including coverage for subacute care, transitional inpatient care, or care provided in skilled nursing facilities. An insurer shall also disclose those processes to policyholders or persons designated by a policyholder, or to any other person or organization, upon request.
(2)The criteria or guidelines used by an insurer, or an entity with which an insurer contracts for utilization review or utilization management functions, to determine whether to authorize, modify, delay, or deny health care services, shall comply with all of the following:
(A)Be developed with involvement from actively practicing health care providers.
(B)Be consistent with sound clinical principles and processes.
(C)Be evaluated, and updated if necessary, at least annually.
(D)If used as the basis of a decision to modify, delay, or deny services in a specified case under review, be disclosed to the provider and the policyholder in that specified case.
(E)Be available to the public upon request. An insurer shall only be required to disclose the criteria or guidelines for the specific procedures or conditions requested. An insurer may charge reasonable fees to cover administrative expenses related to disclosing criteria or guidelines pursuant to this paragraph that are limited to copying and postage costs. The insurer may also make the criteria or guidelines available through electronic communication means.
(3)The disclosure required by subparagraph (E) of paragraph (2) shall be accompanied by the following notice: The materials provided to you are guidelines used by this insurer to authorize, modify, or deny health care benefits for persons with similar illnesses or conditions. Specific care and treatment may vary depending on individual need and the benefits covered under your insurance contract.
(g)If an insurer subject to this section requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the insurer shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, based in whole or in part on medical necessity, every insurer subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with, the provision of health care services to insureds that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the insureds condition, not to exceed five business days from the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the insureds condition is such that the insured faces an imminent and serious threat to the insureds health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the insureds life or health or could jeopardize the insureds ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to insureds shall be made in a timely fashion, appropriate for the nature of the insureds condition, but not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to insureds shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the insureds treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the insured in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the insureds treating provider has been notified of the insurers decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall be communicated to insureds in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the insurers decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification or a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the provider or the insured may file an appeal with the insurer or seek department review under the unfair practices provisions of Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 and the regulations adopted thereunder.
(5)If the insurer cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the insurer is not in receipt of all of the information reasonably necessary and requested, or because the insurer requires consultation by an expert reviewer, or because the insurer has asked that an additional examination or test be performed upon the insured, provided that the examination or test is reasonable and consistent with good medical practice, the insurer shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2), or as soon as the insurer becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the insured, in writing, that the insurer cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The insurer shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the insurer, the insurer shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)If the commissioner determines that an insurer has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the commissioner may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected. The administrative penalties shall not be deemed an exclusive remedy for the commissioner. These penalties shall be paid to the Insurance Fund.
(i)Every insurer subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)(1)Use of algorithms or artificial intelligence by or on behalf of an insurer for the purpose of utilization review or utilization management functions shall comply with this section.
(2)Algorithms, artificial intelligence, and other software tools used by or on behalf of an insurer for the purpose of utilization review or utilization management functions for health care services shall comply with all of the following:
(A)Be based upon an insureds medical or dental history, as applicable, and individual clinical circumstances as presented by the requesting provider, as well as other relevant clinical information contained in the insureds medical or dental record, and not supplant health care provider decisionmaking.
(B)Not directly or indirectly discriminate against an individual on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions.
(C)Be fairly and equitably applied.
(D)Be open to inspection and disclosed in the written policies and procedures required by subdivision (b).
(E)Be governed by policies that establish accountability for performance, use, and outcomes that are reviewed and revised for accuracy and reliability.
(F)Not allow data to be used beyond its intended and stated purpose.
(G)Be protected from risk that may Not directly or indirectly cause harm to the insured.
(3)Notwithstanding paragraphs (1) and (2), a denial, delay, or modification of health care services based on medical necessity shall be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider and with the same or similar specialty as the requesting provider, as provided in subdivision (e), by considering the requesting providers recommendation and based on the insureds medical or dental history, as applicable, and individual clinical circumstances.
(4)For purposes of this subdivision, artificial intelligence means an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
(k)Nothing in this section shall cause a disability insurer to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 3.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)A health care service plan and any entity with which it contracts for services that include utilization review or utilization management functions, that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A health care service plan that is subject to this section shall have written policies and procedures establishing the process by which the plan prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for plan enrollees. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to Section 1363.5. These policies and procedures, and a description of the process by which the plan reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, shall be filed with the director for review and approval, and shall be disclosed by the plan to providers and enrollees upon request, and by the plan to the public upon request.
(c)A health care service plan subject to this section, except a plan that meets the requirements of Section 1351.2, shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or pursuant to the Osteopathic Act, or, if the plan is a specialized health care service plan, a clinical director with California licensure in a clinical area appropriate to the type of care provided by the specialized health care service plan. The medical director or clinical director shall ensure that the process by which the plan reviews and approves, modifies, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, complies with the requirements of this section.
(d)If health plan personnel, or individuals under contract to the plan to review requests by providers, approve the providers request, pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)No individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may deny or modify requests for authorization of health care services for an enrollee for reasons of medical necessity. The decision of the physician or other health care professional shall be communicated to the provider and the enrollee pursuant to subdivision (h).
(f)The criteria or guidelines used by the health care service plan to determine whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall be consistent with clinical principles and processes. These criteria and guidelines shall be developed pursuant to the requirements of Section 1363.5.
(g)If the health care service plan requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the plan shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, based in whole or in part on medical necessity, a health care service plan subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with the provision of health care services to enrollees that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed five business days from the plans receipt of the information reasonably necessary and requested by the plan to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the enrollees condition is such that the enrollee faces an imminent and serious threat to the enrollees health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the enrollees life or health or could jeopardize the enrollees ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to enrollees, shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the plans receipt of the information reasonably necessary and requested by the plan to make the determination. Nothing in this section shall be construed to alter the requirements of subdivision (b) of Section 1371.4. Notwithstanding Section 1371.4, the requirements of this division shall be applicable to all health plans and other entities conducting utilization review or utilization management.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the enrollees treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the enrollee in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the enrollees treating provider has been notified of the plans decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall be communicated to the enrollee in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the plans decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification of a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the enrollee may file a grievance with the plan pursuant to Section 1368, and in the case of Medi-Cal enrollees, shall explain how to request an administrative hearing and aid paid pending under Sections 51014.1 and 51014.2 of Title 22 of the California Code of Regulations.
(5)If the health care service plan cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the plan is not in receipt of all of the information reasonably necessary and requested, or because the plan requires consultation by an expert reviewer, or because the plan has asked that an additional examination or test be performed upon the enrollee, provided the examination or test is reasonable and consistent with good medical practice, the plan shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2) or as soon as the plan becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the enrollee, in writing, that the plan cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The plan shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the plan, the plan shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)If the director determines that a health care service plan has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the director may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected, in accordance with subdivision (a) of Section 1397. The administrative penalties shall not be deemed an exclusive remedy for the director. These penalties shall be paid to the Managed Care Administrative Fines and Penalties Fund and shall be used for the purposes specified in Section 1341.45.
(i)A health care service plan subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)A health care service plan subject to this section that reviews requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall establish, as part of the quality assurance program required by Section 1370, a process by which the plans compliance with this section is assessed and evaluated. The process shall include provisions for evaluation of complaints, assessment of trends, implementation of actions to correct identified problems, mechanisms to communicate actions and results to the appropriate health plan employees and contracting providers, and provisions for evaluation of any corrective action plan and measurements of performance.
(k)(1)Use of algorithms or artificial intelligence by or on behalf of a health care service plan or a specialized health care service plan covering dental services for the purpose of utilization review or utilization management functions shall comply with this section.
(2)Algorithms, artificial intelligence, and other software tools used by or on behalf of a health care service plan or a specialized health care service plan covering dental services for the purpose of utilization review or utilization management functions for health care services shall comply with all of the following:
(A)Be based upon an enrollees medical history or dental history, as applicable, and individual clinical circumstances as presented by the requesting provider provider, as well as other relevant clinical information contained in the enrollees medical or dental record, and not supplant health care provider decisionmaking.
(B)Not directly or indirectly discriminate against an individual on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions.
(C)Be fairly and equitably applied.
(D)Be open to inspection and disclosed in the written policies and procedures required by subdivision (b).
(E)Be governed by policies with that establish accountability for performance, use, and outcomes that are reviewed and revised for accuracy and reliability.
(F)Not allow data to be used beyond its intended and stated purpose.
(G)Be protected from risk that may directly or indirectly cause harm to the enrollee.
(3)Notwithstanding paragraphs (1) and (2), a denial, delay, or modification of health care services based on medical necessity shall be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider and with the same or similar specialty as the requesting provider, as provided in subdivision (e), by considering the requesting providers recommendation and based on the enrollees medical history or dental history, as applicable, and individual clinical circumstances.
(4)For purposes of this subdivision, artificial intelligence means an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
(l)The director shall review a health care service plans compliance with this section as part of its periodic onsite medical survey of each plan undertaken pursuant to Section 1380, and shall include a discussion of compliance with this section as part of its report issued pursuant to that section.
(m)This section shall not apply to decisions made for the care or treatment of the sick who depend upon prayer or spiritual means for healing in the practice of religion as set forth in subdivision (a) of Section 1270.
(n)Nothing in this section shall cause a health care service plan to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 2.Section 10123.135 of the Insurance Code is amended to read:10123.135.(a)Every disability insurer, or an entity with which it contracts for services that include utilization review or utilization management functions, that covers hospital, medical, or surgical expenses and that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A disability insurer that is subject to this section, or any entity with which an insurer contracts for services that include utilization review or utilization management functions, shall have written policies and procedures establishing the process by which the insurer prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for insureds. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to subdivision (f). These policies and procedures, and a description of the process by which an insurer, or an entity with which an insurer contracts for services that include utilization review or utilization management functions, reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, shall be filed with the commissioner, and shall be disclosed by the insurer to insureds and providers upon request, and by the insurer to the public upon request.
(c)If the number of insureds covered under health benefit plans in this state that are issued by an insurer subject to this section constitute at least 50 percent of the number of insureds covered under health benefit plans issued nationwide by that insurer, the insurer shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or the Osteopathic Initiative Act, or the insurer may employ a clinical director licensed in California whose scope of practice under California law includes the right to independently perform all those services covered by the insurer. The medical director or clinical director shall ensure that the process by which the insurer reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, complies with the requirements of this section. Nothing in this subdivision shall be construed as restricting the existing authority of the Medical Board of California.
(d)If an insurer subject to this section, or individuals under contract to the insurer to review requests by providers, approve the providers request pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)An individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may not deny or modify requests for authorization of health care services for an insured for reasons of medical necessity. The decision of the physician or other health care provider shall be communicated to the provider and the insured pursuant to subdivision (h).
(f)(1)An insurer shall disclose, or provide for the disclosure, to the commissioner and to network providers, the process the insurer, its contracting provider groups, or any entity with which it contracts for services that include utilization review or utilization management functions, uses to authorize, delay, modify, or deny health care services under the benefits provided by the insurance contract, including coverage for subacute care, transitional inpatient care, or care provided in skilled nursing facilities. An insurer shall also disclose those processes to policyholders or persons designated by a policyholder, or to any other person or organization, upon request.
(2)The criteria or guidelines used by an insurer, or an entity with which an insurer contracts for utilization review or utilization management functions, to determine whether to authorize, modify, delay, or deny health care services, shall comply with all of the following:
(A)Be developed with involvement from actively practicing health care providers.
(B)Be consistent with sound clinical principles and processes.
(C)Be evaluated, and updated if necessary, at least annually.
(D)If used as the basis of a decision to modify, delay, or deny services in a specified case under review, be disclosed to the provider and the policyholder in that specified case.
(E)Be available to the public upon request. An insurer shall only be required to disclose the criteria or guidelines for the specific procedures or conditions requested. An insurer may charge reasonable fees to cover administrative expenses related to disclosing criteria or guidelines pursuant to this paragraph that are limited to copying and postage costs. The insurer may also make the criteria or guidelines available through electronic communication means.
(3)The disclosure required by subparagraph (E) of paragraph (2) shall be accompanied by the following notice: The materials provided to you are guidelines used by this insurer to authorize, modify, or deny health care benefits for persons with similar illnesses or conditions. Specific care and treatment may vary depending on individual need and the benefits covered under your insurance contract.
(g)If an insurer subject to this section requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the insurer shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, based in whole or in part on medical necessity, every insurer subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with, the provision of health care services to insureds that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the insureds condition, not to exceed five business days from the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the insureds condition is such that the insured faces an imminent and serious threat to the insureds health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the insureds life or health or could jeopardize the insureds ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to insureds shall be made in a timely fashion, appropriate for the nature of the insureds condition, but not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to insureds shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the insureds treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the insured in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the insureds treating provider has been notified of the insurers decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall be communicated to insureds in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the insurers decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification or a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the provider or the insured may file an appeal with the insurer or seek department review under the unfair practices provisions of Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 and the regulations adopted thereunder.
(5)If the insurer cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the insurer is not in receipt of all of the information reasonably necessary and requested, or because the insurer requires consultation by an expert reviewer, or because the insurer has asked that an additional examination or test be performed upon the insured, provided that the examination or test is reasonable and consistent with good medical practice, the insurer shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2), or as soon as the insurer becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the insured, in writing, that the insurer cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The insurer shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the insurer, the insurer shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)If the commissioner determines that an insurer has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the commissioner may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected. The administrative penalties shall not be deemed an exclusive remedy for the commissioner. These penalties shall be paid to the Insurance Fund.
(i)Every insurer subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)(1)Use of algorithms or artificial intelligence by or on behalf of an insurer for the purpose of utilization review or utilization management functions shall comply with this section.
(2)Algorithms, artificial intelligence, and other software tools used by or on behalf of an insurer for the purpose of utilization review or utilization management functions for health care services shall comply with all of the following:
(A)Be based upon an insureds medical history or dental history, as applicable, and individual clinical circumstances as presented by the requesting provider provider, as well as other relevant clinical information contained in the insureds medical or dental record, and not supplant health care provider decisionmaking.
(B)Not directly or indirectly discriminate against an individual on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions.
(C)Be fairly and equitably applied.
(D)Be open to inspection and disclosed in the written policies and procedures required by subdivision (b).
(E)Be governed by policies with that establish accountability for performance, use, and outcomes that are reviewed and revised for accuracy and reliability.
(F)Not allow data to be used beyond its intended and stated purpose.
(G)Be protected from risk that may directly or indirectly cause harm to the insured.
(3)Notwithstanding paragraphs (1) and (2), a denial, delay, or modification of health care services based on medical necessity shall be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider and with the same or similar specialty as the requesting provider, as provided in subdivision (e), by considering the requesting providers recommendation and based on the insureds medical history or dental history, as applicable, and individual clinical circumstances.
(4)For purposes of this subdivision, artificial intelligence means an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
(k)Nothing in this section shall cause a disability insurer to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 3.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)A health care service plan and any entity with which it contracts for services that include utilization review or utilization management functions, that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A health care service plan that is subject to this section shall have written policies and procedures establishing the process by which the plan prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for plan enrollees. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to Section 1363.5. These policies and procedures, and a description of the process by which the plan reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, shall be filed with the director for review and approval, and shall be disclosed by the plan to providers and enrollees upon request, and by the plan to the public upon request.
(c)A health care service plan subject to this section, except a plan that meets the requirements of Section 1351.2, shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or pursuant to the Osteopathic Act, or, if the plan is a specialized health care service plan, a clinical director with California licensure in a clinical area appropriate to the type of care provided by the specialized health care service plan. The medical director or clinical director shall ensure that the process by which the plan reviews and approves, modifies, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, complies with the requirements of this section.
(d)If health plan personnel, or individuals under contract to the plan to review requests by providers, approve the providers request, pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)No individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may deny or modify requests for authorization of health care services for an enrollee for reasons of medical necessity. The decision of the physician or other health care professional shall be communicated to the provider and the enrollee pursuant to subdivision (h).
(f)The criteria or guidelines used by the health care service plan to determine whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall be consistent with clinical principles and processes. These criteria and guidelines shall be developed pursuant to the requirements of Section 1363.5.
(g)If the health care service plan requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the plan shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, based in whole or in part on medical necessity, a health care service plan subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with the provision of health care services to enrollees that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed five business days from the plans receipt of the information reasonably necessary and requested by the plan to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the enrollees condition is such that the enrollee faces an imminent and serious threat to the enrollees health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the enrollees life or health or could jeopardize the enrollees ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to enrollees, shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the plans receipt of the information reasonably necessary and requested by the plan to make the determination. Nothing in this section shall be construed to alter the requirements of subdivision (b) of Section 1371.4. Notwithstanding Section 1371.4, the requirements of this division shall be applicable to all health plans and other entities conducting utilization review or utilization management.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the enrollees treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the enrollee in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the enrollees treating provider has been notified of the plans decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall be communicated to the enrollee in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the plans decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification of a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the enrollee may file a grievance with the plan pursuant to Section 1368, and in the case of Medi-Cal enrollees, shall explain how to request an administrative hearing and aid paid pending under Sections 51014.1 and 51014.2 of Title 22 of the California Code of Regulations.
(5)If the health care service plan cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the plan is not in receipt of all of the information reasonably necessary and requested, or because the plan requires consultation by an expert reviewer, or because the plan has asked that an additional examination or test be performed upon the enrollee, provided the examination or test is reasonable and consistent with good medical practice, the plan shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2) or as soon as the plan becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the enrollee, in writing, that the plan cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The plan shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the plan, the plan shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)A health care service plan shall ensure that a licensed physician supervises the use of artificial intelligence decisionmaking tools when those tools are used to inform decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees. (7)(6)If the director determines that a health care service plan has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the director may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected, in accordance with subdivision (a) of Section 1397. The administrative penalties shall not be deemed an exclusive remedy for the director. These penalties shall be paid to the Managed Care Administrative Fines and Penalties Fund and shall be used for the purposes specified in Section 1341.45.
(i)A health care service plan subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)A health care service plan subject to this section that reviews requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall establish, as part of the quality assurance program required by Section 1370, a process by which the plans compliance with this section is assessed and evaluated. The process shall include provisions for evaluation of complaints, assessment of trends, implementation of actions to correct identified problems, mechanisms to communicate actions and results to the appropriate health plan employees and contracting providers, and provisions for evaluation of any corrective action plan and measurements of performance.
(k)(1)Use of algorithms or artificial intelligence by or on behalf of a health care service plan for the purpose of utilization review or utilization management functions shall comply with this section.
(2)Algorithms, artificial intelligence, and other software tools used by or on behalf of a health care service plan for the purpose of utilization review or utilization management functions for health care services shall comply with all of the following:
(A)Be based upon an enrollees medical history and individual clinical circumstances as presented by the requesting provider and not supplant health care provider decisionmaking.
(B)Not directly or indirectly discriminate on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions.
(C)Be fairly and equitably applied.
(D)Be open to inspection and disclosed in the written policies and procedures required by subdivision (b).
(E)Be governed by policies with accountability for outcomes that are reviewed and revised for accuracy and reliability.
(F)Not allow data to be used beyond its intended and stated purpose.
(G)Be protected from risk that may directly or indirectly cause harm to the enrollee.
(3)Notwithstanding paragraphs (1) and (2), a denial, delay, or modification of health care services based on medical necessity shall be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider and with the same or similar specialty as the requesting provider, as provided in subdivision (e), by considering the requesting providers recommendation and based on the enrollees medical history and individual clinical circumstances.
(l)The director shall review a health care service plans compliance with this section as part of its periodic onsite medical survey of each plan undertaken pursuant to Section 1380, and shall include a discussion of compliance with this section as part of its report issued pursuant to that section.
(m)This section shall not apply to decisions made for the care or treatment of the sick who depend upon prayer or spiritual means for healing in the practice of religion as set forth in subdivision (a) of Section 1270.
(n)Nothing in this section shall cause a health care service plan to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 2.Section 10123.135 of the Insurance Code is amended to read:10123.135.(a)Every disability insurer, or an entity with which it contracts for services that include utilization review or utilization management functions, that covers hospital, medical, or surgical expenses and that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A disability insurer that is subject to this section, or any entity with which an insurer contracts for services that include utilization review or utilization management functions, shall have written policies and procedures establishing the process by which the insurer prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for insureds. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to subdivision (f). These policies and procedures, and a description of the process by which an insurer, or an entity with which an insurer contracts for services that include utilization review or utilization management functions, reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, shall be filed with the commissioner, and shall be disclosed by the insurer to insureds and providers upon request, and by the insurer to the public upon request.
(c)If the number of insureds covered under health benefit plans in this state that are issued by an insurer subject to this section constitute at least 50 percent of the number of insureds covered under health benefit plans issued nationwide by that insurer, the insurer shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or the Osteopathic Initiative Act, or the insurer may employ a clinical director licensed in California whose scope of practice under California law includes the right to independently perform all those services covered by the insurer. The medical director or clinical director shall ensure that the process by which the insurer reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, complies with the requirements of this section. Nothing in this subdivision shall be construed as restricting the existing authority of the Medical Board of California.
(d)If an insurer subject to this section, or individuals under contract to the insurer to review requests by providers, approve the providers request pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)An individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may not deny or modify requests for authorization of health care services for an insured for reasons of medical necessity. The decision of the physician or other health care provider shall be communicated to the provider and the insured pursuant to subdivision (h).
(f)(1)An insurer shall disclose, or provide for the disclosure, to the commissioner and to network providers, the process the insurer, its contracting provider groups, or any entity with which it contracts for services that include utilization review or utilization management functions, uses to authorize, delay, modify, or deny health care services under the benefits provided by the insurance contract, including coverage for subacute care, transitional inpatient care, or care provided in skilled nursing facilities. An insurer shall also disclose those processes to policyholders or persons designated by a policyholder, or to any other person or organization, upon request.
(2)The criteria or guidelines used by an insurer, or an entity with which an insurer contracts for utilization review or utilization management functions, to determine whether to authorize, modify, delay, or deny health care services, shall comply with all of the following:
(A)Be developed with involvement from actively practicing health care providers.
(B)Be consistent with sound clinical principles and processes.
(C)Be evaluated, and updated if necessary, at least annually.
(D)If used as the basis of a decision to modify, delay, or deny services in a specified case under review, be disclosed to the provider and the policyholder in that specified case.
(E)Be available to the public upon request. An insurer shall only be required to disclose the criteria or guidelines for the specific procedures or conditions requested. An insurer may charge reasonable fees to cover administrative expenses related to disclosing criteria or guidelines pursuant to this paragraph that are limited to copying and postage costs. The insurer may also make the criteria or guidelines available through electronic communication means.
(3)The disclosure required by subparagraph (E) of paragraph (2) shall be accompanied by the following notice: The materials provided to you are guidelines used by this insurer to authorize, modify, or deny health care benefits for persons with similar illnesses or conditions. Specific care and treatment may vary depending on individual need and the benefits covered under your insurance contract.
(g)If an insurer subject to this section requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the insurer shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, based in whole or in part on medical necessity, every insurer subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with, the provision of health care services to insureds that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the insureds condition, not to exceed five business days from the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the insureds condition is such that the insured faces an imminent and serious threat to the insureds health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the insureds life or health or could jeopardize the insureds ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to insureds shall be made in a timely fashion, appropriate for the nature of the insureds condition, but not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to insureds shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the insureds treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the insured in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the insureds treating provider has been notified of the insurers decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall be communicated to insureds in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the insurers decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification or a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the provider or the insured may file an appeal with the insurer or seek department review under the unfair practices provisions of Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 and the regulations adopted thereunder.
(5)If the insurer cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the insurer is not in receipt of all of the information reasonably necessary and requested, or because the insurer requires consultation by an expert reviewer, or because the insurer has asked that an additional examination or test be performed upon the insured, provided that the examination or test is reasonable and consistent with good medical practice, the insurer shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2), or as soon as the insurer becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the insured, in writing, that the insurer cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The insurer shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the insurer, the insurer shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)An insurer shall ensure that a licensed physician supervises the use of artificial intelligence decisionmaking tools when those tools are used to inform decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to insureds. (7)(6)If the commissioner determines that an insurer has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the commissioner may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected. The administrative penalties shall not be deemed an exclusive remedy for the commissioner. These penalties shall be paid to the Insurance Fund.
(i)Every insurer subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)(1)Use of algorithms or artificial intelligence by or on behalf of an insurer for the purpose of utilization review or utilization management functions shall comply with this section.
(2)Algorithms, artificial intelligence, and other software tools used by or on behalf of an insurer for the purpose of utilization review or utilization management functions for health care services shall comply with all of the following:
(A)Be based upon an insureds medical history and individual clinical circumstances as presented by the requesting provider and not supplant health care provider decisionmaking.
(B)Not directly or indirectly discriminate on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions.
(C)Be fairly and equitably applied.
(D)Be open to inspection and disclosed in the written policies and procedures required by subdivision (b).
(E)Be governed by policies with accountability for outcomes that are reviewed and revised for accuracy and reliability.
(F)Not allow data to be used beyond its intended and stated purpose.
(G)Be protected from risk that may directly or indirectly cause harm to the insured.
(3)Notwithstanding paragraphs (1) and (2), a denial, delay, or modification of health care services based on medical necessity shall be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider and with the same or similar specialty as the requesting provider, as provided in subdivision (e), by considering the requesting providers recommendation and based on the insureds medical history and individual clinical circumstances.
(k)Nothing in this section shall cause a disability insurer to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 3.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)A health care service plan and any entity with which it contracts for services that include utilization review or utilization management functions, that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A health care service plan that is subject to this section shall have written policies and procedures establishing the process by which the plan prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for plan enrollees. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to Section 1363.5. These policies and procedures, and a description of the process by which the plan reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, shall be filed with the director for review and approval, and shall be disclosed by the plan to providers and enrollees upon request, and by the plan to the public upon request.
(c)A health care service plan subject to this section, except a plan that meets the requirements of Section 1351.2, shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or pursuant to the Osteopathic Act, or, if the plan is a specialized health care service plan, a clinical director with California licensure in a clinical area appropriate to the type of care provided by the specialized health care service plan. The medical director or clinical director shall ensure that the process by which the plan reviews and approves, modifies, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, complies with the requirements of this section.
(d)If health plan personnel, or individuals under contract to the plan to review requests by providers, approve the providers request, pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)No individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may deny or modify requests for authorization of health care services for an enrollee for reasons of medical necessity. The decision of the physician or other health care professional shall be communicated to the provider and the enrollee pursuant to subdivision (h).
(f)The criteria or guidelines used by the health care service plan to determine whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall be consistent with clinical principles and processes. These criteria and guidelines shall be developed pursuant to the requirements of Section 1363.5.
(g)If the health care service plan requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the plan shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, based in whole or in part on medical necessity, a health care service plan subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with the provision of health care services to enrollees that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed five business days from the plans receipt of the information reasonably necessary and requested by the plan to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the enrollees condition is such that the enrollee faces an imminent and serious threat to the enrollees health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the enrollees life or health or could jeopardize the enrollees ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to enrollees, shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the plans receipt of the information reasonably necessary and requested by the plan to make the determination. Nothing in this section shall be construed to alter the requirements of subdivision (b) of Section 1371.4. Notwithstanding Section 1371.4, the requirements of this division shall be applicable to all health plans and other entities conducting utilization review or utilization management.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the enrollees treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the enrollee in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the enrollees treating provider has been notified of the plans decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall be communicated to the enrollee in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the plans decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification of a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the enrollee may file a grievance with the plan pursuant to Section 1368, and in the case of Medi-Cal enrollees, shall explain how to request an administrative hearing and aid paid pending under Sections 51014.1 and 51014.2 of Title 22 of the California Code of Regulations.
(5)If the health care service plan cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the plan is not in receipt of all of the information reasonably necessary and requested, or because the plan requires consultation by an expert reviewer, or because the plan has asked that an additional examination or test be performed upon the enrollee, provided the examination or test is reasonable and consistent with good medical practice, the plan shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2) or as soon as the plan becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the enrollee, in writing, that the plan cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The plan shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the plan, the plan shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)A health care service plan shall ensure that a licensed physician supervises the use of artificial intelligence decisionmaking tools when those tools are used to inform decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees.
(7)If the director determines that a health care service plan has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the director may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected, in accordance with subdivision (a) of Section 1397. The administrative penalties shall not be deemed an exclusive remedy for the director. These penalties shall be paid to the Managed Care Administrative Fines and Penalties Fund and shall be used for the purposes specified in Section 1341.45.
(i)A health care service plan subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)A health care service plan subject to this section that reviews requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall establish, as part of the quality assurance program required by Section 1370, a process by which the plans compliance with this section is assessed and evaluated. The process shall include provisions for evaluation of complaints, assessment of trends, implementation of actions to correct identified problems, mechanisms to communicate actions and results to the appropriate health plan employees and contracting providers, and provisions for evaluation of any corrective action plan and measurements of performance.
(k)(1)Use of algorithms or artificial intelligence by or on behalf of a health care service plan for the purpose of utilization review or utilization management functions shall comply with this section.
(2)Algorithms, artificial intelligence, and other software tools used by or on behalf of a health care service plan for the purpose of utilization review or utilization management functions for health care services shall comply with all of the following:
(A)Be based upon an enrollees medical history and individual clinical circumstances as presented by the requesting provider and not supplant health care provider decisionmaking.
(B)Not directly or indirectly discriminate on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions.
(C)Be fairly and equitably applied.
(D)Be open to inspection and disclosed in the written policies and procedures required by subdivision (b).
(E)Be governed by policies with accountability for outcomes that are reviewed and revised for accuracy and reliability.
(F)Not allow data to be used beyond its intended and stated purpose.
(G)Be protected from risk that may directly or indirectly cause harm to the enrollee.
(3)Notwithstanding paragraphs (1) and (2), a denial, delay, or modification of health care services based on medical necessity shall be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider and with the same or similar specialty as the requesting provider, as provided in subdivision (e), by considering the requesting providers recommendation and based on the enrollees medical history and individual clinical circumstances.
(k)(l)The director shall review a health care service plans compliance with this section as part of its periodic onsite medical survey of each plan undertaken pursuant to Section 1380, and shall include a discussion of compliance with this section as part of its report issued pursuant to that section.
(l)(m)This section shall not apply to decisions made for the care or treatment of the sick who depend upon prayer or spiritual means for healing in the practice of religion as set forth in subdivision (a) of Section 1270.
(m)(n)Nothing in this section shall cause a health care service plan to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 2.Section 10123.135 of the Insurance Code is amended to read:10123.135.(a)Every disability insurer, or an entity with which it contracts for services that include utilization review or utilization management functions, that covers hospital, medical, or surgical expenses and that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A disability insurer that is subject to this section, or any entity with which an insurer contracts for services that include utilization review or utilization management functions, shall have written policies and procedures establishing the process by which the insurer prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for insureds. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to subdivision (f). These policies and procedures, and a description of the process by which an insurer, or an entity with which an insurer contracts for services that include utilization review or utilization management functions, reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, shall be filed with the commissioner, and shall be disclosed by the insurer to insureds and providers upon request, and by the insurer to the public upon request.
(c)If the number of insureds covered under health benefit plans in this state that are issued by an insurer subject to this section constitute at least 50 percent of the number of insureds covered under health benefit plans issued nationwide by that insurer, the insurer shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or the Osteopathic Initiative Act, or the insurer may employ a clinical director licensed in California whose scope of practice under California law includes the right to independently perform all those services covered by the insurer. The medical director or clinical director shall ensure that the process by which the insurer reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, complies with the requirements of this section. Nothing in this subdivision shall be construed as restricting the existing authority of the Medical Board of California.
(d)If an insurer subject to this section, or individuals under contract to the insurer to review requests by providers, approve the providers request pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)An individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may not deny or modify requests for authorization of health care services for an insured for reasons of medical necessity. The decision of the physician or other health care provider shall be communicated to the provider and the insured pursuant to subdivision (h).
(f)(1)An insurer shall disclose, or provide for the disclosure, to the commissioner and to network providers, the process the insurer, its contracting provider groups, or any entity with which it contracts for services that include utilization review or utilization management functions, uses to authorize, delay, modify, or deny health care services under the benefits provided by the insurance contract, including coverage for subacute care, transitional inpatient care, or care provided in skilled nursing facilities. An insurer shall also disclose those processes to policyholders or persons designated by a policyholder, or to any other person or organization, upon request.
(2)The criteria or guidelines used by an insurer, or an entity with which an insurer contracts for utilization review or utilization management functions, to determine whether to authorize, modify, delay, or deny health care services, shall comply with all of the following:
(A)Be developed with involvement from actively practicing health care providers.
(B)Be consistent with sound clinical principles and processes.
(C)Be evaluated, and updated if necessary, at least annually.
(D)If used as the basis of a decision to modify, delay, or deny services in a specified case under review, be disclosed to the provider and the policyholder in that specified case.
(E)Be available to the public upon request. An insurer shall only be required to disclose the criteria or guidelines for the specific procedures or conditions requested. An insurer may charge reasonable fees to cover administrative expenses related to disclosing criteria or guidelines pursuant to this paragraph that are limited to copying and postage costs. The insurer may also make the criteria or guidelines available through electronic communication means.
(3)The disclosure required by subparagraph (E) of paragraph (2) shall be accompanied by the following notice: The materials provided to you are guidelines used by this insurer to authorize, modify, or deny health care benefits for persons with similar illnesses or conditions. Specific care and treatment may vary depending on individual need and the benefits covered under your insurance contract.
(g)If an insurer subject to this section requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the insurer shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, based in whole or in part on medical necessity, every insurer subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with, the provision of health care services to insureds that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the insureds condition, not to exceed five business days from the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the insureds condition is such that the insured faces an imminent and serious threat to the insureds health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the insureds life or health or could jeopardize the insureds ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to insureds shall be made in a timely fashion, appropriate for the nature of the insureds condition, but not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to insureds shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the insureds treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the insured in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the insureds treating provider has been notified of the insurers decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall be communicated to insureds in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the insurers decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification or a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the provider or the insured may file an appeal with the insurer or seek department review under the unfair practices provisions of Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 and the regulations adopted thereunder.
(5)If the insurer cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the insurer is not in receipt of all of the information reasonably necessary and requested, or because the insurer requires consultation by an expert reviewer, or because the insurer has asked that an additional examination or test be performed upon the insured, provided that the examination or test is reasonable and consistent with good medical practice, the insurer shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2), or as soon as the insurer becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the insured, in writing, that the insurer cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The insurer shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the insurer, the insurer shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)An insurer shall ensure that a licensed physician supervises the use of artificial intelligence decisionmaking tools when those tools are used to inform decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to insureds.
(7)If the commissioner determines that an insurer has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the commissioner may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected. The administrative penalties shall not be deemed an exclusive remedy for the commissioner. These penalties shall be paid to the Insurance Fund.
(i)Every insurer subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)(1)Use of algorithms or artificial intelligence by or on behalf of an insurer for the purpose of utilization review or utilization management functions shall comply with this section.
(2)Algorithms, artificial intelligence, and other software tools used by or on behalf of an insurer for the purpose of utilization review or utilization management functions for health care services shall comply with all of the following:
(A)Be based upon an insureds medical history and individual clinical circumstances as presented by the requesting provider and not supplant health care provider decisionmaking.
(B)Not directly or indirectly discriminate on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions.
(C)Be fairly and equitably applied.
(D)Be open to inspection and disclosed in the written policies and procedures required by subdivision (b).
(E)Be governed by policies with accountability for outcomes that are reviewed and revised for accuracy and reliability.
(F)Not allow data to be used beyond its intended and stated purpose.
(G)Be protected from risk that may directly or indirectly cause harm to the insured.
(3)Notwithstanding paragraphs (1) and (2), a denial, delay, or modification of health care services based on medical necessity shall be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider and with the same or similar specialty as the requesting provider, as provided in subdivision (e), by considering the requesting providers recommendation and based on the insureds medical history and individual clinical circumstances.
(j)(k)Nothing in this section shall cause a disability insurer to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 3.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
(a)A health care service plan and any entity with which it contracts for services that include utilization review or utilization management functions, that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A health care service plan that is subject to this section shall have written policies and procedures establishing the process by which the plan prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for plan enrollees. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to Section 1363.5. These policies and procedures, and a description of the process by which the plan reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, shall be filed with the director for review and approval, and shall be disclosed by the plan to providers and enrollees upon request, and by the plan to the public upon request.
(c)A health care service plan subject to this section, except a plan that meets the requirements of Section 1351.2, shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or pursuant to the Osteopathic Act, or, if the plan is a specialized health care service plan, a clinical director with California licensure in a clinical area appropriate to the type of care provided by the specialized health care service plan. The medical director or clinical director shall ensure that the process by which the plan reviews and approves, modifies, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, complies with the requirements of this section.
(d)If health plan personnel, or individuals under contract to the plan to review requests by providers, approve the providers request, pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)No individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may deny or modify requests for authorization of health care services for an enrollee for reasons of medical necessity. The decision of the physician or other health care professional shall be communicated to the provider and the enrollee pursuant to subdivision (h).
(f)The criteria or guidelines used by the health care service plan to determine whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall be consistent with clinical principles and processes. These criteria and guidelines shall be developed pursuant to the requirements of Section 1363.5.
(g)If the health care service plan requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the plan shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees, based in whole or in part on medical necessity, a health care service plan subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with the provision of health care services to enrollees that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed five business days from the plans receipt of the information reasonably necessary and requested by the plan to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the enrollees condition is such that the enrollee faces an imminent and serious threat to his or her the enrollees health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the enrollees life or health or could jeopardize the enrollees ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to enrollees, shall be made in a timely fashion appropriate for the nature of the enrollees condition, not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the plans receipt of the information reasonably necessary and requested by the plan to make the determination. Nothing in this section shall be construed to alter the requirements of subdivision (b) of Section 1371.4. Notwithstanding Section 1371.4, the requirements of this division shall be applicable to all health plans and other entities conducting utilization review or utilization management.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the enrollees treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the enrollee in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the enrollees treating provider has been notified of the plans decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees shall be communicated to the enrollee in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the plans decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification of a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the enrollee may file a grievance with the plan pursuant to Section 1368, and in the case of Medi-Cal enrollees, shall explain how to request an administrative hearing and aid paid pending under Sections 51014.1 and 51014.2 of Title 22 of the California Code of Regulations.
(5)If the health care service plan cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the plan is not in receipt of all of the information reasonably necessary and requested, or because the plan requires consultation by an expert reviewer, or because the plan has asked that an additional examination or test be performed upon the enrollee, provided the examination or test is reasonable and consistent with good medical practice, the plan shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2) or as soon as the plan becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the enrollee, in writing, that the plan cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The plan shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the plan, the plan shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)A health care service plan shall ensure that a licensed physician supervises the use of artificial intelligence decisionmaking tools when those tools are used to inform decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees.
(6)(7)If the director determines that a health care service plan has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the director may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected, in accordance with subdivision (a) of Section 1397. The administrative penalties shall not be deemed an exclusive remedy for the director. These penalties shall be paid to the Managed Care Administrative Fines and Penalties Fund and shall be used for the purposes specified in Section 1341.45.
(i)A health care service plan subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)A health care service plan subject to this section that reviews requests by providers prior to, retrospectively, or concurrent with, the provision of health care services to enrollees shall establish, as part of the quality assurance program required by Section 1370, a process by which the plans compliance with this section is assessed and evaluated. The process shall include provisions for evaluation of complaints, assessment of trends, implementation of actions to correct identified problems, mechanisms to communicate actions and results to the appropriate health plan employees and contracting providers, and provisions for evaluation of any corrective action plan and measurements of performance.
(k)The director shall review a health care service plans compliance with this section as part of its periodic onsite medical survey of each plan undertaken pursuant to Section 1380, and shall include a discussion of compliance with this section as part of its report issued pursuant to that section.
(l)This section shall not apply to decisions made for the care or treatment of the sick who depend upon prayer or spiritual means for healing in the practice of religion as set forth in subdivision (a) of Section 1270.
(m)Nothing in this section shall cause a health care service plan to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 2.Section 10123.135 of the Insurance Code is amended to read:10123.135.(a)Every disability insurer, or an entity with which it contracts for services that include utilization review or utilization management functions, that covers hospital, medical, or surgical expenses and that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, or that delegates these functions to medical groups or independent practice associations or to other contracting providers, shall comply with this section.
(b)A disability insurer that is subject to this section, or any entity with which an insurer contracts for services that include utilization review or utilization management functions, shall have written policies and procedures establishing the process by which the insurer prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers of health care services for insureds. These policies and procedures shall ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. These criteria and guidelines shall be developed pursuant to subdivision (f). These policies and procedures, and a description of the process by which an insurer, or an entity with which an insurer contracts for services that include utilization review or utilization management functions, reviews and approves, modifies, delays, or denies requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, shall be filed with the commissioner, and shall be disclosed by the insurer to insureds and providers upon request, and by the insurer to the public upon request.
(c)If the number of insureds covered under health benefit plans in this state that are issued by an insurer subject to this section constitute at least 50 percent of the number of insureds covered under health benefit plans issued nationwide by that insurer, the insurer shall employ or designate a medical director who holds an unrestricted license to practice medicine in this state issued pursuant to Section 2050 of the Business and Professions Code or the Osteopathic Initiative Act, or the insurer may employ a clinical director licensed in California whose scope of practice under California law includes the right to independently perform all those services covered by the insurer. The medical director or clinical director shall ensure that the process by which the insurer reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, complies with the requirements of this section. Nothing in this subdivision shall be construed as restricting the existing authority of the Medical Board of California.
(d)If an insurer subject to this section, or individuals under contract to the insurer to review requests by providers, approve the providers request pursuant to subdivision (b), the decision shall be communicated to the provider pursuant to subdivision (h).
(e)An individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may not deny or modify requests for authorization of health care services for an insured for reasons of medical necessity. The decision of the physician or other health care provider shall be communicated to the provider and the insured pursuant to subdivision (h).
(f)(1)An insurer shall disclose, or provide for the disclosure, to the commissioner and to network providers, the process the insurer, its contracting provider groups, or any entity with which it contracts for services that include utilization review or utilization management functions, uses to authorize, delay, modify, or deny health care services under the benefits provided by the insurance contract, including coverage for subacute care, transitional inpatient care, or care provided in skilled nursing facilities. An insurer shall also disclose those processes to policyholders or persons designated by a policyholder, or to any other person or organization, upon request.
(2)The criteria or guidelines used by an insurer, or an entity with which an insurer contracts for utilization review or utilization management functions, to determine whether to authorize, modify, delay, or deny health care services, shall comply with all of the following:
(A)Be developed with involvement from actively practicing health care providers.
(B)Be consistent with sound clinical principles and processes.
(C)Be evaluated, and updated if necessary, at least annually.
(D)If used as the basis of a decision to modify, delay, or deny services in a specified case under review, be disclosed to the provider and the policyholder in that specified case.
(E)Be available to the public upon request. An insurer shall only be required to disclose the criteria or guidelines for the specific procedures or conditions requested. An insurer may charge reasonable fees to cover administrative expenses related to disclosing criteria or guidelines pursuant to this paragraph that are limited to copying and postage costs. The insurer may also make the criteria or guidelines available through electronic communication means.
(3)The disclosure required by subparagraph (E) of paragraph (2) shall be accompanied by the following notice: The materials provided to you are guidelines used by this insurer to authorize, modify, or deny health care benefits for persons with similar illnesses or conditions. Specific care and treatment may vary depending on individual need and the benefits covered under your insurance contract.
(g)If an insurer subject to this section requests medical information from providers in order to determine whether to approve, modify, or deny requests for authorization, the insurer shall request only the information reasonably necessary to make the determination.
(h)In determining whether to approve, modify, or deny requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds, based in whole or in part on medical necessity, every insurer subject to this section shall meet the following requirements:
(1)Decisions to approve, modify, or deny, based on medical necessity, requests by providers prior to, or concurrent with, the provision of health care services to insureds that do not meet the requirements for the time period for review required by paragraph (2), shall be made in a timely fashion appropriate for the nature of the insureds condition, not to exceed five business days from the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination. In cases where the review is retrospective, the decision shall be communicated to the individual who received services, or to the individuals designee, within 30 days of the receipt of information that is reasonably necessary to make this determination, and shall be communicated to the provider in a manner that is consistent with current law. For purposes of this section, retrospective reviews shall be for care rendered on or after January 1, 2000.
(2)When the insureds condition is such that the insured faces an imminent and serious threat to his or her the insureds health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decisionmaking process, as described in paragraph (1), would be detrimental to the insureds life or health or could jeopardize the insureds ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to insureds shall be made in a timely fashion, appropriate for the nature of the insureds condition, but not to exceed 72 hours or, if shorter, the period of time required under Section 2719 of the federal Public Health Service Act (42 U.S.C. Sec. 300gg-19) and any subsequent rules or regulations issued thereunder, after the insurers receipt of the information reasonably necessary and requested by the insurer to make the determination.
(3)Decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to insureds shall be communicated to the requesting provider within 24 hours of the decision. Except for concurrent review decisions pertaining to care that is underway, which shall be communicated to the insureds treating provider within 24 hours, decisions resulting in denial, delay, or modification of all or part of the requested health care service shall be communicated to the insured in writing within two business days of the decision. In the case of concurrent review, care shall not be discontinued until the insureds treating provider has been notified of the insurers decision and a care plan has been agreed upon by the treating provider that is appropriate for the medical needs of that patient.
(4)Communications regarding decisions to approve requests by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall specify the specific health care service approved. Responses regarding decisions to deny, delay, or modify health care services requested by providers prior to, retrospectively, or concurrent with the provision of health care services to insureds shall be communicated to insureds in writing, and to providers initially by telephone or facsimile, except with regard to decisions rendered retrospectively, and then in writing, and shall include a clear and concise explanation of the reasons for the insurers decision, a description of the criteria or guidelines used, and the clinical reasons for the decisions regarding medical necessity. Any written communication to a physician or other health care provider of a denial, delay, or modification or a request shall include the name and telephone number of the health care professional responsible for the denial, delay, or modification. The telephone number provided shall be a direct number or an extension, to allow the physician or health care provider easily to contact the professional responsible for the denial, delay, or modification. Responses shall also include information as to how the provider or the insured may file an appeal with the insurer or seek department review under the unfair practices provisions of Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 and the regulations adopted thereunder.
(5)If the insurer cannot make a decision to approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2) because the insurer is not in receipt of all of the information reasonably necessary and requested, or because the insurer requires consultation by an expert reviewer, or because the insurer has asked that an additional examination or test be performed upon the insured, provided that the examination or test is reasonable and consistent with good medical practice, the insurer shall, immediately upon the expiration of the timeframe specified in paragraph (1) or (2), or as soon as the insurer becomes aware that it will not meet the timeframe, whichever occurs first, notify the provider and the insured, in writing, that the insurer cannot make a decision to approve, modify, or deny the request for authorization within the required timeframe, and specify the information requested but not received, or the expert reviewer to be consulted, or the additional examinations or tests required. The insurer shall also notify the provider and enrollee of the anticipated date on which a decision may be rendered. Upon receipt of all information reasonably necessary and requested by the insurer, the insurer shall approve, modify, or deny the request for authorization within the timeframes specified in paragraph (1) or (2), whichever applies.
(6)An insurer shall ensure that a licensed physician supervises the use of artificial intelligence decisionmaking tools when those tools are used to inform decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to insureds.
(6)(7)If the commissioner determines that an insurer has failed to meet any of the timeframes in this section, or has failed to meet any other requirement of this section, the commissioner may assess, by order, administrative penalties for each failure. A proceeding for the issuance of an order assessing administrative penalties shall be subject to appropriate notice to, and an opportunity for a hearing with regard to, the person affected. The administrative penalties shall not be deemed an exclusive remedy for the commissioner. These penalties shall be paid to the Insurance Fund.
(i)Every insurer subject to this section shall maintain telephone access for providers to request authorization for health care services.
(j)Nothing in this section shall cause a disability insurer to be defined as a health care provider for purposes of any provision of law, including, but not limited to, Section 6146 of the Business and Professions Code, Sections 3333.1 and 3333.2 of the Civil Code, and Sections 340.5, 364, 425.13, 667.7, and 1295 of the Code of Civil Procedure.
SEC. 3.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
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Date
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Status
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|---|---|
| Sep 28, 2024 | Chaptered by Secretary of State. Chapter 879, Statutes of 2024. |
| Sep 28, 2024 | Approved by the Governor. |
| Sep 11, 2024 | Enrolled and presented to the Governor at 3 p.m. |
| Aug 31, 2024 | Assembly amendments concurred in. (Ayes 40. Noes 0. Page 5770.) Ordered to engrossing and enrolling. |
| Aug 30, 2024 | In Senate. Concurrence in Assembly amendments pending. |
| Aug 30, 2024 | Read third time. Passed. (Ayes 76. Noes 0. Page 7004.) Ordered to the Senate. |
| Aug 23, 2024 | Read third time and amended. |
| Aug 23, 2024 | Ordered to third reading. |
| Aug 22, 2024 | Read third time and amended. |
| Aug 22, 2024 | Ordered to third reading. |
| Aug 19, 2024 | Read second time. Ordered to third reading. |
| Aug 15, 2024 | From committee: Do pass. (Ayes 14. Noes 0.) (August 15). |
| Aug 7, 2024 | August 7 set for first hearing. Placed on suspense file. |
| Jul 8, 2024 | Read second time and amended. Re-referred to Com. on APPR. |
| Jul 8, 2024 | From committee: Do pass as amended and re-refer to Com. on APPR. with recommendation: To consent calendar. (Ayes 11. Noes 0.) (July 2). |
| Jun 20, 2024 | Read second time and amended. Re-referred to Com. on P. & C.P. |
| Jun 19, 2024 | From committee: Do pass as amended and re-refer to Com. on P. & C.P. (Ayes 16. Noes 0.) (June 18). |
| Jun 10, 2024 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on HEALTH. |
| Jun 3, 2024 | Referred to Coms. on HEALTH and P. & C.P. |
| May 24, 2024 | In Assembly. Read first time. Held at Desk. |
| May 23, 2024 | Read third time. Passed. (Ayes 37. Noes 0. Page 4179.) Ordered to the Assembly. |
| May 20, 2024 | Ordered to special consent calendar. |
| May 16, 2024 | Read second time. Ordered to third reading. |
| May 16, 2024 | From committee: Do pass. (Ayes 7. Noes 0. Page 3972.) (May 16). |
| May 10, 2024 | Set for hearing May 16. |
| Apr 22, 2024 | April 22 hearing: Placed on APPR suspense file. |
| Apr 16, 2024 | Set for hearing April 22. |
| Apr 15, 2024 | Read second time and amended. Re-referred to Com. on APPR. |
| Apr 11, 2024 | From committee: Do pass as amended and re-refer to Com. on APPR. (Ayes 11. Noes 0. Page 3561.) (April 10). |
| Apr 1, 2024 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on HEALTH. |
| Mar 28, 2024 | Set for hearing April 10. |
| Mar 26, 2024 | April 3 set for second hearing canceled at the request of author. |
| Mar 14, 2024 | Set for hearing April 3. |
| Mar 13, 2024 | March 20 set for first hearing canceled at the request of author. |
| Mar 1, 2024 | Set for hearing March 20. |
| Feb 21, 2024 | Referred to Com. on HEALTH. |
| Feb 14, 2024 | From printer. May be acted upon on or after March 15. |
| Feb 13, 2024 | Introduced. Read first time. To Com. on RLS. for assignment. To print. |
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Date
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Description
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Location
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Votes
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|---|---|---|---|---|
| Aug 31, 2024 | Unfinished Business SB1120 Becker et al. Concurrence | Senate Floor |
Passed |
|
| Aug 30, 2024 | SB 1120 Becker Senate Third Reading By Reyes | Assembly Floor |
Passed |
|
| Aug 15, 2024 | Do pass. | Assembly Standing Committee on Appropriations |
Passed |
|
| Jul 2, 2024 | Do pass as amended, and be re-referred to the Committee on [Appropriations] with recommendation: To Consent Calendar | Assembly Standing Committee on Privacy and Consumer Protection |
Passed |
|
| Jun 18, 2024 | Do pass as amended and be re-referred to the Committee on [Privacy and Consumer Protection] | Assembly Standing Committee on Health |
Passed |
|
| May 23, 2024 | Special Consent SB1120 Becker | Senate Floor |
Passed |
|
| May 16, 2024 | Do pass | Senate Standing Committee on Appropriations |
Passed |
|
| Apr 22, 2024 | Placed on suspense file | Senate Standing Committee on Appropriations |
Passed |
|
| Apr 10, 2024 | Do pass as amended, but first amend, and re-refer to the Committee on [Appropriations] | Senate Standing Committee on Health |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| ALS Association | * Support | Apr 10, 2024 |
| AmericaS Health Insurance Plans | ** Against | |
| Association Of California Life Health Insurance Companies | * Against Unless Amend | Jun 18, 2024 |
| Autism Business Association | ** Support | |
| Breathe California | ** Support | |
| California Academy Of Family Physicians | ** Support | |
| California Association Of Health Plans | * Against Unless Amend | Jun 19, 2024 |
| California Chapter of American Cardiology | * Support | Jun 18, 2024 |
| California Chapter of American College of Cardiology | ** Support | |
| California Chapter of the American College of Emergency Physicians | ** Support | Jun 18, 2024 |
| California Dental Association | ** Support | |
| California Hospital Association | ** Support | |
| California Life Sciences | ** Support | |
| California Medical Association | ** Support | |
| California Orthopedic Association | ** Support | |
| California Podiatric Medical Association | ** Support | |
| California Rheumatology Alliance | ** Support | |
| California State Council of Service Employees International Union | ** Support | |
| Capitol Advocacy | * Support | Apr 10, 2024 |
| Consumer Attorneys Of California | ** Support | |
| CPCA | * Support | Jun 18, 2024 |
| CPCA Advocacy | ** Support | |
| CPCA Advocates, Subsidiary of The California Primary Care Association | ** Support | |
| Oakland Privacy | ** Support | |
| Physician Association of California | ** Support | |
| Providence | ** Support | |
| Providence Health Services | * Support | Apr 10, 2024 |
| Providence Medical Group and Clinical Network | ** Support | |
| Psychiatric Physicians Alliance of California | ** Support | |
| san francisco marin medical society | ** Support | |
| Spondylitis Association of America | ** Support | |
| Stone Advocacy | * Support | Apr 10, 2024 |
| UC Davis Health | * Support | Jun 18, 2024 |
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | SB 1120 |
UNFINISHED BUSINESS
Bill No: SB 1120
Author: Becker (D), et al.
Amended: 8/23/24
Vote: 21
SENATE HEALTH COMMITTEE: 11-0, 4/10/24
AYES: Roth, Nguyen, Glazer, Gonzalez, Grove, Hurtado, Limón, Menjivar, Rubio, Smallwood-Cuevas, Wiener
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/16/24
AYES: Caballero, Jones, Ashby, Becker, Bradford, Seyarto, Wahab
SENATE FLOOR: 37-0, 5/23/24
AYES: Alvarado-Gil, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk
NO VOTE RECORDED: Allen, Archuleta, Newman
ASSEMBLY FLOOR: 60-0, 8/30/24
(ROLL CALL NOT AVAILABLE)
SUBJECT: Health care coverage: utilization review
SOURCE: California Medical Association
DIGEST:
This bill establishes requirements on health plans and insurers applicable to their use of Artificial Intelligence (AI) for utilization review (UR) and utilization management (UM) decisions, including, that the use of AI, algorithm, or other software must be based upon a patient’s medical or other clinical history and individual clinical circumstances as presented by the requesting provider and not supplant health care provider decision making.
Assembly Amendments add “other clinical history” and “other clinical records” to the information for which AI, algorithm, or other software tools can base UR/UM functions related to medical necessity determinations. Prohibit a decision from being based solely on a group dataset. Require the criteria and guidelines to comply with applicable state and federal law. Provide less specificity with regard to the antidiscrimination provision. Define AI. Clarify that this bill applies to UR/UM that prospectively, retrospectively, or concurrently review requests for covered health care services. Require disclosure of the use and oversight of AI, algorithm or other software tools in policies and procedures. Allow the Department of Managed Health Care (DMHC), California Department of Insurance (CDI) and the Department of Health Care Services (DHCS) to issue guidance, not subject to the Administrative Procedures Act, within one year of the adoption of federal rules or guidance by the federal Department of Health and Human Services (DHHS) regarding the use of AI, algorithm, or other software tools. Allow DMHC, CDI and DHCS to enter into exclusive or nonexclusive, bid or no bid, contracts exempt from the Department of General Services review. Apply this bill to Medi-Cal managed care plans to the extent allowed with federal financial participation. Delete a requirement that a decision to deny, delay, or modify health care services be made by a provider with the same or similar specialty as the requesting provider.
ANALYSIS:
Existing law:
- Establishes the DMHC to regulate health plans under the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act) and the CDI to regulate health insurers. [HSC §1340, et seq., and INS §106, et seq.]
- Establishes requirements on health plans and insurers relating to UR/UM functions that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers for the provision of health care services to enrollees. These requirements also apply when a plan or insurer delegates these functions to medical groups or independent practice associations or to other contracting providers. [HSC §1367.01 and INS §10123.135]
- Prohibits any individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by a provider, from denying or modifying requests for authorization of health care services for an enrollee or insured for reasons of medical necessity. [HSC §1367.01 and INS §10123.135]
This bill:
- Requires a health plan or disability insurer, including a specialized plans that uses AI, algorithm, or other software tools for UR/UM for medical necessity, or that contracts with or otherwise works through an entity that provides this service, to comply with UR/UM law and ensure the following:
- Requires the AI, algorithm, or other software tool to base its determination on the following, as applicable:
- Medical or other clinical history;
- Individual clinical circumstances as presented by the requesting provider; and,
- Other relevant clinical information contained in the medical or other clinical record;
- Prohibits the AI, algorithm, or other software tool from basing its determination solely on a group dataset;
- Prohibits the AI, algorithm, or other software tool from supplanting health care provider decision making;
- Prohibits the use of the AI, algorithm, or other software tool from discriminating, directly or indirectly, against patients in violation of state or federal law;
- Requires the AI, algorithm, or other software tool to be fairly and equitably applied, including in accordance with any applicable regulations and guidance issued by the federal DHHS;
- Requires the AI, algorithm, or other software tool to be open to inspection for audit or compliance reviews and pursuant to applicable state and federal law;
- Requires disclosures pertaining to the use and oversight of the AI, algorithm, or other software tool to be contained in written policies and procedures, as required in existing law;
- Requires the AI, algorithm, or other software tool’s performance, use, and outcomes to be periodically reviewed and revised to maximize accuracy and reliability;
- Prohibits patient data from being used beyond its intended and stated purpose, consistent with the Confidentiality of Medical Information Act and the federal Health Insurance Portability and Accountability Act of 1996, as applicable; and,
- Prohibits the AI, algorithm, or other software tool from directly or indirectly causing harm to the patient.
- Requires the AI, algorithm, or other software tool to base its determination on the following, as applicable:
- Prohibits the AI, algorithm, or other software tool from denying, delaying, or modifying health care services based in whole or in part on medical necessity.
- Requires a medical necessity determination to be made only by a licensed physician or other licensed health care professional competent to evaluate the specific clinical issues involved in the health care services requested by the provider, as provided in existing law, by reviewing and considering the requesting provider’s recommendation and based on the patient’s medical history or other clinical history, as applicable, and individual clinical circumstances.
- Defines AI as an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
Comments
According to the author, recent reports of automated decision tools inaccurately denying provider requests to deliver care is worrisome. While AI has the potential to improve healthcare delivery, it must be supervised by trained medical professionals who understand the complexities of each patient’s situation. Wrongful denial of insurance claims based on AI algorithms can lead to serious health consequences, and even death. This bill strikes a common sense balance that puts safeguards in place for automated decision tools without discouraging companies from using this new technology.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes
According to the Assembly Appropriations Committee, the DMHC estimates the total cost of this bill to the Managed Care Fund, as follows:
- $18,000 in fiscal year (FY) 2024-25; $2.44 million in FY 2025-26; $2.46 million in FY 2026-27; $2.51 million in FY 2027-28; and, $3.51 million in FY 2028-29 in FY 2029-30 and annually thereafter. DMHC's Office of Legal Services anticipates short-term workload to draft legal memorandum and promulgate regulations to clarify the requirements; the Office of Plan Monitoring (OPM) will need to revise survey methodology, develop tools to assess health plan compliance, and review health plan filings of UM and other health plan documents; the Office of Enforcement anticipates an additional twenty referrals annually from the OPM beginning in FY 2026-27 and will need consultation funding for expert witness consultants, court reporting services and trial-related costs; and the Office of Technology and Innovation anticipates licensing costs. DMHC states that generally, a $1 million dollar increase to the Managed Care Fund could result in a 2-cent increase per enrollee on assessments to full-service health plans and a 1-cent increase per enrollee to specialized health plans. To the extent this bill and others result in an additional assessment on health plans, consumers could face higher premiums.
- CDI estimates workload costs of $840 in FY 2024-25 and $13,000 in FY 2025-26 (Insurance Fund).
SUPPORT: (Verified 8/28/24)
California Medical Association (source)
Autism Business Association
Breathe California
California Academy of Family Physicians
California Chapter of American College of Cardiology
California Dental Association
California Hospital Association
California Life Sciences
California Orthopedic Association
California Podiatric Medical Association
California Rheumatology Alliance
California State Council of Service Employees International Union
Consumer Attorneys of California
CPCA Advocacy
Oakland Privacy
Physician Association of California
Providence
Providence Medical Group and Clinical Network
Psychiatric Physicians Alliance of California
San Francisco Marin Medical Society
Spondylitis Association of America
OPPOSITION: (Verified 8/28/24)
None received
ARGUMENTS IN SUPPORT: The California Medical Association, sponsor of this bill, writes while AI tools can improve access to care and assist providers, they have also faced criticism for inaccuracies and biases. This bill addresses those issues by guaranteeing that a provider has final approval of utilization review decisions when AI is being used. Additionally, this bill includes safeguards to ensure AI, or algorithms used in utilization review do not discriminate against individuals based on their identity. As powerful as many AI tools are, they can be compromised when they rely on faulty, outdated, or biased data sources, leading to improper treatment recommendations. This bill adopts federal guidance requiring health plans to make certain that their AI technology is free from such problems. Without this bill, patients could have essential medical services denied by AI when being used for utilization review by health insurers. AI has been and will continue to be an essential tool in improving health care access and affordability for patients, but physicians must have oversight of critical utilization review decisions to allow for the best health outcomes for our communities. This bill provides essential guardrails to allow us to continue successfully integrating AI into our health care system.
Prepared by: Teri Boughton / HEALTH / (916) 651-4111
8/30/24 17:27:08
**** END ****
SENATE THIRD READING
STR Bill Id:SB 1120
Author:(Becker)
As Amended Ver:August 23, 2024
Majority vote
SUMMARY
Requires health plans and disability insurers, including specialized plans and insurers, that uses artificial intelligence (AI), and other software tools used for utilization review (UR) or utilization management (UM) decisions to comply with specified requirements, including that it be based on an enrollee or insured's medical history and individual clinical circumstances, and be fairly and equitably applied. Prohibits the AI, algorithm, or other software tool from denying, delaying, or modifying health care services based, in whole or in part, on medical necessity and requires such determinations to be made only by a licensed physician or a licensed health care professional, as specified.
Major Provisions
COMMENTS
- AI and generative AI (GenAI). In a draft regulation, the California Privacy Protection Agency, the entity tasked with implementing and enforcing the California Privacy Rights Act of 2020, defines AI as follows:
AI means a machine-based system that infers, from the input it receives, how to generate outputs that can influence physical or virtual environments. The AI may do this to achieve explicit or implicit objectives. Outputs can include predictions, content, recommendations, or decisions. Different AI varies in its levels of autonomy and adaptiveness after deployment. For example, AI includes GenAI models, such as large language models, that can learn from inputs and create new outputs, such as text, images, audio, or video; and facial- or speech-recognition or -detection technology.
- Recent State and Federal Activity. Below is a high-level overview of some recent activity:
- State Executive Order (EO). In September 2023, Governor Gavin Newsom signed an EO to study the development, use, and risks of AI technology throughout the state and to develop a deliberate and responsible process for evaluation and deployment of AI within state government. The Administration is implementing the EO, including moving forward to evaluate procurement proposals by state agencies, two of which relate to health care: one proposal to improve efficiency in inspections of health facilities by the Department of Public Health, and another within the California Health and Human Services Agency to improve translations.
- Centers for Medicare & Medicaid Services (CMS) Frequently Asked Questions (FAQs). In February 2024, CMS released its FAQs related to coverage criteria and UM requirements in its Final Rule. CMS clarified that an algorithm or software tool can be used to assist Medicare Advantage (MA) plans in making coverage determinations, but it is the responsibility of the MA organization to ensure that the algorithm or AI complies with all applicable rules for how coverage determinations by MA organizations are made. For example, compliance is required with all of the rules for making a determination of medical necessity, including that the MA organization base the decision on the individual patient's circumstances, so an algorithm that determines coverage based on a larger data set instead of the individual patient's medical history, the physician's recommendations, or clinical notes would not be compliant. Additionally, CMS is concerned that algorithms and many new AI technologies can exacerbate discrimination and bias and reminds MA organizations of the nondiscrimination requirements of the federal Patient Protection and Affordable Care Act, which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs and activities. MA organizations should, prior to implementing an algorithm or software tool, ensure that the tool is not perpetuating or exacerbating existing bias, or introducing new biases.
- Prior Authorization (PA). PA is a decision by a health plan or insurer that a health care service, treatment plan, prescription drug, or durable medical equipment is medically necessary. The health plan or insurer may require preauthorization for certain services before an individual receives them, except in an emergency.
Health plans and insurers are subject to various requirements in California, including an obligation to file policies and procedures that describe UR or UM functions, used to authorize, modify, or deny health care services under the benefits provided by the health plan. Additionally, California law requires these policies and procedures to ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. Finally, current law prohibits an individual, other than a licensed physician or licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, from denying authorization for health care services based on medical necessity.
According to the Kaiser Family Foundation, insurers use PA to reduce payments for care that is not medically necessary or appropriate, which in turn helps to keep premiums down. However, PA has come under scrutiny for creating unnecessary burdens for providers, plans, and patients. Patients can find it challenging to know what services require PA, the process and criteria plans use to make a PA coverage decision, and whether providers are giving the needed information to a plan to determine coverage. Inefficient processes can delay decisions and consequently access to care, increasing health risks to patients. Improper denials may increase patient out-of-pocket costs or cause patients to abandon care. The process itself may have a chilling effect on individuals seeking out care and providers recommending it.
In December 2023, the National Association of Insurance Commissioners issued guidance that the use of AI should be designed to mitigate the risk that the insurer's use of AI will result in adverse outcomes for consumers. Insurers should have robust governance, risk management controls, and internal audit functions, which all play a role in mitigating such risk including, but not limited to, unfair discrimination in outcomes resulting from predictive models and AI systems. The guidance reminds insurance carriers that decisions impacting consumers that are made or supported by advanced analytical and computational technologies, including AI, must comply with all applicable insurance laws and regulations, including unfair trade practices.
According to the Author
Recent reports of automated decision tools inaccurately denying provider requests to deliver care is worrisome. While AI has the potential to improve healthcare delivery, trained medical professionals who understand the complexities of each patient's situation need to have the final say. Wrongful denial of insurance claims based on AI algorithms can lead to serious health consequences, and even death. The author concludes that this bill strikes a common sense balance that puts safeguards in place for automated decision tools without discouraging companies from using this new technology.
Arguments in Support
The California Medical Association, sponsor, writes that AI has been and will continue to be an essential tool in improving health care access and affordability for patients, but physicians must have oversight of critical UR decisions to allow for the best health outcomes for our communities. This bill provides essential guardrails to allow us to continue successfully integrating AI into our health care system.
Arguments in Support if Amended
The California Academy of Preventive Medicine recommends amendments to assure that no AI criteria or computerized algorithms tools be utilized in PA without the approval of the medical director or clinical director and to clarify that final decisions involving denials be made by a licensed physician or licensed health care professional.
Arguments in Opposition
Department of Finance is opposed to this bill as it results in ongoing General Fund and significant special fund costs not included in the state's fiscal plan. Finance has concerns that these costs may add pressure to the departments as they are currently evaluating and implementing efficiencies resulting from the statewide, ongoing reductions to departmental budgets adopted in the 2024 Budget Act. Additionally, the costs and pressures to the Managed Care Fund could result in assessments on health care plans. These costs would likely be passed along to consumers in the form of higher premiums. Existing law established the Office of Health Care Affordability to slow healthcare spending and address prevailing cost drivers. The costs associated with this bill could increase the cost of health care for enrollees, conflicting with the state's goal to slow the growth of health care costs. This bill does not create a state-reimbursable mandate because it does not require a new program or higher level of service. Rather, these sections make a willful violation of these provisions by a health plan a crime, which is not a reimbursable state mandate.
FISCAL COMMENTS
According to the Assembly Appropriations Committee, the Department of Managed Health Care (DMHC) estimates the total cost of this bill to the Managed Care Fund, as follows:
- $18,000 in fiscal year (FY) 2024-25; $2.44 million in FY 2025-26; $2.46 million in FY 2026-27; $2.51 million in FY 2027-28; and, $3.51 million in FY 2028-29 in FY 2029-30 and annually thereafter. DMHC's Office of Legal Services anticipates short-term workload to draft legal memorandum and promulgate regulations to clarify the requirements; the Office of Plan Monitoring (OPM) will need to revise survey methodology, develop tools to assess health plan compliance, and review health plan filings of UM and other health plan documents; the Office of Enforcement anticipates an additional twenty referrals annually from the OPM beginning in FY 2026-27 and will need consultation funding for expert witness consultants, court reporting services and trial-related costs; and the Office of Technology and Innovation anticipates licensing costs. DMHC states that generally, a $1 million dollar increase to the Managed Care Fund could result in a 2-cent increase per enrollee on assessments to full-service health plans and a 1-cent increase per enrollee to specialized health plans. To the extent this bill and others result in an additional assessment on health plans, consumers could face higher premiums.
- The Department of Insurance estimates workload costs of $840 in FY 2024-25 and $13,000 in FY 2025-26 (Insurance Fund).
VOTES
SENATE FLOOR: 37-0-3
YES: Alvarado-Gil, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk
ABS, ABST OR NV: Allen, Archuleta, Newman
ASM HEALTH: 16-0-0
YES: Bonta, Waldron, Aguiar-Curry, Arambula, Jackson, Flora, Haney, Jones-Sawyer, Maienschein, McCarty, Joe Patterson, Rodriguez, Sanchez, Santiago, Schiavo, Weber
ASM PRIVACY AND CONSUMER PROTECTION: 11-0-0
YES: Bauer-Kahan, Joe Patterson, Bryan, Dixon, Hoover, Irwin, Lowenthal, Ortega, Ward, Wicks, Wilson
ASM APPROPRIATIONS: 14-0-1
YES: Wicks, Sanchez, Arambula, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Grayson, Haney, Hart, Pellerin, Ta, Villapudua
ABS, ABST OR NV: Jim Patterson
UPDATED
VERSION: August 23, 2024
CONSULTANT: Kristene Mapile / HEALTH / (916) 319-2097, Lisa Murawski / HEALTH / (916) 319-2097 FN: 0004601
SENATE THIRD READING
STR Bill Id:SB 1120
Author:(Becker)
As Amended Ver:July 8, 2024
Majority vote
SUMMARY
Requires health plans and disability insurers, including specialized plans and insurers, that uses artificial intelligence (AI), and other software tools used for utilization review (UR) or utilization management (UM) decisions to comply with specified requirements, including that it be based on an enrollee or insured's medical history and individual clinical circumstances, and be fairly and equitably applied.
Major Provisions
COMMENTS
- AI and generative AI (GenAI). In a draft regulation, the California Privacy Protection Agency, the entity tasked with implementing and enforcing the California Privacy Rights Act of 2020, defines AI as follows:
AI means a machine-based system that infers, from the input it receives, how to generate outputs that can influence physical or virtual environments. The AI may do this to achieve explicit or implicit objectives. Outputs can include predictions, content, recommendations, or decisions. Different AI varies in its levels of autonomy and adaptiveness after deployment. For example, AI includes GenAI models, such as large language models, that can learn from inputs and create new outputs, such as text, images, audio, or video; and facial- or speech-recognition or -detection technology.
- Recent State and Federal Activity. Below is a high-level overview of some recent activity:
- State Executive Order (EO). In September 2023, Governor Gavin Newsom signed an EO to study the development, use, and risks of AI technology throughout the state and to develop a deliberate and responsible process for evaluation and deployment of AI within state government. The Administration is implementing the EO, including moving forward to evaluate procurement proposals by state agencies, two of which relate to health care: one proposal to improve efficiency in inspections of health facilities by the Department of Public Health, and another within the California Health and Human Services Agency to improve translations.
- Centers for Medicare & Medicaid Services (CMS) Frequently Asked Questions (FAQs). In February 2024, CMS released its FAQs related to coverage criteria and UM requirements in its Final Rule. CMS clarified that an algorithm or software tool can be used to assist Medicare Advantage (MA) plans in making coverage determinations, but it is the responsibility of the MA organization to ensure that the algorithm or AI complies with all applicable rules for how coverage determinations by MA organizations are made. For example, compliance is required with all of the rules for making a determination of medical necessity, including that the MA organization base the decision on the individual patient's circumstances, so an algorithm that determines coverage based on a larger data set instead of the individual patient's medical history, the physician's recommendations, or clinical notes would not be compliant. Additionally, CMS is concerned that algorithms and many new AI technologies can exacerbate discrimination and bias and reminds MA organizations of the nondiscrimination requirements of the federal Patient Protection and Affordable Care Act, which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs and activities. MA organizations should, prior to implementing an algorithm or software tool, ensure that the tool is not perpetuating or exacerbating existing bias, or introducing new biases.
- Prior Authorization (PA). PA is a decision by a health plan or insurer that a health care service, treatment plan, prescription drug, or durable medical equipment is medically necessary. The health plan or insurer may require preauthorization for certain services before an individual receives them, except in an emergency.
Health plans and insurers are subject to various requirements in California, including an obligation to file policies and procedures that describe UR or UM functions, used to authorize, modify, or deny health care services under the benefits provided by the health plan. Additionally, California law requires these policies and procedures to ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. Finally, current law prohibits an individual, other than a licensed physician or licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, from denying authorization for health care services based on medical necessity.
According to the Kaiser Family Foundation, insurers use PA to reduce payments for care that is not medically necessary or appropriate, which in turn helps to keep premiums down. However, PA has come under scrutiny for creating unnecessary burdens for providers, plans, and patients. Patients can find it challenging to know what services require PA, the process and criteria plans use to make a PA coverage decision, and whether providers are giving the needed information to a plan to determine coverage. Inefficient processes can delay decisions and consequently access to care, increasing health risks to patients. Improper denials may increase patient out-of-pocket costs or cause patients to abandon care. The process itself may have a chilling effect on individuals seeking out care and providers recommending it.
In December 2023, the National Association of Insurance Commissioners issued guidance that the use of AI should be designed to mitigate the risk that the insurer's use of AI will result in adverse outcomes for consumers. Insurers should have robust governance, risk management controls, and internal audit functions, which all play a role in mitigating such risk including, but not limited to, unfair discrimination in outcomes resulting from predictive models and AI systems. The guidance reminds insurance carriers that decisions impacting consumers that are made or supported by advanced analytical and computational technologies, including AI, must comply with all applicable insurance laws and regulations, including unfair trade practices.
According to the Author
Recent reports of automated decision tools inaccurately denying provider requests to deliver care is worrisome. While AI has the potential to improve healthcare delivery, trained medical professionals who understand the complexities of each patient's situation need to have the final say. Wrongful denial of insurance claims based on AI algorithms can lead to serious health consequences, and even death. The author concludes that this bill strikes a common sense balance that puts safeguards in place for automated decision tools without discouraging companies from using this new technology.
Arguments in Support
The California Medical Association, sponsor, writes that AI has been and will continue to be an essential tool in improving health care access and affordability for patients, but physicians must have oversight of critical UR decisions to allow for the best health outcomes for our communities. This bill provides essential guardrails to allow us to continue successfully integrating AI into our health care system.
Arguments in Support if Amended
The California Academy of Preventive Medicine recommends amendments to assure that no AI criteria or computerized algorithms tools be utilized in PA without the approval of the medical director or clinical director and to clarify that final decisions involving denials be made by a licensed physician or licensed health care professional.
Arguments in Opposition
Department of Finance is opposed to this bill as it results in ongoing General Fund and significant special fund costs not included in the state's fiscal plan. Finance has concerns that these costs may add pressure to the departments as they are currently evaluating and implementing efficiencies resulting from the statewide, ongoing reductions to departmental budgets adopted in the 2024 Budget Act. Additionally, the costs and pressures to the Managed Care Fund could result in assessments on health care plans. These costs would likely be passed along to consumers in the form of higher premiums. Existing law established the Office of Health Care Affordability to slow healthcare spending and address prevailing cost drivers. The costs associated with this bill could increase the cost of health care for enrollees, conflicting with the state's goal to slow the growth of health care costs. This bill does not create a state-reimbursable mandate because it does not require a new program or higher level of service. Rather, these sections make a willful violation of these provisions by a health plan a crime, which is not a reimbursable state mandate.
FISCAL COMMENTS
According to the Assembly Appropriations Committee, the Department of Managed Health Care (DMHC) estimates the total cost of this bill to the Managed Care Fund, as follows:
- $18,000 in fiscal year (FY) 2024-25; $2.44 million in FY 2025-26; $2.46 million in FY 2026-27; $2.51 million in FY 2027-28; and, $3.51 million in FY 2028-29 in FY 2029-30 and annually thereafter. DMHC's Office of Legal Services anticipates short-term workload to draft legal memorandum and promulgate regulations to clarify the requirements; the Office of Plan Monitoring (OPM) will need to revise survey methodology, develop tools to assess health plan compliance, and review health plan filings of UM and other health plan documents; the Office of Enforcement anticipates an additional twenty referrals annually from the OPM beginning in FY 2026-27 and will need consultation funding for expert witness consultants, court reporting services and trial-related costs; and the Office of Technology and Innovation anticipates licensing costs. DMHC states that generally, a $1 million dollar increase to the Managed Care Fund could result in a 2-cent increase per enrollee on assessments to full-service health plans and a 1-cent increase per enrollee to specialized health plans. To the extent this bill and others result in an additional assessment on health plans, consumers could face higher premiums.
- The Department of Insurance estimates workload costs of $840 in FY 2024-25 and $13,000 in FY 2025-26 (Insurance Fund).
VOTES
SENATE FLOOR: 37-0-3
YES: Alvarado-Gil, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk
ABS, ABST OR NV: Allen, Archuleta, Newman
ASM HEALTH: 16-0-0
YES: Bonta, Waldron, Aguiar-Curry, Arambula, Jackson, Flora, Haney, Jones-Sawyer, Maienschein, McCarty, Joe Patterson, Rodriguez, Sanchez, Santiago, Schiavo, Weber
ASM PRIVACY AND CONSUMER PROTECTION: 11-0-0
YES: Bauer-Kahan, Joe Patterson, Bryan, Dixon, Hoover, Irwin, Lowenthal, Ortega, Ward, Wicks, Wilson
ASM APPROPRIATIONS: 14-0-1
YES: Wicks, Sanchez, Arambula, Bryan, Calderon, Wendy Carrillo, Dixon, Mike Fong, Grayson, Haney, Hart, Pellerin, Ta, Villapudua
ABS, ABST OR NV: Jim Patterson
UPDATED
VERSION: July 8, 2024
CONSULTANT: Kristene Mapile / HEALTH / (916) 319-2097 FN: 0004043
Date of Hearing: August 7, 2024
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Buffy Wicks, Chair
SBPCA Bill Id:SB 1120
Author:(Becker) – As Amended Ver:July 8, 2024
Policy Committee: | Health | Vote: | 16 - 0 |
Privacy and Consumer Protection | 11 - 0 | ||
|
|
Urgency: No State Mandated Local Program: Yes Reimbursable: No
SUMMARY:
This bill requires a health plan or insurer that uses an artificial intelligence (AI), algorithm, or other software tool for the purpose of utilization review (UR) or utilization management (UM) functions to ensure the tool meets specified safety and equity criteria and that UR and UM decisions are made by a licensed health care provider, as specified.
Specifically, this bill:
- Requires a health plan or insurer, including a specialized health plan or insurer, that uses an AI, algorithm, or other software tool, or works through an entity that uses such a tool, for the purpose of UR or UM functions, to ensure the following:
- The tool bases its determination on an enrollee’s or insured’s medical or dental history and individual clinical circumstances as presented by the requesting provider, and other relevant clinical information in the enrollee’s medical or dental record.
- The tool does not supplant health care provider decisionmaking.
- The tool is fairly and equitably applied, and use of the tool does not adversely discriminate, directly or indirectly, against an individual on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions.
- The tool is open to inspection and disclosures pertaining to the use and oversight of the tool are contained in the written policies and procedures, as required by existing UM criteria.
- The tool’s performance, use, and outcomes are periodically reviewed and revised to maximize accuracy and reliability.
- Patient data is protected, as required under specified state and federal statutes.
- The tool does not cause direct or indirect harm to the enrollee.
- Requires a denial, delay, or modification of health care services based on medical necessity be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues relevant to the requested health care services, as specified.
- Defines AI to mean an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
FISCAL EFFECT:
- The Department of Managed Health Care (DMHC) estimates the total cost of this bill to the Managed Care Fund, as follows:
- $18,000 in fiscal year (FY) 2024-25.
- $2.44 million in FY 2025-26.
- $2.46 million in FY 2026-27.
- $2.51 million in FY 2027-28.
- $3.51 million in FY 2028-29 in FY 2029-30 and annually thereafter.
DMHC’s Office of Legal Services anticipates short-term workload to draft legal memorandum and promulgate regulations to clarify the requirements; the Office of Plan Monitoring (OPM) will need to revise survey methodology, develop tools to assess health plan compliance, and review health plan filings of UM and other health plan documents; the Office of Enforcement anticipates an additional twenty referrals annually from the OPM beginning in FY 2026-27 and will need consultation funding for expert witness consultants, court reporting services and trial-related costs; and the Office of Technology and Innovation anticipates licensing costs.
DMHC states that generally, a $1 million dollar increase to the Managed Care Fund could result in a 2-cent increase per enrollee on assessments to full-service health plans and a 1-cent increase per enrollee to specialized health plans. To the extent this bill and others result in an additional assessment on health plans, consumers could face higher premiums.
- The Department of Insurance estimates workload costs of $840 in FY 2024-25 and $13,000 in FY 2025-26 (Insurance Fund).
COMMENTS:
- Purpose. This bill is sponsored by the California Medical Association. According to the author:
Recent reports of automated decision tools inaccurately denying provider requests to deliver care is worrisome. While artificial intelligence (AI) has the potential to improve healthcare delivery, trained medical professionals who understand the complexities of each patient’s situation need to have the final say. Wrongful denial of insurance claims based on AI algorithms can lead to serious health consequences, and even death. This bill strikes a common sense balance that puts safeguards in place for automated decision tools without discouraging companies from using this new technology.
- Background.
Assembly Privacy and Consumer Protection Committee Informational Hearing. On February 27, 2024, the Assembly Privacy and Consumer Protection Committee held an informational hearing on AI. The briefing paper suggests policymakers will need to design regulatory guardrails to limit harmful uses while allowing for the development and refinement of tools that benefit society. With respect to health care, the briefing paper notes that when AI tools are deployed in healthcare, biased historical data can lead to patients being recommended substandard care on the basis of their race or ethnicity.
Federal Government Rule. In February 2024, the federal Centers for Medicare & Medicaid Services (CMS) released frequently asked questions (FAQs) related to the Medicare Advantage and Part D Final Rule. CMS clarified that an algorithm or software tool may be used to assist Medicare Advantage (MA) plans in making coverage determinations, but it is the responsibility of the MA organization to ensure that the algorithm or AI complies with all applicable rules for how coverage determinations are made. For example, an MA plan must comply with all of the rules for making a determination of medical necessity, including that the decision be based on the individual patient’s circumstances. Therefore, an algorithm that determines coverage based on a larger data set instead of the individual patient's medical history, the physician’s recommendations, or clinical notes would not be compliant. CMS is also concerned that algorithms and new AI technologies can exacerbate discrimination and bias, and reminds MA organizations to ensure an algorithm or software tool is not perpetuating or exacerbating existing bias, or introducing new biases prior to implementing such a tool.
Analysis Prepared by: Allegra Kim / APPR. / (916) 319-2081
Date of Hearing: July 2, 2024
ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION
Rebecca Bauer-Kahan, Chair
SBPCA Bill Id:SB 1120
Author:(Becker) – As Amended Ver:June 20, 2024
AS PROPOSED FOR CONSENT
AS PROPOSED TO BE AMENDED
SENATE VOTE: 37-0
SUBJECT: Health care coverage: utilization review
SYNOPSIS
Artificial intelligence (AI) models can process enormous datasets, identify hidden patterns, and make decisions with a degree of accuracy and reliability that vastly exceeds human capabilities. But the datasets AI are trained on are often contaminated with bias, and the inferences AI draw from intricate patterns in these datasets are often inscrutable. Rather than eliminating human bias, AI can reinforce and mask it with the guise of mathematical neutrality. Without human-centered oversight, particularly in consequential contexts such as healthcare, the impacts can be catastrophic.
The bill, sponsored by California Medical Association, seeks to ensure that physicians exercise oversight over utilization review decisions in order to foster the best health outcomes for patients. The bill would require health plans and insurers to comply with specific requirements when using AI and other similar decision-making tools for utilization management review or utilization management functions. Additionally, the bill would require that denials, delays, or modifications of health care services must be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested. The bill is supported by a number of health organizations as well as by Oakland Privacy.
The bill is opposed by California Association of Health Plans, the Association of California Life and Health Insurance Companies, and America’s Health Insurance Plans unless it is amended to omit the provision requiring that a licensed physician or health care provider has final approval of any utilization review decisions involving an AI. The bill passed the Assembly Health Committee on a 16-0 vote.
As set forth below, proposed amendments make various clarifying changes to the bill.
SUMMARY: Requires that health care service plans and disability insurers ensure that the use of AI and other similar tools for the purpose of utilization review or utilization management functions take certain steps to ensure that the AI is deployed with proper oversight. Requires health plans and insurers to ensure that a licensed physician supervises any AI-based decisions that approve, modify, or deny a patient’s care. Specifically, this bill:
- Requires that health care service plans and disability insurers ensure that the use of AI or other similar tools for the purpose of utilization review or utilization management functions ensure all of the following:
- The tool bases its determination on information specific to the patient.
- The tool does not supplant health care provider decisionmaking.
- The use of the tool does not adversely discriminate against individuals on the basis of protected characteristics.
- The tool is fairly and equitably applied.
- The tool is open to inspection.
- Disclosures pertaining to the use and oversight of the tool are contained in the written policies and procedures.
- The tool’s performance, use, and outcomes are periodically reviewed.
- The tool is periodically reviewed and revised in order to maximize accuracy and reliability.
- Patient data is not used beyond its intended and stated purpose, consistent with medical privacy laws.
- Requires that a denial, delay, or modification of health care services based on medical necessity be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider, as specified.
EXISTING LAW:
- Establishes the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care. (Health & Saf. Code § 1340, et seq.)
- Provides for the regulation of disability insurers by the Department of Insurance. (Ins. Code § 106, et seq.)
- Authorizes a health care service plan or disability insurer to use prior authorization and other utilization review or utilization management functions, under which a licensed physician or a licensed health care professional who is competent to evaluate specific clinical issues may approve, modify, delay, or deny requests for health care services based on medical necessity. (Health & Saf. Code § 1367.01(e); Ins. Code § 10123.135(e).)
- Requires a health care service plan or disability insurer, including those plans or insurers that delegate utilization review or utilization management functions to medical groups, independent practice associations, or to other contracting providers, to comply with specified requirements and limitations on their utilization review or utilization management functions. (Health & Saf. Code § 1367.01; Ins. Code § 10123.135.)
- Authorizes the Director of the Department of Managed Health Care or the Insurance Commissioner to assess an administrative penalty to a health care service plan or disability insurer, as applicable, for failure to comply with the above-described requirements. (Health & Saf. Code § 1374.9; Ins. Code § 12968.)
FISCAL EFFECT: As currently in print, this bill is keyed fiscal.
COMMENTS:
- Background. AI uses algorithms – sets of rules – to transform inputs into outputs. Inputs and outputs can be anything a computer can process: numbers, text, audio, video, or movement. This is because AI is not fundamentally different from other computer functions. Its novelty lies in its application: unlike standard computer functions, AI is able to accomplish tasks that are normally performed by humans.
Computers can generally draw upon vast quantities of digitally-encoded data, processing it faster than any human being. A recent New York Times article described the development of a breast cancer screening system that uses AI:
From the millions of cases the system is fed, the technology creates a mathematical representation of normal mammograms and those with cancers. With the ability to look at each image in a more granular way than the human eye, it then compares that baseline to find abnormalities in each mammogram.
Last year, after a test on more than 275,000 breast cancer cases, Kheiron [Medical Technologies, the system’s developer] reported that its A.I. software matched the performance of human radiologists when acting as the second reader of mammography scans. It also cut down on radiologists’ workloads by at least 30 percent because it reduced the number of X-rays they needed to read. In other results from a Hungarian clinic last year, the technology increased the cancer detection rate by 13 percent because more malignancies were identified.[1]
But care should be taken to avoid what New York University Professor Meredith Broussard describes as “the notion that computers are more ‘objective’ or ‘unbiased’ because they distill questions and answers down to mathematical evaluation…an unwavering faith that if the world used more computers, and used them properly, social problems would disappear and we’d create a digitally enabled utopia.”[2] Many aspects of the real world are not reducible to data, and many complex situations present competing demands that human beings remain best equipped to assess. Illustrations of such pitfalls follow.
Problematic correlations. In one example, a hospital trained AI models on a dataset of 15,000 pneumonia patients in order to develop a model that could identify which pneumonia patients were at the greatest risk in order to triage new patients. During testing, it was discovered that one of the most accurate models recommended outpatient status for asthmatics—a life-threateningly dangerous error based on a statistical correlation: asthmatics are less likely to die from pneumonia than the general population precisely because asthma is such a serious risk factor that asthmatics automatically get elevated care.[3]
Bias and discrimination. Bias and discrimination can result from skewed training data. There is a famous saying in computer science: “garbage in, garbage out.” The performance of an AI is directly impacted by the quality, quantity, and relevance of the data used to train it.[4] If the data used to train the AI is biased, the tool’s outputs will be similarly biased. When AIs are deployed in healthcare, biased historical data can lead to patients being recommended substandard care on the basis of their race or ethnicity.
In 2007, an AI was developed to help doctors estimate whether it was safe for people who had delivered previous children through cesarean section to deliver subsequent children vaginally – a risky procedure. The AI considered various health relevant factors as it made its decision, such as the woman’s age, her reason for the previous cesarean, and how long ago the cesarean had been performed. However, a 2017 study found that the AI was biased; it predicted Black and Latino people were less likely to have a successful vaginal birth after a cesarean than non-Hispanic white women. As a result, doctors performed more cesareans on Black and Latino people than on white people.[5] These discrepancies perpetuate historical biases – Black Americans, for example, have historically received a lower standard of healthcare than their white counterparts.[6]
Issues with interpretability. Issues such as those described above can be masked by the inscrutability of the most advanced AI models. AI that use “deep learning”—machine learning that uses multilayer (deep) neural networks to analyze vast datasets—can infer intricate patterns and relationships from complicated data, but exactly how they do so is not always obvious. Deep neural networks are sometimes criticized for being “black boxes” that generate predictions and outcomes that cannot be clearly explained.[7] “It’s often observed in the field that the most powerful models are on the whole the least intelligible, and the most intelligible are among the least accurate.”[8] If a decision-making process cannot be explained and clearly understood, how can it be guaranteed that the decision reached is fair and free of bias? AI experts are currently researching ways to solve this problem.
Algorithmic denials of care. Last year, a class action lawsuit alleged that UnitedHealth Group unlawfully used an algorithm to deny rehabilitative care to sick Medicare Advantage patients. According to Forbes:
The lawsuit, filed in the US District Court for the District of Minnesota, accuses UnitedHealthcare of utilizing the nH Predict algorithm to make health-care determinations, leading to the premature and bad-faith discontinuation of payment for healthcare services. The plaintiffs, representing the estates of deceased individuals covered by Medicare Advantage plans provided by UnitedHealthcare, claim that they were forced to pay out of pocket for medically necessary care due to claim denials by the insurer. This suit potentially involve thousands of individuals and billions of dollars of damages, according to a lawyer for the plaintiffs.[9]
A letter penned last week by Senator Elizabeth Warren and a bipartisan group of Congress members urged the Centers for Medicare & Medicaid Services to take a more proactive role in monitoring plans’ use of AI. “Given that we do not know what inputs are used for the algorithms and AI tools currently being used, it is difficult to know the accuracy of the information they generate and whether the inputs comply with the regulations.”[10] The letter called for a prohibition on the use of AI tools and software from use in coverage denials until a systematic review of their use can be completed. “These tools apply a generalized need for care to an individual beneficiary’s situation, resulting in generalizations instead of person-centered approaches to care, which is antithetical to the mission of the Medicare program.”[11]
- Prior Authorization (PA). According to the Assembly Health Committee’s analysis:
PA is a decision by a health plan or insurer that a health care service, treatment plan, prescription drug, or durable medical equipment is medically necessary. The health plan or insurer may require preauthorization for certain services before an individual receives them, except in an emergency.
Health plans and insurers are subject to various requirements in California, including an obligation to file policies and procedures that describe UR or UM functions, used to authorize, modify, or deny health care services under the benefits provided by the health plan. Additionally, California law requires these policies and procedures to ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. Finally, current law prohibits an individual, other than a licensed physician or licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, from denying authorization for health care services based on medical necessity.
According to the Kaiser Family Foundation, insurers use PA to reduce payments for care that is not medically necessary or appropriate, which in turn helps to keep premiums down. However, PA has come under scrutiny for creating unnecessary burdens for providers, plans, and patients. Patients can find it challenging to know what services require PA, the process and criteria plans use to make a PA coverage decision, and whether providers are giving the needed information to a plan to determine coverage. Inefficient processes can delay decisions and consequently access to care, increasing health risks to patients. Improper denials may increase patient out-of-pocket costs or cause patients to abandon care. The process itself may have a chilling effect on individuals seeking out care and providers recommending it.
In December 2023, the National Association of Insurance Commissioners issued guidance that the use of AI should be designed to mitigate the risk that the insurer’s use of AI will result in adverse outcomes for consumers. Insurers should have robust governance, risk management controls, and internal audit functions, which all play a role in mitigating such risk including, but not limited to, unfair discrimination in outcomes resulting from predictive models and AI systems. The guidance reminds insurance carriers that decisions impacting consumers that are made or supported by advanced analytical and computational technologies, including AI, must comply with all applicable insurance laws and regulations, including unfair trade practices.
- Author’s statement. According to the author:
Recent reports of automated decision tools inaccurately denying provider requests to deliver care is worrisome. While artificial intelligence (AI) has the potential to improve healthcare delivery, trained medical professionals who understand the complexities of each patient’s situation need to have the final say. Wrongful denial of insurance claims based on AI algorithms can lead to serious health consequences, and even death. This bill strikes a common sense balance that puts safeguards in place for automated decision tools without discouraging companies from using this new technology.
4) This bill. Existing law authorizes a health care service plan or disability insurer to use prior authorization and other utilization review or utilization management functions, under which a licensed physician or a licensed health care professional who is competent to evaluate specific clinical issues may approve, modify, delay, or deny requests for health care services based on medical necessity.
This bill, with regard to the use of AI and similar tools for the purpose of utilization review or utilization management functions, requires that health care service plans and disability insurers ensure all of the following:
- The tool bases its determination on information specific to the patient.
- The tool does not supplant health care provider decisionmaking.
- The use of the tool does not adversely discriminate against individuals on the basis of protected characteristics.
- The tool is fairly and equitably applied.
- The tool is open to inspection.
- Disclosures pertaining to the use and oversight of the tool are contained in the written policies and procedures.
- The tool’s performance, use, and outcomes are periodically reviewed.
- The tool is periodically reviewed and revised in order to maximize accuracy and reliability.
- Patient data is not used beyond its intended and stated purpose, consistent with medical privacy laws.
The bill also requires that a denial, delay, or modification of health care services based on medical necessity be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider, as specified. In doing so the bill helps to ensure that AI used to decide the level of care a person receives, if any, is subject to appropriate human oversight and thus is deployed in a responsible manner. As aptly stated by Oakland Privacy:
There are a number of reasons why health care automated decision-making systems should have physician supervision of denials. [AI systems] are fed sets of criteria to govern their decision-making processes, and these criteria can be impacted by human errors, including inaccurate data entry and flawed weights for one or more factors. Additionally, medical research and findings can change over time, including recommended treatment protocols, and there can be time gaps between cutting-edge medical research and the reformulation of medical decision-making algorithms. We also know that some forms of bias exist in the medical system, and those biases likely carry over into the data and formula fed to the automatic system. Fighting bias is an ongoing effort, but institutionalizing it permanently in machine learning is an impediment to that struggle. Finally, some medical care decisions may require judgment that goes beyond mathematical patterns.
5) Committee amendments. The author has agreed to a number of clarifying changes that recast the provision. The amendments are as follows:
Amendment #1: Make the following changes to section 1367.01 of the Health and Safety Code:
(k) (1) Use of algorithms or artificial intelligence by or on behalf of a health care service plan or a specialized health care service plan covering dental services A health care service plan or specialized health care service plan that uses an artificial intelligence, algorithm, or other software tool for the purpose of utilization review or utilization management functions, 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, shall comply with this section (2) Algorithms, artificial intelligence, and other software tools used by or on behalf of a health care service plan or a specialized health care service plan covering dental services for the purpose of utilization review or utilization management functions for health care services shall comply with and shall ensure all of the following:
(A) Be based upon The tool bases its determination on the following information, as applicable:
(i) aAn enrollee’s medical or dental history., as applicable, and
(ii) iIndividual clinical circumstances as presented by the requesting provider., as well as
(iii) oOther relevant clinical information contained in the enrollee’s medical or dental record, and not supplant health care provider decisionmaking.
(B) The tool does not supplant health care provider decisionmaking.
(B) Not directly or indirectly discriminate (C) The use of the tool does not adversely discriminate, directly or indirectly, against an individual on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions.
(C) Be (D) The tool is fairly and equitably applied.
(E) The tool is open to inspection.
(D) Be open to inspection and disclosed (F) Disclosures pertaining to the use and oversight of the tool are contained in the written policies and procedures, as required by subdivision (b).
(E) Be governed by policies that establish accountability for (G) The tool’s performance, use, and outcomes that are periodically reviewed and revised for in order to maximize accuracy and reliability.
(F) Not allow data to be(H) Patient data is not used beyond its intended and stated purpose, consistent with the Confidentiality of Medical Information Act (Part 2.6 (commencing with Section 56) of Division 1 of the Civil Code and the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191).
(G) Not (I) The tool does not directly or indirectly cause harm to the enrollee.
(2) Notwithstanding paragraphs (1) and (2), a denial, delay, or modification of health care services based on medical necessity shall be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider, as provided in subdivision (e), by considering the requesting provider’s recommendation, and based on the enrollee’s medical or dental history, as applicable, and individual clinical circumstances.
(3) For purposes of this subdivision, “artificial intelligence” means an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
Amendment #2: Make equivalent changes in Section 10123.135 of the Insurance Code.
6) Related legislation. AB 2930 (Bauer-Kahan) establishes a statutory framework to further the safe and informed use of automated decision tools across various sectors of the economy. The bill is pending in the Senate Judiciary Committee.
AB 3030 (Calderon) requires a health facility, clinic, physician’s office, or office of a group practice that uses generative artificial intelligence to generate written or verbal patient communications pertaining to patient clinical information to ensure that those communications include a disclaimer that indicates to the patient that the communication was generated by generative artificial intelligence and clear instructions on how the patient may contact a human person. The bill is pending in the Senate.
ARGUMENTS IN SUPPORT: The bill’s sponsor, the California Medical Association, writes:
This bill would require that a licensed physician or health care provider has final approval of any utilization review decisions that are made or assisted by AI decision making tools or algorithms used by a health care insurer. While AI tools can improve access to care and assist providers, they have also faced criticism for inaccuracies and biases. This bill addresses those issues by guaranteeing that a provider has final approval of utilization review decisions when AI is being used.
Additionally, this bill includes safeguards to ensure AI, or algorithms used in utilization review do not discriminate against individuals based on their identity. As powerful as many AI tools are, they can be compromised when they rely on faulty, outdated, or biased data sources, leading to improper treatment recommendations. SB 1120 adopts federal guidance requiring health plans to make certain that their AI technology is free from such problems. Without the Physicians Make Decisions Act, patients could have essential medical services denied by AI when being used for utilization review by health insurers.
AI has been and will continue to be an essential tool in improving health care access and affordability for patients, but physicians must have oversight of critical utilization review decisions to allow for the best health outcomes for our communities. This bill provides essential guardrails to allow us to continue successfully integrating AI into our health care system.
ARGUMENTS IN OPPOSITION: Adopting an oppose-unless-amended position, the California Association of Health Plans, the Association of California Life and Health Insurance Companies, and America’s Health Insurance Plans jointly write:
Health plans and insurers have been using automated decision tools for years, as these tools are critical to increasing efficiencies, informing decision-making, and reducing administrative burdens. Current practice dictates that these tools are not used in isolation to make utilization management decisions and that these tools are monitored by appropriate health professionals. While we appreciate that much of the bill seems to mirror current federal guidelines regarding the use of AI tools, we are concerned that the bill includes narrow clinical peer review language that goes well beyond existing law. SB 1120 would substantially limit who is allowed to conduct utilization reviews by requiring the reviewing provider be within the same or similar specialty as the requesting provider. Current law already requires that all peer review must be done by a competent health professional within a timely manner. If the treating provider disagrees with the reviewing provider, current law already affords a process for the resolution of the dispute through independent medical review. We believe this provision is unnecessary and will only add more costs to the health care system. We respectfully request that the language outlined in Health and Safety Code 1367.07(k)(3) be removed from the bill.
REGISTERED SUPPORT / OPPOSITION:
Support
California Medical Association (CMA) (sponsor)
California Chapter American College of Cardiology
California Dental Association
California Hospital Association
California Life Sciences
California Podiatric Medical Association
California Rheumatology Alliance
CPCA Advocates, Subsidiary of The California Primary Care Association
Oakland Privacy
San Francisco Marin Medical Society
Opposition
None on file.
Analysis Prepared by: Josh Tosney / P. & C.P. / (916) 319-2200
Santariano & Metz, “Using A.I. to Detect Breast Cancer That Doctors Miss,” New York Times, Mar. 5, 2023, https://www.nytimes.com/2023/03/05/technology/artificial-intelligence-breast-cancer-detection.html. ↑
Broussard, “Artificial Unintelligence,” MIT Press, 2019. ↑
Brian Christian, “The Alignment Problem: Machine Learning and Human Values” (Norton 2020, First Ed.), pp. 82-84. ↑
Rohit Sehgal, “AI Needs Data More Than Data Needs AI”, Forbes, Oct. 5, 2023, https://www.forbes.com/sites/forbestechcouncil/2023/10/05/ai-needs-data-more-than-data-needs-ai/. ↑
Caleb J Colón-Rodríguez, “Shedding Light on Healthcare Algorithmic and Artificial Intelligence Bias,” U.S. Department of Health & Human Services Office of Minority Health, Jul. 12, 2023, minorityhealth.hhs.gov/news/shedding-light-healthcare-algorithmic-and-artificial-intelligence-bias. ↑
California Task Force to Study and Develop Reparation Proposals for African American, “Final Report,” California. ↑
Neil Savage, "Breaking into the black box of artificial intelligence," Nature, March 29, 2022. ↑
Brian Christian, “The Alignment Problem: Machine Learning and Human Values” (Norton 2020, First Ed.), p. 85. ↑
Douglas B. Laney, “AI Ethics Essentials: Lawsuit Over AI Denial of Healthcare” (Nov. 16, 2023) Forbes, https://www.forbes.com/sites/douglaslaney/2023/11/16/ai-ethics-essentials-lawsuit-over-ai-denial-of-healthcare/. ↑
Letter to the Honorable Chiquite Brooks-LaSure (June 25, 2024), p. 2, https://www.documentcloud.org/documents/24777080-final-chu-nadler-warren-letter-to-cms-to-increase-oversight-of-ai-in-medicare-advantage-coverage-decisions-06252024. ↑
Ibid. ↑
Date of Hearing: June 18, 2024
ASSEMBLY COMMITTEE ON HEALTH
Mia Bonta, Chair
SBPCA Bill Id:SB 1120
Author:(Becker) – As Amended Ver:June 10, 2024
SENATE VOTE: 37-0
SUBJECT: Health care coverage: utilization review.
SUMMARY: Requires algorithms, artificial intelligence (AI), and other software tools used for utilization review (UR) or utilization management (UM) decisions to comply with specified requirements, including that it be based on an enrollee or insured’s medical history and individual clinical circumstances, and be fairly and equitably applied. Specifically, this bill:
- Requires health plans and insurers, or a specialized health plan or insurer covering dental services, to comply, as part of their UR or UM functions, using algorithms, AI, and other software tools, with all of the following:
- Be based upon an enrollee or insured’s medical or dental history and individual clinical circumstances as presented by the requesting provider, as well as other relevant clinical information contained in the enrollee or insured’s medical or dental record, and to not supplant health care provider decisionmaking;
- Not directly or indirectly discriminate on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions;
- Be fairly and equitably applied;
- Be open to inspection and disclosed in the written policies and procedures required by existing law that medical necessity decisions are consistent with criteria or guidelines that are supported by clinical principles and processes;
- Be governed by policies that establish accountability for performance, use, and outcomes that are reviewed and revised for accuracy and reliability;
- Not allow data to be used beyond its intended and stated purpose; and,
- Be protected from risk that may directly or indirectly cause harm to the enrollee or insured.
- Requires a denial, delay, or modification of health care services based on medical necessity to be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider and with the same or similar specialty as the requesting provider, as provided in 4) of existing law below, by considering the requesting provider’s recommendation and based on the enrollee or insured’s medical or dental history, as applicable, and individual clinical circumstances.
- Defines AI as an engineered or machine-based system that varies in its level of autonomy and that can, for explicit or implicit objectives, infer from the input it receives how to generate outputs that can influence physical or virtual environments.
EXISTING LAW:
- Establishes the Department of Managed Health Care (DMHC) to regulate health plans and the California Department of Insurance (CDI) to regulate health insurance. [Health and Safety Code (HSC) §1340, et seq., Insurance Code (INS) §106, et seq.]
- Requires health plans to demonstrate that medical decisions are rendered by qualified medical providers, unhindered by fiscal and administrative management. [HSC §1367]
- Requires the criteria or guidelines used by health plans and insurers, or any entities with which plans or insurers contract for UR or UM functions, to determine whether to authorize, modify, or deny health care services to:
- Be developed with involvement from actively practicing health care providers;
- Be consistent with sound clinical principles and processes;
- Be evaluated, and updated if necessary, at least annually;
- If used as the basis of a decision to modify, delay, or deny services in a specified case under review, to be disclosed to the provider and the enrollee or insured in that specified case; and,
- Be available to the public upon request. [HSC §1363.5 and INS §10123.135]
- Requires a health plan to employ or designate a medical director who holds an unrestricted license to practice medicine in this state, as specified, or, if the plan is a specialized health plan, a clinical director with California licensure in a clinical area appropriate to the type of care provided by the specialized health plan, for purposes of UR or UM functions. Requires the medical director or clinical director to ensure that the process by which the plan reviews and approves, modifies, or denies, is based in whole or in part on medical necessity, requests by providers prior to, retrospectively, or concurrent with the provision of health care services to enrollees. Specifies that no individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, may deny or modify requests for authorization of health care services for an enrollee for reasons of medical necessity. [HSC §1367.01]
- Establishes the Independent Medical Review (IMR) process as part of the DMHC or CDI appeal process when a health plan or insurer denies, changes, or delays a request for medical services, denies payment for emergency treatment, or refuses to cover experimental or investigational treatment for a serious medical condition. Requires medical professionals selected by the IMR organizations to review medical treatment decisions to be physicians or other appropriate providers that meet specified minimum requirements, including, that the medical professional must hold an nonrestricted license in any state and for physicians, a current certification by a recognized American medical specialty board in the area or areas appropriate to the condition or treatment under review. Requires the IMR organization to give preference to the use of a California licensed physician as the reviewer, except when training and experience with the issue under review reasonably requires the use of an out-of-state reviewer. [HSC §1374.30 and INS §10169]
- Requires reviews, for purposes of IMR, to determine whether the disputed health care service was medically necessary based on the specific medical needs of the enrollee or insured and any of the following:
- Peer-reviewed scientific and medical evidence regarding the effectiveness of the disputed service;
- Nationally recognized professional standards;
- Expert opinion;
- Generally accepted standards of medical practice; or,
- Treatments that are likely to provide a benefit to a patient for conditions for which other treatments are not clinically efficacious. [HSC §1374.33 and INS §10169.3]
FISCAL EFFECT: According to the Senate Appropriations Committee, DMHC estimates costs of approximately $18,000 in 2024-25, $4,671,000 in 2025-26, $4,192,000 in 2026-27, $3,780,000 in 2027-28, $4,781,000 in 2028-29, and $4,779,000 in 2029-30 and annually thereafter for state administration (Managed Care Fund). CDI anticipates minor fiscal impacts (Insurance Fund).
COMMENTS:
- PURPOSE OF THIS BILL. According to the author, recent reports of automated decision tools inaccurately denying provider requests to deliver care is worrisome. While AI has the potential to improve healthcare delivery, trained medical professionals who understand the complexities of each patient’s situation need to have the final say. Wrongful denial of insurance claims based on AI algorithms can lead to serious health consequences, and even death. The author concludes that this bill strikes a common sense balance that puts safeguards in place for automated decision tools without discouraging companies from using this new technology.
- BACKGROUND.
- AI And GenAI. In a draft regulation, the California Privacy Protection Agency (CPPA), the entity tasked with implementing and enforcing the California Privacy Rights Act of 2020, defines AI as follows:
AI means a machine-based system that infers, from the input it receives, how to generate outputs that can influence physical or virtual environments. The AI may do this to achieve explicit or implicit objectives. Outputs can include predictions, content, recommendations, or decisions. Different AI varies in its levels of autonomy and adaptiveness after deployment. For example, AI includes generative (GenAI) models, such as large language models, that can learn from inputs and create new outputs, such as text, images, audio, or video; and facial- or speech-recognition or -detection technology.
- Recent State and Federal Activity. Below is a high-level overview of some recent activity:
- State Executive Order (EO). In September 2023, Governor Gavin Newsom signed an EO to study the development, use, and risks of AI technology throughout the state and to develop a deliberate and responsible process for evaluation and deployment of AI within state government. The Administration is implementing the EO, including moving forward to evaluate procurement proposals by state agencies, two of which relate to health care: one proposal to improve efficiency in inspections of health facilities by the Department of Public Health, and another within the California Health and Human Services Agency to improve translations.
- Assembly Informational Hearing. On February 27, 2024, the Assembly Privacy and Consumer Protection Committee held an informational hearing titled, “Understanding AI: Myths, Magic, and Machine Learning.” The briefing paper notes AI is already embedded into most online systems, that it is integral to many aspects of modern society, and that the advent of GenAI will undoubtedly lead to an even greater number of applications. It also notes, however, that AI is not an inherently benevolent technology – it is a tool, and it can be used for good or ill. It suggests policymakers will need to design regulatory guardrails to limit harmful uses while allowing for the development and refinement of tools that benefit society. The paper discusses negative aspects of AI that imply a role for regulation, and a variety of troubling applications of AI. Specifically, it discusses bias and discrimination, effect on labor, deepfakes (the creation of realistic text, imagery, video, and audio by GenAI), questionable originality and copyright issues, and the inability to remove data from a trained model.
- Recent State and Federal Activity. Below is a high-level overview of some recent activity:
With respect to health care, it notes that when AI tools are deployed in healthcare, biased historical data can lead to patients being recommended substandard care on the basis of their race or ethnicity. It also notes the capacity for GenAI to “hallucinate,” or generate output that has no basis in reality, is a unique risk if GenAI is embedded in health care applications. Disclosure and digital watermarking (the practice of embedding visible or invisible markers into a GenAI product) are presented as stopgap measures to prevent harms in the short term.
- Centers for Medicare & Medicaid Services (CMS) Frequently Asked Questions (FAQs). In February 2024, CMS released its FAQs related to coverage criteria and UM requirements in its Final Rule. CMS clarified that an algorithm or software tool can be used to assist Medicare Advantage (MA) plans in making coverage determinations, but it is the responsibility of the MA organization to ensure that the algorithm or AI complies with all applicable rules for how coverage determinations by MA organizations are made. For example, compliance is required with all of the rules for making a determination of medical necessity, including that the MA organization base the decision on the individual patient’s circumstances, so an algorithm that determines coverage based on a larger data set instead of the individual patient's medical history, the physician’s recommendations, or clinical notes would not be compliant. Additionally, CMS is concerned that algorithms and many new AI technologies can exacerbate discrimination and bias and reminds MA organizations of the nondiscrimination requirements of the federal Patient Protection and Affordable Care Act, which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs and activities. MA organizations should, prior to implementing an algorithm or software tool, ensure that the tool is not perpetuating or exacerbating existing bias, or introducing new biases.
- Prior Authorization (PA). PA is a decision by a health plan or insurer that a health care service, treatment plan, prescription drug, or durable medical equipment is medically necessary. The health plan or insurer may require preauthorization for certain services before an individual receives them, except in an emergency.
Health plans and insurers are subject to various requirements in California, including an obligation to file policies and procedures that describe UR or UM functions, used to authorize, modify, or deny health care services under the benefits provided by the health plan. Additionally, California law requires these policies and procedures to ensure that decisions based on the medical necessity of proposed health care services are consistent with criteria or guidelines that are supported by clinical principles and processes. Finally, current law prohibits an individual, other than a licensed physician or licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by the provider, from denying authorization for health care services based on medical necessity.
According to the Kaiser Family Foundation, insurers use PA to reduce payments for care that is not medically necessary or appropriate, which in turn helps to keep premiums down. However, PA has come under scrutiny for creating unnecessary burdens for providers, plans, and patients. Patients can find it challenging to know what services require PA, the process and criteria plans use to make a PA coverage decision, and whether providers are giving the needed information to a plan to determine coverage. Inefficient processes can delay decisions and consequently access to care, increasing health risks to patients. Improper denials may increase patient out-of-pocket costs or cause patients to abandon care. The process itself may have a chilling effect on individuals seeking out care and providers recommending it.
In December 2023, the National Association of Insurance Commissioners issued guidance that the use of AI should be designed to mitigate the risk that the insurer’s use of AI will result in adverse outcomes for consumers. Insurers should have robust governance, risk management controls, and internal audit functions, which all play a role in mitigating such risk including, but not limited to, unfair discrimination in outcomes resulting from predictive models and AI systems. The guidance reminds insurance carriers that decisions impacting consumers that are made or supported by advanced analytical and computational technologies, including AI, must comply with all applicable insurance laws and regulations, including unfair trade practices.
- SUPPORT. The California Medical Association, sponsor, writes that AI has been and will continue to be an essential tool in improving health care access and affordability for patients, but physicians must have oversight of critical UR decisions to allow for the best health outcomes for our communities. This bill provides essential guardrails to allow us to continue successfully integrating AI into our health care system.
- SUPPORT IF AMENDED. The California Academy of Preventive Medicine recommends amendments to assure that no AI criteria or computerized algorithms tools be utilized in PA without the approval of the medical director or clinical director and to clarify that final decisions involving denials be made by a licensed physician or licensed health care professional.
- OPPOSE UNLESS AMENDED. The California Association of Health Plans, the Association of California Life and Health Insurance Companies, and America’s Health Insurance Plans (opposition), write that plans and insurers have been using automated decision tools for years, as these tools are critical to increasing efficiencies, informing decision-making, and reducing administrative burdens. Current practice dictates that these tools are not used in isolation to make UM decisions and that these tools are monitored by appropriate health professionals. While the opposition appreciate that much of the bill seems to mirror current federal guidelines regarding the use of AI tools, the opposition is concerned that the bill includes narrow clinical peer review language that goes well beyond existing law. This bill would substantially limit who is allowed to conduct UR by requiring the reviewing provider be within the same or similar specialty as the requesting provider. Current law already requires that all peer review must be done by a competent health professional within a timely manner. If the treating provider disagrees with the reviewing provider, current law already affords a process for the resolution of the dispute through IMR.
- RELATED LEGISLATION.
- SB 516 (Skinner) prohibits a health plan or health insurer from requiring a contracted health professional to complete or obtain a PA for any covered health care services if the plan or insurer approved or would have approved not less than 90% of the PA requests they submitted in the most recent completed one-year contracted period. SB 516 is pending in the Assembly Appropriations Committee.
- AB 3030 (Calderon) requires specified health care providers to disclose the use of a GenAI tool when it is used to generate responses that are communicated to a patient, and requires such a communication to include clear instructions permitting a patient to communicate with a human health care provider. AB 3030 is pending in the Senate Health Committee.
- PREVIOUS LEGISLATION.
- SB 598 (Skinner) of 2023 was similar to SB 516. SB 598 was held in the Assembly Appropriations Committee.
- AB 1880 (Arambula) of 2022 would have required a health plan’s or health insurer’s UM process to ensure that an appeal of a denial of an exception request is reviewed by a clinical peer of the health care provider or prescribing provider, as specified. Would have defined a clinical peer as a physician or other health professional who holds an unrestricted license or certification from any state and whose practice is in the same or a similar specialty as the medical condition, procedures, or treatment under review. AB 1880 was vetoed by Governor Newsom who stated in part:
“Health plans and health insurers should make every effort to streamline UM processes and reduce barriers to all medically necessary care. However, the bill's requirements, which are limited to denied authorizations for prescription drugs, are duplicative of California's existing IMR requirements, which provide enrollees, insureds, and their designated representatives with the opportunity to request an external review from an independent provider. I encourage the Legislature to pursue options that leverage existing requirements and resources, rather than creating duplicative new processes.”
- DOUBLE REFERRAL. This bill is double referred. Upon passage in this Committee, this bill will be re-referred to the Assembly Committee on Privacy and Consumer Protection.
- COMMITTEE AMENDMENTS. The Committee is recommending the following:
- To address concerns that UR determinations utilizing AI is inconsistent with existing UR law (without AI), the requirement that the UR reviewer be of the same or similar specialty of the requesting provider should be deleted from the provisions of this bill; and,
- To make the following technical amendment:
Be protected from risk that mayNot directly or indirectly cause harm to the enrollee or insured.
REGISTERED SUPPORT / OPPOSITION:
Support
California Medical Association (sponsor)
Autism Business Association
Breathe California
Breathe Southern California
California Chapter American College of Cardiology
California Dental Association
California Hospital Association
California Life Sciences
California Orthopedic Association
California Podiatric Medical Association
California Rheumatology Alliance
California State Council of Service Employees International Union (seiu California)
Consumer Attorneys of California
Cpca Advocates, Subsidiary of The California Primary Care Association
Oakland Privacy
Physician Association of California (PAC)
Providence
Providence Medical Group & Physician Enterprise
Psychiatric Physicians Alliance of California (PPAC)
San Francisco Marin Medical Society
Spondylitis Assocation of America
Opposition
None on file.
Analysis Prepared by: Kristene Mapile / HEALTH / (916) 319-2097
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | SB 1120 |
THIRD READING
Bill No: SB 1120
Author: Becker (D)
Amended: 4/15/24
Vote: 21
SENATE HEALTH COMMITTEE: 11-0, 4/10/24
AYES: Roth, Nguyen, Glazer, Gonzalez, Grove, Hurtado, Limón, Menjivar, Rubio, Smallwood-Cuevas, Wiener
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/16/24
AYES: Caballero, Jones, Ashby, Becker, Bradford, Seyarto, Wahab
SUBJECT: Health care coverage: utilization review
SOURCE: California Medical Association
DIGEST: Establishes requirements on health plans and insurers applicable to their use of Artificial Intelligence (AI) for utilization review decisions, including, that decisions be based upon an enrollee’s medical history and individual clinical circumstances as presented by the requesting provider and not supplant health care provider decision making.
ANALYSIS:
Existing law:
- Establishes the Department of Managed Health Care (DMHC) to regulate health plans under the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act) and the California Department of Insurance (CDI) to regulate health insurers. [HSC §1340, et seq., and INS §106, et seq.]
- Establishes requirements on health plans and insurers relating to utilization review or utilization management functions that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers for the provision of health care services to enrollees. These requirements also apply when a plan or insurer delegates these functions to medical groups or independent practice associations or to other contracting providers. [HSC §1367.01 and INS §10123.135]
- Prohibits any individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by a provider, from denying or modifying requests for authorization of health care services for an enrollee or insured for reasons of medical necessity. Requires the decision to be communicated to the provider within 24 hours of the decision, and the enrollee (in writing) within two business days of the decision. In the case of concurrent review, prohibits discontinuance of care until the treating provider has been notified and has agreed to a care plan that is appropriate for the medical needs of the patient. [HSC §1367.01 and INS §10123.135]
This bill:
- Requires the use of algorithms or AI by or on behalf of a health plan or insurer
for the purpose of utilization review or utilization management functions to comply with the following:
a) Be based upon an enrollee’s or insurer’s medical history and individual clinical circumstances as presented by the requesting provider and not supplant health care provider decision-making;
b) Not directly or indirectly discriminate on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions;
c) Be fairly and equitably applied;
d) Be open to inspection and disclosed in the written policies and procedures required in existing law;
e) Be governed by policies with accountability for outcomes that are reviewed and revised for accuracy and reliability;
f) Not allow data to be used beyond its intended and stated purpose; and,
g)Be protected from risk that may directly or indirectly cause harm to the enrollee or insured.
- Requires a denial, delay, or modification of health care services based on medical necessity to be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider and with the same or similar specialty as the requesting provider, as provided in existing law, by considering the requesting provider’s recommendation and based on the enrollee’s medical history and individual clinical circumstances.
COMMENTS:
Author’s statement. According to the author:
Recent reports of automated decision tools inaccurately denying provider requests to deliver care is worrisome. While AI has the potential to improve healthcare delivery, it must be supervised by trained medical professionals who understand the complexities of each patient’s situation. Wrongful denial of insurance claims based on AI algorithms can lead to serious health consequences, and even death. This bill strikes a common sense balance that puts safeguards in place for automated decision tools without discouraging companies from using this new technology.
Background. The author’s office provided articles describing health plan use of AI in review of prior authorization requests. One article describes a system where physicians “rubber stamped” decisions by a computer generated mechanism and were allegedly held to certain metrics. Another article describes a class action lawsuit where the company is accused of failing to fulfill its “statutory, common law, and contractual obligations to have a doctor determine individual coverage… in a thorough, fair, and objective manner…” According to a press release issued by the American Medical Association (AMA), the AMA has newly adopted policy that calls for health insurers utilizing AI technology to implement a thorough and fair process that is based on clinical criteria and includes reviews by physicians and other health care professionals with expertise for the service under review and no incentives to deny care. Additionally, some members of Congress have called upon the Center of Medicare and Medicaid Services (CMS) to monitor and evaluate Medicare Advantage (MA) plans use of AI/algorithmic tools by requiring the reporting of prior authorization data, comparison of AI generated guidance to coverage decisions, assessment of denials and data reviewed by third party appeals reviewers, assessment of adjustment of AI determinations to account for unanticipated patient conditions, attestations that coverage guidelines are not more restrictive than traditional Medicare, assessment of data and use of race and other factors, and, assessment of whether or not AI/algorithms are self-correcting. Another article describes recent CMS guidance that permits the use of algorithm or software to assist with coverage decisions as long as it complies with coverage rules.
Medicare Frequently Asked Questions (FAQ). In February of 2024, CMS issued a FAQ following the release of an April 5, 2023 final rule on MA coverage criteria, use of prior authorization, and review of utilization management tools. As it relates to AI or algorithms, FAQ #2 states that AI systems use machine- and human-based inputs to perceive real and virtual environments; abstract such perceptions into models through analysis in an automated manner; and use model inference to formulate options for information or action. An algorithm or software tool can be used to assist MA plans in making coverage determinations, but it is the responsibility of the MA organization to ensure that the algorithm or AI complies with rules for how coverage determinations by MA organizations are made. For example, compliance is required with the final rule for making a determination of medical necessity, including that the MA organization base the decision on the individual patient’s circumstances. An algorithm that determines coverage based on a larger data set instead of the individual patient's medical history, the physician’s recommendations, or clinical notes would not be compliant with the final rule.
MA organizations may only deny coverage for basic benefits based on criteria in the final rule or for other permissible bases, such as network limitations or failure to comply with prior authorization requirements. Therefore, the algorithm or software tool should only be used to adhere to the publicly posted coverage criteria. Because publicly posted coverage criteria are static and unchanging, AI cannot be used to shift the coverage criteria over time. Predictive algorithms or software tools cannot apply additional coverage criteria that have not been made public and adopted in compliance with the final rule.
CMS also expresses concerns that algorithms and many new AI technologies can exacerbate discrimination and bias, and reminds MA organizations of the nondiscrimination requirements of Section 1557 of the Affordable Care Act, which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs and activities. MA organizations should, prior to implementing an algorithm or software tool, ensure that the tool is not perpetuating or exacerbating existing bias, or introducing new biases.
Trustworthy AI. The federal Health and Human Services Agency (HHS) has
developed a “playbook” for AI development with the goal of maintaining public trust by using AI solutions that are “ethical, effective, and secure,” according to the HHS Chief AI Officer. With regard to HHS agencies, principles have been established for trustworthy AI that “fosters public trust and confidence while protecting privacy, civil rights, civil liberties, and American values, consistent with applicable laws.” The playbook describes AI as whether the solution or system:
a) Performs tasks under varying and unpredictable circumstances without significant human oversight, or can learn from experience and improvement performance when exposed to data sets;
b) Uses computer software, physical hardware, or other technology to solve tasks that require human-like perception, thinking, planning, learning, communication, or physical action;
c) Thinks or acts like a human, including the use of cognitive architecture or neural networks (e.g., developed to mimic the underlying mechanisms of the human mind);
d) Relies on a set of techniques, including machine learning, to approximate a cognitive task; and,
e) Is designed to act rationally by utilizing intelligent software or an embodied robot to achieve goals using perception, planning, reasoning, learning, communicating, decision-making, and action.
The HHS principles for use of trustworthy AI in government cover six areas: fair and impartial application; transparent and explainable data use; responsible and accountable governance and policies; robust and reliable outputs; safe and secure from risks; and, that privacy should be respected, data not used beyond its intended and stated use, and that it’s use is approved by the data owner or steward.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes
According to the Senate Appropriations Committee:
DMHC estimates costs of approximately $18,000 in 2024-25, $4,671,000 in 2025-26, $4,192,000 in 2026-27, $3,780,000 in 2027-28, $4,781,000 in 2028-29, and $4,779,000 in 2029-30 and annually thereafter for state administration (Managed Care Fund). CDI anticipates minor fiscal impacts (Insurance Fund).
SUPPORT: (Verified 5/1/24)
California Medical Association (Source)
Autism Business Association
Breathe California
California Chapter of American College of Cardiology
California Hospital Association
California Life Sciences
California Orthopedic Association
California Rheumatology Alliance
California State Council of Service Employees International Union
Consumer Attorneys of California
Oakland Privacy
Providence Medical Group and Clinical Network
Psychiatric Physicians Alliance of California
Spondylitis Association of America
OPPOSITION: (Verified 5/1/24)
America’s Health Insurance Plans
Association of California Life and Health Insurance Companies
California Association of Health Plans
ARGUMENTS IN SUPPORT: The California Medical Association (sponsor) writes:
While AI tools can improve access to care and assist providers, they have also faced criticism for inaccuracies and biases. This bill addresses those issues by guaranteeing that a provider has final approval of utilization review decisions when AI is being used. Additionally, this bill includes safeguards to ensure AI, or algorithms used in utilization review do not discriminate against individuals based on their identity. As powerful as many AI tools are, they can be compromised when they rely on faulty, outdated, or biased data sources, leading to improper treatment recommendations. This bill adopts federal guidance requiring health plans to make certain that their AI technology is free from such problems. Without this bill, patients could have essential medical services denied by AI when being used for utilization review by health insurers. AI has been and will continue to be an essential tool in improving health care access and affordability for patients, but physicians must have oversight of critical utilization review decisions to allow for the best health outcomes for our communities. This bill provides essential guardrails to allow us to continue successfully integrating AI into our health care system.
Support if amended. The California Academy of Preventive Medicine requests amendments to ensure that no AI criteria or computerized algorithms tools shall be utilized in prior authorization without the approval of the medical director or clinical director.
ARGUMENTS IN OPPOSITION: The California Association of Health Plans, Association of California Life and Health Insurance Companies, and America’s Health Insurance Plans writes:
With an oppose unless amended position. They are concerned that the bill includes narrow clinical peer review language that goes well beyond existing law. This bill would substantially limit who is allowed to conduct utilization reviews by requiring the reviewing provider be within the same or similar specialty as the requesting provider. Current law already requires that all peer review must be done by a competent health professional within a timely manner. If the treating provider disagrees with the reviewing provider, current law already affords a process for the resolution of the dispute through independent medical review. They believe this provision is unnecessary and will only add more costs to the health care system, and request that the language outlined in Health and Safety Code 1367.07(k)(3) be removed from the bill.
Prepared by: Teri Boughton / HEALTH / (916) 651-4111
5/17/24 14:02:28
**** END ****
SENATE COMMITTEE ON
Senator Anna Caballero, Chair
2023 - 2024 Regular Session
SB 1120 (Becker) - Health care coverage: utilization review
Version: | Policy Vote: |
Urgency: | Mandate: |
Hearing Date: | Consultant: |
Bill Summary:
SB 1120 would require algorithms, artificial intelligence (AI), and other software tools used by or on behalf of a health care service plan or health insurer for the purpose of utilization review or utilization management functions for health care services to comply with specified requirements.
Fiscal Impact:
- The Department of Managed Health Care (DMHC) estimates costs of approximately $18,000 in 2024-25, $4,671,000 in 2025-26, $4,192,000 in 2026-27, $3,780,000 in 2027-28, $4,781,000 in 2028-29, and $4,779,000 in 2029-30 and annually thereafter for state administration (Managed Care Fund).
- The California Department of Insurance (CDI) anticipates minor fiscal impacts (Insurance Fund).
Background:
The DMHC regulates health plans under the Knox-Keene Act and the CDI regulates health insurance. Current law establishes requirements on health plans and insurers relating to utilization reviews or utilization management functions that review and approve, modify, delay, or deny, based on medical necessity, requests by providers for the provision of health care services to enrollees. Current law prohibits any individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by a provider, from denying or modifying requests for authorization of health care services for an enrollee or insured for reasons of medical necessity.
In February 2024, the federal Center of Medicare and Medicaid Services (CMS) issued a Frequently Asked Questions (FAQ) document following the release of an April 5, 2023 final rule on Medicare Advantage (MA) coverage criteria, use of prior authorization, and review of utilization management tools. As it relates to AI or algorithms, the FAQ document states that AI systems use machine- and human-based inputs to perceive real and virtual environments; abstract such perceptions into models through analysis in an automated manner; and use model inference to formulate options for information or action. An algorithm or software tool can be used to assist MA plans in making coverage determinations, but it is the responsibility of the MA organization to ensure that the algorithm or AI complies with rules for how coverage determinations by MA organizations are made. For example, compliance is required with the final rule for making a determination of medical necessity, including that the MA organization base the decision on the individual patient’s circumstances. An algorithm that determines coverage based on a larger data set instead of the individual patient's medical history, the physician’s recommendations, or clinical notes would not be compliant with the final rule. CMS also expresses concerns that algorithms and many new AI technologies can exacerbate discrimination and bias, and reminds MA organizations of the federal nondiscrimination requirements, which prohibit discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs and activities.
Proposed Law:
Specific provisions of the bill would:
- Require that algorithms, AI, and other software tools used by or on behalf of a health care service plan or health insurer for the purpose of utilization review or utilization management functions for health care services to comply with all of the following:
- Be based upon an enrollee’s medical history and individual clinical circumstances as presented by the requesting provider and not supplant health care provider decisionmaking.
- Not directly or indirectly discriminate on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions.
- Be fairly and equitably applied.
- Be open to inspection and disclosed in the written policies and procedures, as specified.
- Be governed by policies with accountability for outcomes that are reviewed and revised for accuracy and reliability.
- Not allow data to be used beyond its intended and stated purpose.
- Be protected from risk that may directly or indirectly cause harm to the enrollee.
- Require that, notwithstanding the above requirements, a denial, delay, or modification of health care services based on medical necessity must be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider and with the same or similar specialty as the requesting provider, by considering the requesting provider’s recommendation and based on the enrollee’s medical history and individual clinical circumstances.
-- END --
SENATE COMMITTEE ON HEALTH
Senator Richard Roth, Chair
BILL NO: SB 1120
AUTHOR: | Becker | ||
VERSION: | April 1, 2024 | ||
HEARING DATE: | March 20, 2024 | ||
CONSULTANT: | Teri Boughton | ||
SUBJECT: Health care coverage: utilization review
SUMMARY:
- Establishes requirements on health plans and insurers applicable to their use of Artificial Intelligence (AI) for utilization review decisions, including, requiring health plans and insurers to ensure that a licensed physician supervises the use of AI decision-making tools when those tools are used to inform decisions to approve, modify, or deny requests for authorization prior to, or concurrent with, the provision of health care services to enrollees and insureds.
Existing law:
- Establishes the Department of Managed Health Care (DMHC) to regulate health plans under the Knox-Keene Health Care Service Plan Act of 1975 (Knox-Keene Act) and the California Department of Insurance (CDI) to regulate health insurers. [HSC §1340, et seq., and INS §106, et seq.]
- Establishes requirements on health plans and insurers relating to utilization review or utilization management functions that prospectively, retrospectively, or concurrently reviews and approves, modifies, delays, or denies, based in whole or in part on medical necessity, requests by providers for the provision of health care services to enrollees. These requirements also apply when a plan or insurer delegates these functions to medical groups or independent practice associations or to other contracting providers. [HSC §1367.01 and INS §10123.135]
- Prohibits any individual, other than a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services requested by a provider, from denying or modifying requests for authorization of health care services for an enrollee or insured for reasons of medical necessity. Requires the decision to be communicated to the provider within 24 hours of the decision, and the enrollee (in writing) within two business days of the decision. In the case of concurrent review, prohibits discontinuance of care until the treating provider has been notified and has agreed to a care plan that is appropriate for the medical needs of the patient. [HSC §1367.01 and INS §10123.135]
- Requires, when the condition is such that the insured or enrollee faces an imminent and serious threat to his or her health, including, but not limited to, the potential loss of life, limb, or other major bodily function, or the normal timeframe for the decision-making process would be detrimental to the insured’s life or health or could jeopardize the insured’s or enrollee’s ability to regain maximum function, decisions to approve, modify, or deny requests by providers prior to, or concurrent with, the provision of health care services to be made in a timely fashion, appropriate for the nature of the insured’s condition, but not to exceed 72 hours or, if shorter, the period of time required under federal law and any subsequent rules or regulations issued thereunder, after the receipt of the information reasonably necessary and requested by the insurer or plan to make the determination. [HSC §1367.01 and INS §10123.135]
This bill:
- Requires health plans and insurers to ensure that a licensed physician supervises the use of AI decision-making tools when those tools are used to inform decisions to approve, modify, or deny requests by providers for authorization prior to, or concurrent with, the provision of health care services to enrollees and insureds.
- Requires the use of algorithms or AI by or on behalf of a health plan or insurer for the purpose of utilization review or utilization management functions to comply with the following:
- Be based upon an enrollee’s or insurer’s medical history and individual clinical circumstances as presented by the requesting provider and not supplant health care provider decision-making;
- Not directly or indirectly discriminate on the basis of race, color, religion, national origin, ancestry, age, sex, gender, gender identity, gender expression, sexual orientation, present or predicted disability, expected length of life, degree of medical dependency, quality of life, or other health conditions;
- Be fairly and equitably applied;
- Be open to inspection and disclosed in the written policies and procedures required in existing law;
- Be governed by policies with accountability for outcomes that are reviewed and revised for accuracy and reliability;
- Not allow data to be used beyond its intended and stated purpose; and,
- Be protected from risk that may directly or indirectly cause harm to the enrollee or insured.
- Requires a denial, delay, or modification of health care services based on medical necessity to be made by a licensed physician or other health care provider competent to evaluate the specific clinical issues involved in the health care services requested by the provider and with the same or similar specialty as the requesting provider, as provided in existing law, by considering the requesting provider’s recommendation and based on the enrollee’s medical history and individual clinical circumstances.
FISCAL EFFECT:
This bill has not been analyzed by a fiscal committee.
COMMENTS:
- Author’s statement. According to the author, recent reports of automated decision tools inaccurately denying provider requests to deliver care is worrisome. While AI has the potential to improve healthcare delivery, it must be supervised by trained medical professionals who understand the complexities of each patient’s situation. Wrongful denial of insurance claims based on AI algorithms can lead to serious health consequences, and even death. This bill strikes a common sense balance that puts safeguards in place for automated decision tools without discouraging companies from using this new technology.
- Background. The author’s office provided articles describing health plan use of AI in review of prior authorization requests. One article describes a system where physicians “rubber stamped” decisions by a computer generated mechanism and were allegedly held to certain metrics. Another article describes a class action lawsuit where the company is accused of failing to fulfill its “statutory, common law, and contractual obligations to have a doctor determine individual coverage… in a thorough, fair, and objective manner…” According to a press release issued by the American Medical Association (AMA), the AMA has newly adopted policy that calls for health insurers utilizing AI technology to implement a thorough and fair process that is based on clinical criteria and includes reviews by physicians and other health care professionals with expertise for the service under review and no incentives to deny care. Additionally, some members of Congress have called upon the Center of Medicare and Medicaid Services (CMS) to monitor and evaluate Medicare Advantage (MA) plans use of AI/algorithmic tools by requiring the reporting of prior authorization data, comparison of AI generated guidance to coverage decisions, assessment of denials and data reviewed by third party appeals reviewers, assessment of adjustment of AI determinations to account for unanticipated patient conditions, attestations that coverage guidelines are not more restrictive than traditional Medicare, assessment of data and use of race and other factors, and, assessment of whether or not AI/algorithms are self-correcting. Another article describes recent CMS guidance that permits the use of algorithm or software to assist with coverage decisions as long as it complies with coverage rules.
- Medicare Frequently Asked Questions (FAQ). In February of 2024, CMS issued a FAQ following the release of an April 5, 2023 final rule on MA coverage criteria, use of prior authorization, and review of utilization management tools. As it relates to AI or algorithms, FAQ #2 states that AI systems use machine- and human-based inputs to perceive real and virtual environments; abstract such perceptions into models through analysis in an automated manner; and use model inference to formulate options for information or action. An algorithm or software tool can be used to assist MA plans in making coverage determinations, but it is the responsibility of the MA organization to ensure that the algorithm or AI complies with rules for how coverage determinations by MA organizations are made. For example, compliance is required with the final rule for making a determination of medical necessity, including that the MA organization base the decision on the individual patient’s circumstances. An algorithm that determines coverage based on a larger data set instead of the individual patient's medical history, the physician’s recommendations, or clinical notes would not be compliant with the final rule.
MA organizations may only deny coverage for basic benefits based on criteria in the final rule or for other permissible bases, such as network limitations or failure to comply with prior authorization requirements. Therefore, the algorithm or software tool should only be used to adhere to the publicly posted coverage criteria. Because publicly posted coverage criteria are static and unchanging, AI cannot be used to shift the coverage criteria over time. Predictive algorithms or software tools cannot apply additional coverage criteria that have not been made public and adopted in compliance with the final rule.
CMS also expresses concerns that algorithms and many new AI technologies can exacerbate discrimination and bias, and reminds MA organizations of the nondiscrimination requirements of Section 1557 of the Affordable Care Act, which prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in certain health programs and activities. MA organizations should, prior to implementing an algorithm or software tool, ensure that the tool is not perpetuating or exacerbating existing bias, or introducing new biases.
- Trustworthy AI. The federal Health and Human Services Agency (HHS) has developed a “playbook” for AI development with the goal of maintaining public trust by using AI solutions that are “ethical, effective, and secure,” according to the HHS Chief AI Officer. With regard to HHS agencies, principles have been established for trustworthy AI that “fosters public trust and confidence while protecting privacy, civil rights, civil liberties, and American values, consistent with applicable laws.” The playbook describes AI as whether the solution or system:
- Performs tasks under varying and unpredictable circumstances without significant human oversight, or can learn from experience and improvement performance when exposed to data sets;
- Uses computer software, physical hardware, or other technology to solve tasks that require human-like perception, thinking, planning, learning, communication, or physical action;
- Thinks or acts like a human, including the use of cognitive architecture or neural networks (e.g., developed to mimic the underlying mechanisms of the human mind);
- Relies on a set of techniques, including machine learning, to approximate a cognitive task; and,
- Is designed to act rationally by utilizing intelligent software or an embodied robot to achieve goals using perception, planning, reasoning, learning, communicating, decision-making, and action.
The HHS principles for use of trustworthy AI in government cover six areas: fair and impartial application; transparent and explainable data use; responsible and accountable governance and policies; robust and reliable outputs; safe and secure from risks; and, that privacy should be respected, data not used beyond its intended and stated use, and that it’s use is approved by the data owner or steward.
- Related legislation. SB 516 (Skinner) prohibits, on or after January 1, 2026, a health plan or health insurer from requiring a contracted health professional to complete or obtain a prior authorization for any covered health care services if the plan or insurer approved or would have approved not less than 90% of the prior authorization requests they submitted in the most recent completed one-year contracted period. SB 516 sets standards for this exemption and its denial, rescission, and appeal. SB 516 authorizes a plan or insurer to evaluate the continuation of an exemption not more than once every 12 months, and authorizes a plan or insurer to rescind an exemption only at the end of the 12-month period and only if specified criteria are met. SB 516 requires a plan or insurer to provide an electronic prior authorization process, and to have a process for annually monitoring prior authorization approval, modification, appeal, and denial rates to identify services, items, and supplies that are regularly approved, and to discontinue prior authorization on those services, items, and supplies that are approved 95% of the time. SB 516 is pending in the Assembly Appropriations Committee.
SB 562 (Skinner) is substantially similar to SB 516. SB 562 was held in the Assembly Appropriations Committee suspense file.
- Prior legislation. SB 250 (Pan of 2022) would have prohibited a health plan or insurer from requiring a contracted health professional to complete or obtain a prior authorization for any health care services if the health plan or insurer approved or would have approved at least 80% of the prior authorization requests they submitted in the most recent one-year contracted period. SB 250 would have established standards for this prior authorization exemption and its denial and appeal and would have authorized a plan or insurer to evaluate the continuation of an exemption not more than once every two years, and prohibited a plan or insurer from rescinding an exemption outside of the end of the two-year period. SB 250 was held on the Assembly Appropriations Committee suspense file.
AB 1880 (Arambula of 2022) would have required a health plan or health insurer's utilization management process to ensure that an appeal of a denial, is reviewed by a clinical peer, as specified. AB 1880 would have defined “clinical peer” as a physician or other health professional who holds an unrestricted license or certification from any state and whose practice is in the same or a similar specialty as the medical condition, procedures, or treatment under review. AB 1880 would have required health plans and insurers that require step therapy or prior authorization to maintain specified information, including, but not limited to, the number of step therapy exception requests and prior authorization requests received by the plan or insurer, and, upon request, to provide the information in a deidentified format to the DMHC or the CDI commissioner, as appropriate. AB 1880 was vetoed by the Governor, who stated:
This bill would require a health plan or insurer to have a clinical peer review when a provider appeals a denial of requests for step therapy exception, exception requests for coverage of nonformulary drugs, and prior authorization of prescription drugs.
Health plans and health insurers should make every effort to streamline utilization management processes and reduce barriers to all medically necessary care. However, the bill’s requirements, which are limited to denied authorizations for prescription drugs, are duplicative of California’s existing Independent Medical Review requirements, which provide enrollees, insureds, and their designated representatives with the opportunity to request an external review from an independent provider. I encourage the Legislature to pursue options that leverage existing requirements and resources, rather than creating duplicative new processes.
- Support. The California Medical Association, sponsor of this bill, writes while AI tools can improve access to care and assist providers, they have also faced criticism for inaccuracies and biases. This bill addresses those issues by guaranteeing that a provider has final approval of utilization review decisions when AI is being used. Additionally, this bill includes safeguards to ensure AI, or algorithms used in utilization review do not discriminate against individuals based on their identity. As powerful as many AI tools are, they can be compromised when they rely on faulty, outdated, or biased data sources, leading to improper treatment recommendations. This bill adopts federal guidance requiring health plans to make certain that their AI technology is free from such problems. Without this bill, patients could have essential medical services denied by AI when being used for utilization review by health insurers. AI has been and will continue to be an essential tool in improving health care access and affordability for patients, but physicians must have oversight of critical utilization review decisions to allow for the best health outcomes for our communities. This bill provides essential guardrails to allow us to continue successfully integrating AI into our health care system.
- Concerns. The California Association of Health Plans, Association of California Life and Health Insurance Companies, and America’s Health Insurance Plans writes that they are concerned that the bill’s lack of definition of the word “supervise” may lead to confusion amongst regulators and other entities in the health care space. These organizations would suggest that the word “supervise” should be replaced by the term “monitor” in order to remain consistent with other provisions of the law regarding utilization management tools. These organizations understand this bill is an attempt to start a dialogue about the use of AI within the health care delivery system, and are open to continuing this discussion in the hopes of ensuring responsible usage of automated decision tools while also not limiting the promise of these tools’ ability to deliver efficient and high-quality care to enrollees and insureds. As the legislature is trying to define and regulate AI tools in many industries and public life, these organizations stand ready to work with the Legislature and continue the dialogue as the bill moves forward.
- Amendments. Subdivision (h), paragraph (6) related to physician supervision of AI should have been deleted as part of the April 1, 2024 amendments but was inadvertently left in the bill. The author has agreed to an amendment to delete subdivision (h)(6).
SUPPORT AND OPPOSITION:
Support: California Medical Association (sponsor)
California Chapter of American College of Cardiology
California Hospital Association
California Life Sciences
California Orthopedic Association
Oakland Privacy
Providence Medical Group and Clinical Network
Psychiatric Physicians Alliance of California
Oppose: None received
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Bill Author
Bill Co-Author(s):
