Physicians Celebrate New Law to Regulate Artificial Intelligence in Healthcare, Medical Claims

PHOENIX, Arizona — The Arizona Medical Association celebrates the historic passage of House Bill 2175, which was signed by Governor Katie Hobbs on Monday, May 12. The legislation — introduced by ArMA and sponsored by Representative Julie Willoughby — sets a national precedent for regulating and safeguarding patients from the use of Artificial Intelligence in commercial medical insurance.

HB2175 is among the first legislation of its kind in the U.S. to prohibit medical insurance companies from using AI as the final decision-maker in the review and denial of claims for medical necessity and prior authorization requests. Once in effect, the bill guarantees cases requiring medical judgment are reviewed by licensed medical professionals with the training, experience, and ethical responsibility to make clinical decisions.

The gap between AI’s application and its regulation is wide, meaning its use across all industries, especially healthcare, is going largely unregulated across the nation.

“While AI promises innovation for healthcare, the review and denial of medical claims — some of which represent life-changing treatments and procedures — should be left to physicians who can make nuanced clinical judgments about each patient’s unique healthcare needs,” stated ArMA President Nadeem Kazi, MD. “In healthcare, there are no simple, straightforward cases. Each patient’s medical needs are nuanced and best understood by trained professionals — and they should be treated as such.”

Throughout its journey, HB2175 received nearly unanimous support from the Arizona State Legislature. Elected officials and healthcare advocates agree that Arizona patients deserve healthcare delivered by humans with compassionate medical expertise, not pattern-based computer algorithms designed by insurance companies.

“As a nurse, I was proud to champion HB2175 and put Arizona on the forefront of addressing emerging technology in healthcare,” said Rep. Willoughby. "I’ve seen firsthand how insurance denials can inappropriately interfere with patient care and wreak havoc on our health system. The need for reform to ensure that AI is used in a fair and responsible manner was undeniable; 2175 takes a meaningful step forward to halt the use of AI in medical decision-making.”

In a recent interview with Arizona Horizon, ArMA Board Member and private practice owner Michael Dunn, MD, recounted his experience of dealing with AI-denied medical claims. He explained how denials driven by insurer-created algorithms are often obvious because they don’t follow clinical logic. So, while reportedly aimed at creating new efficiencies, insurers’ implementation of AI in the medical claim denial process is hindering physicians and the patients they serve.

“Physicians and patients already face daunting challenges in navigating medical insurers’ bureaucratic administrative processes,” shared Dr. Dunn. “Taking physicians’ clinical experience out of these processes entirely is a misguided step that inflates healthcare costs, increases frustration for patients and physicians, and worsens patients’ health outcomes.”

ArMA proudly introduced HB2175 earlier this year with overwhelming support from the healthcare community, including Yuma Regional Medical Center, Arizona Chronic Care Together, the Arizona Osteopathic Medical Association, the Arizona Nurses Association, the Health System Alliance, the Arizona Hospital & Healthcare Association, the Arizona Pharmacy Association, and the Arizona Alliance for Community Health Centers.

Once in effect next year, HB2175 will be the first state law to regulate AI’s implementation in healthcare and the second of its kind in the nation.