AI Frontier Institute

A bill for an act relating to the use of automated adjudication systems by health carriers, and including civil penalties.

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Iowa Senate File 2226 proposes a new chapter (514M) governing how health carriers may use automated adjudication systems (AAS) — defined as software, algorithms, AI, machine-learning, or rule-based automated processes — when evaluating, approving, denying, or downcoding insurance claims. Under Section 514M.2, a health carrier is prohibited from using an AAS to deny or downcode a claim unless a clinical reviewer first conducts a documented individualized review of the claim, supporting medical documentation, and applicable clinical criteria. An AAS may not serve as the sole basis for denying a claim for lack of medical necessity, rejecting a claim for missing documentation, modifying a code without clinical reviewer verification, or flagging routine or historically validated claims. Section 514M.2 also requires carriers to give written notice of any proposed downcode or denial — including the original code, adjusted code or denial reason, clinical or contractual justification, and the identity and credentials of the responsible reviewer — and to allow providers at least 30 calendar days to appeal. Section 514M.3 requires carriers to disclose their AAS use to the insurance division, including system descriptions, decision rules, oversight processes, and bias-prevention measures, and to retain claim documentation for at least five years. Section 514M.4 establishes an appeals process: providers may appeal within 30 days, carriers must respond within 45 days, and if the original code is found to be properly documented, the carrier must readjust the claim and provide a written explanation. Carriers must also furnish providers with an annual report on AAS-processed claims upon request. Section 514M.5 authorizes the insurance commissioner to impose civil penalties of up to $10,000 per intentional or reckless violation, and allows injured providers or persons to bring civil actions for damages, injunctive relief, court costs, and attorney fees. Section 514M.6 directs the commissioner to adopt rules implementing the chapter.

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