AI Frontier Institute

Health insurance

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South Carolina Bill 5206 proposes to add Article 25 to Chapter 71, Title 38 of the S.C. Code, regulating the use of artificial intelligence (AI) by health insurers in prior authorization decisions. Under Section 38-71-2520, insurers using AI, algorithms, or other software tools for prior authorization or coverage determinations must base those decisions on the enrollee's medical history, unique clinical circumstances presented by the requesting provider, and any additional clinical information in the enrollee's medical record. Insurers must certify annually to the Department of Insurance that their AI tools do not rely solely on group datasets, are applied fairly and consistently across subscriber groups, and do not discriminate in violation of state or federal law. Critically, any decision to deny, reduce, or defer a prior authorization request must always be made by a licensed physician or other qualified healthcare professional—not by AI alone. Insurers must also make prominent written disclosure to enrollees that AI is used in utilization review, make denial rate data available to the department, providers, and enrollees upon request, and ensure patient data used by AI tools is not used beyond its intended purpose consistent with HIPAA (42 U.S.C. Section 1320d). Violations may result in the Department requiring a corrective action plan or, for repeat violations, disciplinary measures under Section 38-71-90. The act takes effect upon the Governor's approval.

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