Can my insurer use AI to deny a claim?

Medicare Advantage: an algorithm may assist

Rules in force since Jan. 1, 2024 require Medicare Advantage plans to base medical-necessity decisions on Medicare's coverage rules and the enrollee's medical history, physician recommendations and clinical notes (42 CFR 422.101; Federal Register), and a physician or other appropriate professional with relevant expertise must review a planned medical-necessity denial before it is issued (42 CFR 422.566).

CMS applied them to AI on Feb. 6, 2024: an algorithm "can be used to assist MA plans in making coverage determinations," but one that decides 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"; AI "alone cannot be used as the basis to deny admission or downgrade to an observation stay"; and a predicted length of stay "alone cannot be used as the basis to terminate post-acute care services" (CMS).

Prior authorization deadlines and reasons

Since 2026, another CMS rule has required Medicare Advantage plans and Medicaid and CHIP programs, including managed care plans, to decide prior authorization requests for items and services other than drugs within 72 hours if urgent and seven calendar days otherwise, and to give a specific reason for a denial, as insurers on the federally facilitated exchanges also must; all must support electronic prior authorization from 2027 (CMS).

Traditional Medicare's WISeR model

The WISeR model, which began Jan. 1, 2026, requires prior authorization or review before payment in traditional Medicare for selected services, such as skin and tissue substitutes and knee arthroscopy for osteoarthritis, in Arizona, New Jersey, Ohio, Oklahoma, Texas and Washington (CMS; CMS). The reviewing companies use technology such as AI and machine learning "along with human clinical review" and are paid a share of the spending they avert (CMS). CMS says "a human clinician with relevant clinical expertise" must review every "non-affirmation," its term for a prior authorization denial (CMS).

State laws, and the plans they miss

At least 13 states have passed laws that limit AI's role in medical-necessity denials by the plans they regulate, typically by reserving the decision for a licensed physician or other qualified reviewer or by barring AI from being its sole basis: those in California, Illinois, Maryland, Texas, Nebraska, Washington, Arizona and Iowa are in effect (California; Illinois; Maryland; Texas; Nebraska; Washington; Arizona; Iowa), Alabama's takes effect Oct. 1, 2026, and those of Colorado, Georgia, Minnesota and Utah on Jan. 1, 2027 (Alabama; Colorado; Georgia; Minnesota; Utah).

Several, including California's and Colorado's, also require AI tools to rely on the patient's own clinical history and circumstances (SB 1120; HB26-1139). Texas bars an automated decision system from making an adverse determination "wholly or partly" (SB 815), and Nebraska and Utah require disclosure of AI use to network providers and enrollees (LB 77; SB 319). Indiana, and Illinois from 2028, limit automated downcoding of claims (HB 1271; SB 3114).

State insurance laws do not reach every plan: the Supreme Court has held that self-funded employer plans covered by ERISA, the federal benefits law, are exempt from state laws that regulate insurance (FMC Corp. v. Holliday), and 67% of workers with employer coverage were in self-funded plans in 2025, according to KFF (KFF).

Lawsuits over nH Predict and PxDx

UnitedHealthcare Medicare Advantage enrollees allege the company used an AI model, nH Predict, "in lieu of physicians" to decide coverage of post-acute care; in February 2025 a federal judge in Minnesota let their contract and good-faith claims proceed (opinion). Humana enrollees make similar allegations about the same model, and a federal judge in Kentucky let their contract, good-faith, unjust-enrichment and fraud claims proceed in August 2025 (opinion). Members of plans Cigna administers allege its PxDx system let its doctors deny more than 300,000 payment requests in two months of 2022, averaging 1.2 seconds each; in March 2025 a federal judge in California let some of their claims proceed (order).

As of Sept. 30, 2026, none of the allegations had been proved, and all three cases were in discovery, with class certification motions due Oct. 15, 2026 against Humana, Oct. 29, 2026 against Cigna and Feb. 16, 2027 against UnitedHealth (order; order; order). In ruling on a motion to dismiss, a court accepts the facts alleged as true (opinion). The insurers deny the allegations; Humana says it "did not use nH Predict to make adverse coverage determinations," and Cigna denies that PxDx is an algorithm (UnitedHealth; Humana; Cigna).

Reasons, appeals and peer-to-peer review

Medicare Advantage denial notices must state the specific reasons (42 CFR 422.568), and employer plans must give the specific reason and the plan provisions relied on (29 CFR 2560.503-1). A Medicare Advantage plan must expedite a decision when a physician indicates the standard timeframe could seriously jeopardize the patient's life, health or ability to regain maximum function (42 CFR 422.570). On appeal, a Medicare Advantage medical-necessity denial must be reconsidered by an uninvolved physician with appropriate expertise, and one the plan upholds goes to an independent entity (42 CFR 422.590; 42 CFR 422.592). Employer plans must allow at least 180 days to appeal and, on appeals involving medical judgment, consult an appropriately trained health professional (29 CFR 2560.503-1); plans that are not grandfathered must also offer external review (45 CFR 147.136). WISeR allows peer-to-peer review during resubmission (CMS), and Iowa will require a peer consultation on request within seven business days of a denial, for requests made from Jan. 1, 2027 (Iowa HF 2635).

1. Which coverage is it: Medicare Advantage, traditional Medicare, Medicaid, a state-regulated plan or a self-funded employer plan?
2. What specific reason does the denial give, and who reviewed it?
3. Does the case qualify for an expedited decision?
4. Is peer-to-peer review offered, and when do appeal rights expire?