How Artificial Intelligence Is Transforming the Health Insurance Industry

The health insurance industry has been integrating AI into their processing systems. Debate has begun on how to regulate it. While the ultimate effects on society remain nebulous, AI has proven to be transformative in certain fields. One of the most affected areas is data processing. The AI is capable of analyzing through thousands of pages of documents in a fraction of the time a human would take. Its outputs can flag important information missing from documents, and flag the important documents or information amidst hundreds of thousands of words. Health insurance companies have begun to move with gusto to take advantage of these perceived benefits.

Use of AI in Utilization Review, Prior Authorization, and Claims Processing

Many health insurers use AI in utilization review to determine whether coverage is applicable in a given case. Utilization review involves: Prior authorization (Physician preapproval of health procedures), concurrent review (assessing whether current health procedures are warranted), and decisions about claims for prior services rendered.¹ Other AI use cases involve fraud detection and risk adjustment.² In total, the National Association of Insurance Commissioners believes that 84% of health insurers use AI, or some form of machine learning, across their product lines.³

Public Trust Concerns Surrounding Artificial Intelligence in Health Care

The move to AI is not without issues, and chief among them is public trust. A recent survey found that roughly two-thirds of adults reported low trust in the health care system to responsibly utilize AI.⁴ For general trust in the health care system, that survey sample had a mean trust of 5.38 out of 12.⁵ A recent Fox poll finding 63% of votes are “very” or “extremely” concerned about AI, including majorities across the political spectrum.⁶

Legislative and Regulatory Scrutiny of AI in Health Insurance

Lawmakers in the House Ways and Means Committee summoned various health insurer executives to address affordability back in January. In that meeting, insurer executives were adamant that AI is not used in the claim denial process. Still, they were forthcoming when it came to AI use in the prior authorization process, which one executive described as having “friction.” These statements come as multiple states enact legislation restricting use of AI in health insurance, including California and Texas.⁷

Rhode Island, for example, is attempting to pass a bill restricting AI use in coverage denials. That bill failed to pass last year, with one Democratic State senator stating that insurers formed “tremendous opposition” to regulation targeting prior authorization and identifying intermediaries such as private insurers or pharmacy benefit managers. A renewed push for that bill is expected this year.

Federal Executive Orders and the Future of State AI Regulation

Under this umbrella of uncertainty, the Trump administration is issuing executive orders that restrict federal funding for any state that enacts “excessive” state regulation of AI. The constitutionality of that order notwithstanding, it shows a desire in higher echelons of government to curtail state regulation of the burgeoning AI sector.

Footnotes

¹Michelle M. Mello, et al., The AI Arms Race In Health Insurance Utilization Review: Promises of Efficiency and Risks of Supercharged Flaws, 45 Health Affairs 1, 6-13 (2026).

²National Association of Insurance Commissioners, Health insurance artificial intelligence/machine learning survey results, Kansas City (MO): NAIC; c 2025 [accessed Feb. 27, 2026]. Available from: https://content.naic.org/sites/default/files/inline-files/NAIC%20AI%20Health%20Survey%20Report%20.pdf .

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⁴Paige Nong, PhD; Jodyn Platt, PhD, Patients’ Trust in Health Care Systems to Use Artificial Intelligence, 8 JAMA Network Open 2, e2460628 (2025).

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⁶Darius Tahir and Lauren Sausser, Should AI weigh in on your insurance?, The New York Times, (Feb. 24, 2026), at 2.

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