Health insurance companies are increasingly using artificial intelligence algorithms to decide whether to pay for healthcare treatments and services recommended by doctors, raising serious questions about fairness and transparency in making these critical decisions.
Article Contents:
- Introduction
- AI in Health Insurance
- Patient Options Upon Denial
- Pattern of Withholding Care
- Regulatory Efforts
- Role of the Food and Drug Administration
- Conclusion
- Frequently Asked Questions
Introduction
Over the past decade, health insurance companies have increasingly adopted the use of artificial intelligence algorithms. Unlike doctors and hospitals that use AI to help diagnose and treat patients, health insurance companies use these algorithms to decide whether to pay for healthcare treatments and services recommended by a patient’s physicians.
AI in Health Insurance
One of the most common examples is prior authorization, which occurs when your doctor needs to receive payment approval from the insurance company before providing care. Many insurance companies use an algorithm to determine whether the requested care is “medically necessary” and should be covered.
These smart systems also help insurance companies decide how much care a patient deserves—for example, how many days of hospital care a patient can receive after surgery. Insurance companies state that AI helps them make quick and safe decisions regarding necessary care while avoiding wasted or harmful treatments.
Patient Options Upon Denial
If an insurance company refuses to pay for a treatment recommended by your doctor, you typically have three options. You can try to appeal the decision, but this process can take a significant amount of time, money, and specialized assistance. Only one out of every 500 denied claims is appealed.
You can agree to a different treatment that your insurance company will cover. Or you can pay for the recommended treatment yourself, which is often unrealistic due to the high costs of healthcare.
Pattern of Withholding Care
Companies are supposed to enter patient healthcare records and other relevant information into healthcare coverage algorithms and compare that information with current medical care standards to decide whether to cover a patient’s claim. However, insurance companies have refused to disclose how these algorithms work in making such decisions.
The use of AI to review coverage provides insurance companies with saved time and resources, particularly because it means fewer medical professionals are needed to review each case. But the financial benefit to insurance companies does not stop there. If an AI system quickly denies a valid claim and the patient appeals, the appeal process can take years.
Regulatory Efforts
Unlike medical algorithms, insurance AI tools are largely unregulated. They do not have to undergo Food and Drug Administration (FDA) review, and insurance companies often claim their algorithms are trade secrets.
This means there is no public information on how these tools make decisions, and no external testing to determine whether they are safe, fair, or effective. There are no peer-reviewed studies showing how well they work in the real world.
There appears to be some momentum for change. The Centers for Medicare & Medicaid Services, the federal agency responsible for Medicare and Medicaid, recently announced that insurance companies in Medicare Advantage plans must base decisions on individual patient needs—rather than just general standards.
Role of the Food and Drug Administration
In the view of many health law experts, the gap between insurance companies’ business practices and patient needs has become so wide that regulating healthcare coverage algorithms is now imperative. The FDA is well-positioned to do this.
The FDA includes medical experts capable of evaluating insurance algorithms before they are used to make coverage decisions. The agency already reviews many medical AI tools for safety and effectiveness. FDA oversight would also provide a unified national regulatory system rather than a patchwork of rules across the country.
Conclusion
The movement toward regulating how health insurance companies use artificial intelligence to determine coverage has clearly begun, but it still awaits a strong push. Patient lives are literally at stake, requiring prompt and effective intervention from regulators to ensure fairness and transparency.
Frequently Asked Questions
1. How do health insurance companies use artificial intelligence?
They use it to decide whether to pay for doctor-recommended treatments, determine the duration of owed care, and make prior authorization decisions.
2. What are the risks associated with this usage?
It can lead to delayed or denied necessary care, and disproportionately affects patients with chronic illnesses and racial minorities.
3. Are there laws regulating these algorithms?
Currently, these tools are largely unregulated, but there are growing efforts by states and federal agencies to establish stronger controls.
