AN ACT to amend Tennessee Code Annotated, Title 8, Chapter 27; Title 56 and Title 71, relative to health insurance.
HB1382 would regulate the use of artificial intelligence, algorithms, and other software tools by health insurance issuers when they perform utilization review or utilization management for covered health care services. The bill defines artificial intelligence broadly and applies its requirements to a wide range of entities, including insurers, HMOs, nonprofit hospital and medical service corporations, pharmacy benefits managers, third-party administrators, TennCare, CoverKids, Access Tennessee, and certain state employee and managed care plans.
Under the bill, any AI or algorithm used in these functions must rely on an enrollee’s medical and clinical history, the requesting provider’s clinical information, and other relevant medical record information; it may not rely solely on group datasets. The tool must follow applicable state and federal law, not replace provider decision-making, not discriminate, and not cause harm. The issuer must maintain written disclosures and oversight policies, periodically review performance and outcomes, protect patient data consistent with HIPAA, and ensure that medical necessity determinations are made only by a licensed physician or qualified licensed health professional. The bill also bars AI from denying, delaying, or modifying care based in whole or part on medical necessity.
The bill would create enforcement mechanisms by treating violations as unfair claims practices and allowing an aggrieved individual to bring a private cause of action for actual damages, punitive damages, and attorney’s fees. It also authorizes the Department of Commerce and Insurance to adopt rules, and it includes a safeguard that the section does not apply to the extent compliance would cause a loss of federal funding. The act would take effect July 1, 2025, with rulemaking authority effective immediately upon enactment.
The overall sentiment reflected by the bill text is consumer-protective and skeptical of automated insurance decision-making, especially where AI may be used to limit access to care. Because there are no committee transcripts or votes provided, there is no recorded debate or vote history to indicate broader legislative support or opposition. The structure of the bill suggests a policy preference for human clinical review over automated utilization management and for stronger oversight of insurer use of AI.
The main points of contention likely center on whether the bill goes too far in restricting insurer use of technology, whether the private right of action and punitive damages exposure are appropriate, and whether the requirements could conflict with federal rules or threaten federal funding for state health programs. Another likely issue is the bill’s broad reach across both private and public coverage programs, including TennCare and state employee plans, and whether the prohibition on AI-based medical necessity determinations is operationally feasible for insurers and administrators.
HB1382 would add a new regulatory framework to Tennessee insurance law governing AI and algorithmic tools used in utilization review and utilization management. It would amend Title 56 and affect health insurance issuers, managed care entities, pharmacy benefit managers, third-party administrators, and certain state-administered coverage programs, while also implicating Title 71 programs such as TennCare and CoverKids and Title 8 group insurance plans. The bill would create new compliance duties, enforcement exposure, and rulemaking authority for the Department of Commerce and Insurance, and it would establish a private cause of action and unfair claims practice penalties for violations.
The bill’s apparent policy direction is strongly protective of patients and provider judgment, with an emphasis on limiting automated denials or delays in care. In the absence of committee testimony or recorded votes, there is no direct evidence of partisan or stakeholder sentiment, but the text itself indicates concern about insurer reliance on AI and a preference for human oversight in medical necessity decisions. The inclusion of a federal-funding savings clause also suggests an effort to make the bill more administratively defensible and less likely to conflict with federal requirements.
Likely areas of contention include the bill’s prohibition on AI making or driving medical necessity determinations, the requirement that only licensed clinicians make those decisions, and the private right of action with actual and punitive damages. Insurers, PBMs, and administrators may object to the operational burden, compliance costs, and litigation risk, while patient advocates would likely support the added protections against automated denials. A further point of dispute is the bill’s interaction with federal law and whether its restrictions could jeopardize federal funding or conflict with existing HHS guidance.