HB 35 — AI USE IN HEALTH INSURANCE ACT

*LRB10403558BAB13582b* HB0035 104THEngrossed GENERALLRB104 ASSEMBLY03558 StateBAB of13582 Illinoisb andAN 2026ACT HB0035concerning Introducedregulation. 1/9/2025, by Rep.

Bob Morgan SYNOPSIS AS INTRODUCED:

New Act ILCS 100/5-45.65 new Creates the Artificial Intelligence Systems Use in Health Insurance Act.

Provides that the Department of Insurance's regulatory oversight of insurers includes oversight of an insurer's use of AI systems to make or support adverse determinations that affect consumers.

Provides that any insurer authorized to operate in the State is subject to review by the Department in an investigation or market conduct action regarding the development, implementation, and use of AI systems or predictive models and the outcomes from the use of those AI systems or predictive models.

Provides that an insurer authorized to do business in Illinois shall not issue an adverse consumer outcome with regard to the denial, reduction, or termination of insurance plans or benefits that result solely from the use or application of any AI system or predictive model.

Provides that any decision-making process for the denial, reduction, or termination of insurance plans or benefits that results from the use of AI systems or predictive models shall be meaningfully reviewed, in accordance with review procedures determined by Department rules, by an individual with authority to override the AI systems and determinations.

Authorizes the Department to adopt emergency rules to implement the Act and to adopt rules concerning standards for full and fair disclosure of an insurer's use of AI systems.

Makes a conforming change in the Illinois Administrative Procedure Act.

LRB104 03558 BAB 13582 b A BILL FOR HB0035 LRB104 03558 BAB 13582 b AN ACT concerning regulation.

"Adverse consumer outcome" means a decision by ana insurerhealth insurance issuer that is subject to insurance regulatory standards enforced by the Department that adversely impacts the consumer in a manner that violates those standards or any claim denial as determined by the use of an AI System.system.

"AI systems program" means a written program for the responsible use of AI systemssystem thatincludes makesartificial orintelligence. supports decisions related to regulated insurance practices to be developed, implemented, and maintained by all insurers authorized to do business in the State.

"Algorithm""AI meanssystems aprogram" clearlymeans specifiedthe mathematicalhealth processinsurance forissuer's computationcontrols and aprocesses setfor the responsible use of rulesAI that,systems, ifincluding followed,governance, willrisk givemanagement, HB0035and -internal 2audit -functions, LRB104which 03558take BABinto 13582account bthird-party aAI prescribedsystems result.and data.

"Artificial"Algorithm" intelligence" or "AI" means a branchclearly ofspecified computermathematical scienceprocess thatHB0035 usesEngrossed data- processing2 systems- thatLRB104 perform03558 functionsBAB normally13582 associatedb withfor humancomputation intelligence, such as reasoning, learning, and self-improvement,a orset the capability of arules devicethat, toif performfollowed, functionswill thatgive area normallyprescribed associatedresult. with human intelligence, such as reasoning, learning, and self-improvement.

"Artificial intelligence" or "AI" includeshas machinethe learning.meaning given to the term "artificial intelligence" in Section 2-101 of the Illinois Human Rights Act.

"Company" has the meaning given to that term in Section 2 of the Illinois Insurance Code.

"Machine"Health learning"insurance meanscoverage" ahas fieldthe withinmeaning artificialgiven intelligenceto that focusesterm onin theSection ability5 of computersthe toIllinois learnHealth fromInsurance providedPortability dataand withoutAccountability beingAct. explicitly programmed.

"Health insurance coverage" includes excepted benefits under the Department's jurisdiction other than insurance under the Illinois Insurance Code that falls outside Class 1(b) or 2(a) of Section 4 of that Code.

"Health insurance issuer" has the meaning given to that term in Section 5 of the Illinois Health Insurance Portability and Accountability Act.

"Health insurance issuer" includes a company offering accident and health insurance under Class 1(b) or 2(a) of Section 4 of the Illinois Insurance Code, a dental service plan corporation, a health maintenance organization, a limited health service organization, a limited health services organization, or a health services plan corporation transacting or authorized to transact business under the Department's jurisdiction.

"Machine learning" means a field within artificial intelligence that focuses on the ability of computers to learn HB0035 Engrossed - 3 - LRB104 03558 BAB 13582 b from provided data without being explicitly programmed.

"Third party" means an organization other than the insurerhealth insurance issuer that provides services, data, or other resources related to AI.AI, including any person who develops or uses AI to support the health insurance issuer in administering its health insurance coverage.

(a) The Department's regulatory oversight of insurershealth insurance coverage includes oversight of anthe insurer's use of AI systems or predictive models to make or support adverse determinationsconsumer thatoutcomes. affect consumers.

AnyThe insurerDepartment's authorizedauthority to operate in the State is subject to HB0035 - 3 - LRB104 03558 BAB 13582 b review by the Department in an investigation or market conduct action includes review regarding the development, implementation, and use of AI systems or predictive models and the outcomes from the use of those AI systems or predictive models.

The Department may also request other information or documentation relevant to an investigation or market conduct action, and ana insurerhealth insurance issuer or any other person described in subsection (b) of Section 132 of the Illinois Insurance Code must comply with that request.

The Department's inquiries may include, but are not limited to, questions regarding any specific model, AI HB0035 Engrossed - 4 - LRB104 03558 BAB 13582 b system, or application of a model or AI system.

information and documentation relating to the insurer'shealth insurance issuer's preacquisition and preutilization diligence, monitoring, and auditing of data or AI systems developed or used by a third party;

and information and documentation relating to implementation and compliance with the insurer'shealth insurance issuer's AI systems program.

(b) AnA insurerhealth insurance issuer authorized to do business in this State shall not issue an adverse consumer outcome with regard to the denial, reduction, or termination of health insurance planscoverage or benefits that result solely from the use or application of any AI system or predictive model.

Any decision-making process concerning the denial, reduction, or termination of insurance plans or benefits that results from the use of AI systems or predictive models shall be meaningfully reviewed, in accordance with review procedures established by Department HB0035 - 4 - LRB104 03558 BAB 13582 b rules, by an individual with authority to override the AI systems and theirthe determinations.determinations of the AI systems.

SectionWhen 15.an adverse consumer outcome is an adverse determination regulated under the Managed Care Reform and Patient Rights Act, the individual with authority to override the AI systems and the determinations of the AI systems shall be a clinical peer as required and defined under that Act.

DisclosureHB0035 ofEngrossed AI- System5 utilization.- LRB104 03558 BAB 13582 b Section 15.

TheDisclosure Department of Insurance may adopt rules that include standards for the full and fair disclosure of an insurer's use of AI systemssystem thatutilization. set forth the manner, content, and required disclosures.

The Department of Insurance may adopt rules that include standards for the full and fair disclosure of a health insurance issuer's use of AI systems that may impact consumers, that set forth the manner, content, and required disclosures including notice before the use of AI systems, notice after an adverse decision, the way personal information is used to inform decisions, a process for correcting inaccurate information, and instructions for appealing decisions.

(a) All insurershealth insurance issuers authorized to do business in Illinois shall comply with this Act regarding any decisions impacting consumers that are made or supported by advanced analytical and computational technologies, including AI systems and machine learning, and must comply with all applicable insurance laws and regulations, including laws addressing unfair trade practices and unfair discrimination.

All decisions made and actions taken by authorized insurershealth insurance issuers using AI systems must comply with applicable federal and State laws, regulations, and rules.

Section(b) 25.A health insurance issuer shall ensure that its health insurance coverage is administered in conformity with this Act.

Rulemaking.The health insurance issuer's AI systems program shall include policies and procedures to ensure such conformity by all employees, directors, trustees, agents, representatives, and persons directly or indirectly contracted to administer HB0035 Engrossed - 6 - LRB104 03558 BAB 13582 b the health insurance coverage.

The Departmenthealth mayinsurance adoptissuer rules,shall includingbe emergencyresponsible rules,for toany implementnoncompliance andunder administer this Act.Act with respect to its health insurance coverage.

Nothing in this Section 90.relieves any other person from liability for failure to comply with the Department's investigations or market conduct actions related to a health insurance issuer's compliance with this Act.