Stricken language would be deleted from and underlined language would be added to present law.
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State of Arkansas 1
95th General Assembly A Bill 2
Regular Session, 2025 HOUSE BILL 1297 3
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By: Representative L. Johnson 5
By: Senator Irvin 6
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For An Act To Be Entitled 8
AN ACT CONCERNING ARTIFICIAL INTELLIGENCE, 9
ALGORITHMS, AND OTHER AUTOMATED TECHNOLOGIES; TO 10
REGULATE CERTAIN PRACTICES OF HEALTHCARE INSURERS; 11
AND FOR OTHER PURPOSES. 12
13
14
Subtitle 15
CONCERNING ARTIFICIAL INTELLIGENCE, 16
ALGORITHMS, AND OTHER AUTOMATED 17
TECHNOLOGIES; AND TO REGULATE CERTAIN 18
PRACTICES OF HEALTHCARE INSURERS. 19
20
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 21
22
SECTION 1. Arkansas Code Title 23, Chapter 63, is amended to add an 23
additional subchapter to read as follows: 24
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Subchapter 21 — Artificial Intelligence, Algorithms, and Other Automated 26
Technologies 27
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23-63-2101. Definitions. 29
As used in this subchapter: 30
(1) "Artificial intelligence" means a machine -based system that 31
for a given set of human -defined objectives, can make predictions, 32
recommendations, or decisions influencing real or virtual environments; 33
(2) "Enrollee" means an individual who is entitled to receive 34
healthcare services under the terms of a health benefit plan; 35
(3)(A) "Health benefit plan" means: 36 HB1297
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(i) An individual, blanket, or group plan, or a 1
policy or contract for healthcare services offered, issued, renewed, 2
delivered, or extended in this state by a healthcare insurer; and 3
(ii) A health benefit program receiving state or 4
federal appropriations from the State of Arkansas, including the Arkansas 5
Medicaid Program and the Arkansas Health and Opportunity for Me Program or 6
any successor program. 7
(B) "Health benefit plan" includes: 8
(i) Indemnity and managed care plans; and 9
(ii) Nonfederal governmental plans as defined in 29 10
U.S.C. § 1002(32), as it existed on January 1, 2025. 11
(C) "Health benefit plan" does not include: 12
(i) A plan that provides only dental benefits or eye 13
and vision care benefits; 14
(ii) A disability income plan; 15
(iii) A credit insurance plan; 16
(iv) Insurance coverage issued as a supplement to 17
liability insurance; 18
(v) A medical payment under an automobile or 19
homeowners insurance plan; 20
(vi) A health benefit plan provided under Arkansas 21
Constitution, Article 5, § 32, the Workers' Compensation Law, § 11 -9-101 et 22
seq., or the Public Employee Workers' Compensation Act, § 21 -5-601 et seq.; 23
(vii) A plan that provides only indemnity for 24
hospital confinement; 25
(viii) An accident-only plan; 26
(ix) A specified disease plan; or 27
(x) A long-term-care-only plan; 28
(4)(A) "Healthcare insurer" means an insurance company, hospital 29
and medical service corporation, or health maintenance organization that 30
issues or delivers health benefit plans in this state and is subject to: 31
(i) The insurance laws of this state; 32
(ii) Section 23-75-101 et seq., pertaining to 33
hospital and medical service corporations; or 34
(iii) Section 23-76-101 et seq., pertaining to 35
health maintenance organizations. 36 HB1297
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(B) "Healthcare insurer" does not include an entity that 1
provides only dental benefits or eye and vision care benefits; 2
(5) "Healthcare provider" means a type of provider that renders 3
healthcare services to patients for compensation, including a doctor of 4
medicine or another licensed healthcare professional acting within the 5
professional's licensed scope of practice; and 6
(6) "Managed care entity" means an insurance company, hospital 7
or medical service plan, healthcare provider network, physician hospital 8
organization, health maintenance organization, healthcare service 9
corporation, employer or employee organization, or managed care contractor. 10
11
23-63-2102. Disclosure of algorithm use — Privacy and data 12
accessibility. 13
(a)(1) On and after January 1, 2026, a healthcare insurer that offers, 14
issues, renews, delivers, or extends a health benefit plan in this state 15
shall disclose to the following through an applied model card the strengths 16
and limitations of artificial intelligence -based algorithms, including 17
without limitation known biases, performance variability, and populations 18
where artificial based -intelligence algorithms are more less effective, used 19
or to be used in the healthcare insurer's utilization review process: 20
(A) The Insurance Commissioner; 21
(B) A healthcare provider in the healthcare insurer's 22
network; 23
(C) An enrollee; and 24
(D) The general public on the healthcare insurer's 25
publicly accessible website. 26
(2) The disclosure under subdivision (a)(1) of this section 27
shall include: 28
(A) The algorithm criteria; 29
(B) Data sets used to train the algorithm, including 30
mitigation of any known bias; 31
(C) The algorithm itself; 32
(D) A description of how the algorithm is used in an 33
applied use case; 34
(E) The outcomes of the software or workflow in which the 35
algorithm is used; and 36 HB1297
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(F) Any results of independent third -party validation for 1
improved transparency and trustworthiness. 2
(b) A healthcare insurer shall ensure that: 3
(1) An algorithm should leverage federated data -sharing models 4
to minimize data centralization and protect enrollee privacy; 5
(2) An algorithm is compliant with national interoperability 6
standards, including Fast Healthcare Interoperability Resources and the 7
United States Core Data for Interoperability; 8
(3) Enrollee data that is used for training or validation of 9
artificial intelligence models are following privacy and security standards 10
that align with the Trusted Exchange Framework and Common Agreement; and 11
(4) Established mechanisms document and obtain explicit enrollee 12
consent for using health data in artificial development and validation. 13
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23-63-2103. Explanation of artificial intelligence -based algorithm 15
recommendations. 16
(a) If artificial intelligence -based algorithms are used in the 17
utilization review process, the artificial intelligence -based algorithm 18
recommendations shall be supported by an explanation, understandable at all 19
literacy levels, of the rationale used by the healthcare insurer -operated 20
algorithm or system used in making a recommendation to deny, delay, or modify 21
healthcare services covered under a health benefit plan. 22
(b)(1) A healthcare insurer using an automated decision -making system 23
shall identify and cite peer -reviewed studies assessing the automated 24
decision-making system's accuracy measured against enrollee outcomes and the 25
validity of automated decision -making systems. 26
(2) The peer-reviewed studies under subdivision (b)(1) of this 27
section shall be concordant or based on easily accessible evidence -based 28
clinical guidelines, as opposed to proprietary healthcare insurer criteria. 29
(3) An enrollee shall be provided a process for contesting 30
enrollee outcomes. 31
32
23-63-2104. Clinician supervision of artificial intelligence. 33
(a) A healthcare insurer shall not make a decision regarding the care 34
of enrollees based solely on the results derived from the use or application 35
of artificial intelligence. 36 HB1297
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(b) A healthcare provider who participates in a utilization review 1
process for a healthcare insurer that initially uses artificial intelligence -2
based algorithms for a utilization review determination shall: 3
(1) Ensure that a utilization review entity guarantees that an 4
initial adverse prior authorization determination or appeal of an adverse 5
prior authorization determination or precertification determination is 6
reviewed by a healthcare provider who: 7
(A) Possesses a current and valid nonrestricted license to 8
practice medicine in this state; 9
(B) Has experience treating patients with the medical 10
condition or disease for which the healthcare service or supply is being 11
requested under initial prior authorization determination or appeal; 12
(C) Is not employed by a utilization review entity, is not 13
under contract with a utilization review entity other than to participate in 14
one (1) or more of the utilization review entity’s healthcare provider 15
networks or to perform reviews of appeals, and does not otherwise have a 16
financial interest in the outcome of the appeal; 17
(D) Has not been directly involved in making the adverse 18
determination; and 19
(E)(i) Has considered known clinical aspects of the 20
healthcare service under review, including without limitation: 21
(a) A review of pertinent medical records 22
provided to the utilization review entity by the enrollee’s healthcare 23
provider; 24
(b) Relevant records provided to the 25
utilization review entity by a healthcare facility; and 26
(c) Medical literature provided to the 27
utilization review entity by the healthcare provider. 28
(ii) If the decision is an adverse determination, 29
the healthcare provider shall complete and sign the denial notice, providing 30
the required information described under this subdivision (b)(1); and 31
(2) Open and document the review of the individual clinical 32
records or data before the individualized documented decision of a denial. 33
(c) The healthcare insurer shall submit to the Insurance Commissioner, 34
in the form and manner as the commissioner may require, data on the amount of 35
time a human reviewer spends examining an adverse organizational 36 HB1297
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determination before signing off on each denial under subsection (b) of this 1
section. 2
(d) An artificial intelligence -based algorithm shall not be the sole 3
basis of a decision to deny, delay, or modify healthcare services based in 4
whole or in part on medical necessity. 5
(e) An adverse determination of medical necessity shall be made only 6
by a healthcare provider or a licensed healthcare professional competent to 7
evaluate the specific clinical issues involved in the healthcare services 8
requested by the healthcare provider as required under subdivision (b)(1) of 9
this section, by reviewing and considering the requesting healthcare 10
provider's recommendation, the enrollee's medical or other clinical history, 11
as applicable, and individual clinical circumstances. 12
(f) A healthcare insurer that uses clinical supervision of artificial 13
intelligence under this section shall provide ongoing education and 14
certification, if applicable, for a clinician reviewing artificial 15
intelligence determinations to ensure the clinician's ability to critically 16
assess artificial intelligence outputs. 17
18
23-63-2105. State audit automated utilization management system. 19
(a) The Insurance Commissioner may audit at any time a healthcare 20
insurer's automated utilization management system. 21
(b) The commissioner may contract with a third -party entity to perform 22
an audit under subsection (a) of this section. 23
(c) A healthcare insurer that uses an automated decision-making system 24
shall: 25
(1) Engage in a regular system audit to ensure use of the 26
automated decision-making system is not increasing overall or disparate 27
claims denials or coverage limitations or otherwise decreasing access to 28
care; and 29
(2) Publish statistics regarding the automated decision -making 30
systems’ approval, denial, and appeal rates on the payor's website or another 31
publicly available website in a readily accessible format with enrollee 32
population demographics to report and contextualize equity implications of 33
automated decisions. 34
35
23-63-2106. Use of artificial intelligence to shift coverage 36 HB1297
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prohibited. 1
(a) A healthcare insurer shall: 2
(1) Reference publicly accessible internal coverage criteria 3
that are based on current evidence in widely used treatment guidelines or 4
clinical literature; or 5
(2) Use artificial intelligence -based algorithms solely to 6
implement internal coverage criteria that have been made public and adopted 7
in compliance with this subchapter. 8
(b) A healthcare insurer shall not use artificial intelligence -based 9
algorithms that: 10
(1) Rely on any information not in compliance with this section; 11
or 12
(2) Independently change or create coverage criteria. 13
14
23-63-2107. Quality assurance testing of artificial intelligence. 15
(a)(1) A healthcare insurer shall establish an ongoing, biannual 16
quality assurance testing process that meets requirements established by rule 17
by the Insurance Commissioner that specify defined parameters on safety and 18
efficacy of an artificial intelligence -based algorithm. 19
(2) The requirements under subdivision (a)(1) of this section 20
shall meet standardized benchmarks or definitions achieved by consensus -21
building at a national level. 22
(b) A healthcare insurer shall ensure that the artificial 23
intelligence-based algorithms used in the quality assurance testing process 24
under subsection (a) of this section are consistent with state and federal 25
antidiscrimination laws and meet certain parameters of safety and fairness. 26
(c) A healthcare insurer shall submit the results of the quality 27
assurance testing under subsection (a) of this section to the commissioner at 28
the time and in the form and manner as the commissioner may specify, but not 29
less frequently than semiannually. 30
(d) The results submitted under subsection (c) of this section shall 31
be published on a public website within thirty (30) days of the submission of 32
the results to the commissioner. 33
(e) Any quality assurance testing shall include: 34
(1) Validation for generalizability as well as mechanisms to 35
support local site testing, where necessary, and on -site monitoring 36 HB1297
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applicability for artificial intelligence solutions to ensure safety, 1
robustness, adaptability, and fairness; and 2
(2) Testing based on the risk level of the model’s intended use, 3
with higher-risk applications requiring more rigorous evaluation and 4
monitoring. 5
(f)(1) A healthcare insurer shall build capabilities for generating 6
and curating real-world evidence to ensure artificial intelligence -based 7
algorithms are tested for the highest standards for safety, accuracy, and 8
reliability to identify potential risks. 9
(2) All artificial intelligence solutions shall undergo 10
benchmarking against standardized metrics approved by the commissioner, 11
including without limitation safety, efficacy, and reliability in 12
representative enrollee populations from Arkansas. 13
(g) Quality assurance testing datasets under this section shall: 14
(1) Be multi-institutional and representative of Arkansas ’s 15
demographic makeup; 16
(2) Explain data provenance and origin; 17
(3) Contain relevant characteristics pertaining to the 18
artificial intelligence being used; and 19
(4) Be updated regularly to ensure the highest quality data is 20
used at all times. 21
(h) The commissioner shall allocate resources to federally qualified 22
health centers, critical access hospitals, and rural clinics in this state to 23
enable participation in quality assurance testing. 24
25
23-63-2108. Healthcare insurer requirements. 26
(a) Except as provided in subsection (b) of this section, this 27
subchapter applies to a healthcare insurer offering a health benefit plan in 28
this state. 29
(b) This subchapter does not apply to a managed care entity or 30
healthcare service contractor that is: 31
(1) Majority-owned or controlled by a nonprofit hospital, 32
hospital system, or managed care entity; or 33
(2) A nonprofit legal entity under 26 U.S.C. § 501(c) that 34
provides a majority of covered professional services in a specific geographic 35
area through employed healthcare providers or a single contracted medical 36 HB1297
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group. 1
2
23-63-2109. Enforcement — Penalties. 3
If the Insurance Commissioner determines that a healthcare insurer is 4
not in compliance with this subchapter, the commissioner may impose: 5
(1) A penalty, including without limitation: 6
(A) A civil money penalty of not more than twenty -five 7
thousand dollars ($25,000) for each determination of noncompliance; 8
(B) A civil money penalty of not more than ten thousand 9
dollars ($10,000) for each week beginning on and after the date on which a 10
civil money penalty under subdivision (a)(1)(A) of this section is imposed by 11
the commissioner during which the deficiency that is the basis of a 12
determination of noncompliance exists; and 13
(C) Suspension of enrollment of individuals in health 14
benefit plans offered by the healthcare insurer on and after the date the 15
commissioner notifies the healthcare insurer of a determination of 16
noncompliance and until the commissioner is satisfied that the basis for the 17
determination has been corrected and is not likely to recur; 18
(2) Administrative fees, including a fee charged or allocated 19
for collection activities conducted by the commissioner that will be passed 20
on to a health benefit plan on a pro -rata basis and added to a civil money 21
penalty under subdivision (a)(1) of this section collected from the health 22
benefit plan; 23
(3) If the commissioner determines that a healthcare provider or 24
enrollee was adversely affected by the noncompliance of the healthcare 25
insurer, an amount necessary to compensate the healthcare provider or 26
enrollee for the harm attributable to the noncompliance that is not otherwise 27
compensated and may require the healthcare insurer to pay the amount, 28
including appropriate interest, to the healthcare provider or enrollee in 29
addition to any other penalties under this section; or 30
(4) Any other remedy available to the commissioner under state 31
law. 32
33
23-63-2110. No waiver, modification, or nullification by contract. 34
(a) Except as provided in subsection (b) of this section, a writing or 35
other agreement shall not contain a provision that constitutes a waiver, 36 HB1297
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modification, or nullification of a requirement or remedy under this 1
subchapter. 2
(b) This section does not prohibit a writing or other agreement that 3
grants to a healthcare provider more protection or remedy than contained in 4
this subchapter or a waiver given in settlement of a dispute or action. 5
6
23-63-2111. Private right of action. 7
(a) The Attorney General may bring a civil action in an appropriate 8
court for declaratory or injunctive relief as is necessary to carry out this 9
subchapter. 10
(b) A person who is aggrieved by a violation of this subchapter may 11
provide written notice of the violation to the Insurance Commissioner. 12
(c) If the violation of this subchapter is not corrected within ninety 13
(90) days after receipt of a notice under subsection (b) of this section, the 14
aggrieved person may bring a civil action in an appropriate court for 15
declaratory or injunctive relief with respect to the violation. 16
(d) In a civil action under this section, the court may allow the 17
prevailing party, other than the state, reasonable attorney's fees, including 18
litigation expenses, and costs. 19
20
23-63-2112. Education artificial intelligence tools. 21
The Insurance Commissioner may: 22
(1) Collaborate with academic institutions and healthcare 23
organizations to establish training programs for ethical artificial 24
intelligence deployment; and 25
(2) Fund public-private partnerships to create education 26
initiatives for a healthcare provider to use artificial intelligence tools. 27
28
23-63-2113. Rules. 29
The Insurance Commissioner shall promulgate rules to: 30
(1) Strengthen oversight and enforcement of existing rules to 31
ensure health benefit plan compliance with applicable legal and contractual 32
requirements for coverage and appeals; 33
(2) Ensure compliance with quality and performance standards; 34
(3) Ensure that health benefit plan compliance with this 35
subchapter is not eroded by using artificial intelligence tools, including 36 HB1297
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auto-denial software; 1
(4) Include continuous post -deployment monitoring of artificial 2
intelligence to ensure models maintain efficacy and safety; and 3
(5) Establish a process for biannual reporting and public 4
disclosure of quality assurance outcomes. 5
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