89R849 SCL-F

By: Campbell S.B. No. 1411

A BILL TO BE ENTITLED

AN ACT

relating to the use of artificial intelligence-based algorithms by health benefit plan issuers, utilization review agents, health care providers, and physicians.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Chapter 544, Insurance Code, is amended by adding Subchapter O to read as follows:

SUBCHAPTER O. ARTIFICIAL INTELLIGENCE USE

Sec. 544.701. DEFINITIONS. In this subchapter:

(1) "Adverse determination" has the meaning assigned by Section 4201.002.

(2) "Artificial intelligence-based algorithm" means any artificial system that:

(A) performs tasks under varying and unpredictable circumstances without significant human oversight; or

(B) is able to learn from experience and improve performance when exposed to data sets.

(3) "Enrollee" means an individual entitled to coverage under a health benefit plan.

(4) "Health benefit plan" means a plan that provides benefits for medical, surgical, or other treatment expenses incurred as a result of a health condition, a mental health condition, an accident, sickness, or substance abuse, including an individual, group, blanket, or franchise insurance policy or insurance agreement, a group hospital service contract, or an individual or group evidence of coverage or similar coverage document.

(5) "Health benefit plan issuer" means an insurance company, association, organization, group hospital service corporation, or health maintenance organization that delivers or issues for delivery a health benefit plan. The term includes:

(A) a life, health, and accident insurance company operating under Chapter 841 or 982;

(B) a general casualty insurance company operating under Chapter 861;

(C) a statewide mutual assessment company operating under Chapter 881;

(D) a mutual life insurance company operating under Chapter 882;

(E) a mutual insurance company operating under Chapter 883 that writes coverage other than life insurance;

(F) a stipulated premium company operating under Chapter 884;

(G) a fraternal benefit society operating under Chapter 885;

(H) a local mutual aid association operating under Chapter 886;

(I) a mutual assessment company or mutual assessment life, health, and accident association operating under Chapter 887;

(J) a Lloyd's plan operating under Chapter 941; and

(K) a reciprocal exchange operating under Chapter 942.

(6) "Health care," "health care provider," "medical care," and "physician" have the meanings assigned by Section 74.001, Civil Practice and Remedies Code.

(7) "Specialist" means a physician or health care provider whose practice is not limited to primary medical or health care services and who has additional postgraduate or specialized training, has board certification, or practices in a licensed specialized area of medicine or health care.

(8) "Utilization review" and "utilization review agent" have the meanings assigned by Section 4201.002.

Sec. 544.702. PROHIBITED DISCRIMINATION. (a) A health benefit plan issuer may not discriminate on the basis of race, color, national origin, gender, age, vaccination status, or disability through the use of clinical artificial intelligence-based algorithms in the issuer's decision making.

(b) This section does not prohibit the use of clinical artificial intelligence-based algorithms that rely on variables to appropriately make decisions, including to identify, evaluate, and address medical or health care.

Sec. 544.703. DISCLOSURE OF UTILIZATION REVIEW USE. A health benefit plan issuer shall publish on a publicly accessible part of the issuer's Internet website and provide in writing to each enrollee, and any physician or health care provider contracting with the issuer or providing services to an enrollee, a disclosure regarding whether the issuer uses or may use artificial intelligence-based algorithms in the issuer's utilization review process.

Sec. 544.704. SUBMISSION OF ALGORITHM AND TRAINING DATA TO DEPARTMENT. (a) A health benefit plan issuer shall submit an artificial intelligence-based algorithm and training data sets that are used or may be used in the issuer's utilization review process to the department in the form and manner prescribed by the commissioner.

(b) The commissioner shall develop and implement a process for the department to certify that an artificial intelligence-based algorithm and related data sets submitted to the department under Subsection (a) have minimized the risk of discrimination prohibited by Section 544.702 and adhere to evidence-based clinical guidelines.

Sec. 544.705. UTILIZATION REVIEW BY SPECIALIST REQUIRED. A utilization review agent that uses artificial intelligence-based algorithms to perform an initial review shall require that a specialist open and document the utilization review of an individual's clinical records or data before making an adverse determination against that individual.

Sec. 544.706. ANNUAL CONSUMER REPORT CARDS. (a) The office of public insurance counsel shall include in the office's annual consumer report cards developed and issued under Section 501.252 information identifying and comparing, on an objective basis, the use of artificial intelligence-based algorithms by health benefit plan issuers and utilization review agents in this state.

(b) The department and the Health and Human Services Commission shall collaborate with and provide assistance to the office of public insurance counsel in developing the information required by this section to be included in the annual consumer report cards.

SECTION 2. Subtitle A, Title 3, Occupations Code, is amended by adding Chapter 117 to read as follows:

CHAPTER 117. USE OF ARTIFICIAL INTELLIGENCE

Sec. 117.001. DEFINITIONS. In this chapter:

(1) "Artificial intelligence-based algorithm" has the meaning assigned by Section 544.701, Insurance Code.

(2) "Commission" means the Health and Human Services Commission.

(3) "Health care," "health care provider," "medical care," and "physician" have the meanings assigned by Section 74.001, Civil Practice and Remedies Code.

Sec. 117.002. PROHIBITED DISCRIMINATION. (a) A physician or health care provider may not discriminate on the basis of race, color, national origin, gender, age, vaccination status, or disability through the use of clinical artificial intelligence-based algorithms when providing a medical or health care service.

(b) This section does not prohibit the use of clinical artificial intelligence-based algorithms that rely on variables to appropriately make decisions, including to identify, evaluate, and address medical or health care.

Sec. 117.003. OVERSIGHT. The office of inspector general for the commission shall conduct investigations into fraud and abuse related to use of artificial intelligence-based algorithms in medical or health care and violations of this chapter.

Sec. 117.004. NOTICE OF VIOLATION OR UNSUBSTANTIATED COMPLAINT. (a) Not later than the 15th day after the date the inspector general determines that a violation of this chapter has occurred, the inspector general shall provide written notice by certified mail to the affected physician or health care provider that:

(1) includes:

(A) a brief summary of the alleged violation; and

(B) a statement of the recommended penalty and administrative action; and

(2) informs the physician or provider of the physician's or provider's right to a hearing.

(b) A physician or health care provider must submit a written request for a hearing not later than the 30th business day after the date the physician or provider receives the notice described by Subsection (a).

(c) Not later than the 10th day after the date the inspector general determines that a violation of this chapter has not occurred after receiving a complaint, the inspector general shall provide written notice to the affected physician or health care provider of findings that the allegations in the complaint are not substantiated.

Sec. 117.005. ENFORCEMENT. (a) Subject to this section, a physician or health care provider who violates this chapter is subject to:

(1) suspension or revocation of the physician's or provider's license, certificate, or other authority to provide medical or health care services in this state;

(2) refusal, for a period not to exceed one year, to issue a new license, certificate, or other authority to provide medical or health care services in this state to the physician or provider;

(3) a fine of not more than $5,000 for each violation;

(4) a fine of not more than $10,000 for each intentional violation; or

(5) a combination of the penalties described by Subdivisions (1), (2), (3), and (4).

(b) A fine imposed under Subsection (a) may not exceed $50,000 in the aggregate during a single calendar year.

(c) Sanctions provided by this section are in addition to any other sanction provided by this code or other applicable laws, including:

(1) Chapter 106, Civil Practice and Remedies Code;

(2) Chapter 81D, Health and Safety Code; or

(3) a civil rights law.

Sec. 117.006. PUBLIC AWARENESS AND EDUCATION CAMPAIGN. (a) The commission, in consultation with the Texas Department of Insurance, shall develop and implement a public awareness and education campaign designed to educate the public on:

(1) a person's rights with respect to the use of, and the limits on the use of, artificial intelligence-based algorithms in connection with medical and health care and health benefits;

(2) the value and availability of artificial intelligence-based algorithms, and their limitations, in connection with medical and health care and health benefits; and

(3) the method for reporting allegations of wrongdoing related to the use of artificial intelligence-based algorithms in connection with medical and health care and health benefits.

(b) The commission may coordinate the implementation of the campaign with any other state outreach campaign or activity relating to artificial intelligence-based algorithms.

SECTION 3. The provisions of this Act are severable, and if any provision of this Act or the application of the provision to any person or circumstance is declared invalid for any reason, the declaration does not affect the validity of the remaining portions of this Act.

SECTION 4. (a) Subchapter O, Chapter 544, Insurance Code, as added by this Act, applies only to a health benefit plan delivered, issued for delivery, or renewed on or after January 1, 2026.

(b) Chapter 117, Occupations Code, as added by this Act, applies only to a medical or health care service provided on or after January 1, 2026.

SECTION 5. This Act takes effect September 1, 2025.