Between 2021 and 2023, health insurance companies issued more than 49 million claim denials annually. But here’s what made regulators sit up and notice: Less than 0.2 percent of patients appealed those denials. Why? When the insurance company sends a vague letter saying the billed care was “not medically necessary,” figuring out how to contest that judgement becomes nearly impossible for patients and providers. (Notice I included PATIENTS, it is always important to include patients in all denials, and EARLY in the process.)
Documents from Cigna showed that its medical directors were processing algorithmically flagged denials at extraordinary speeds, with one physician handling tens of thousands of claim rejections monthly. The review process had become a formality rather than genuine medical oversight.
When patients did challenge Cigna’s denials, the outcomes were striking. The majority of appealed cases resulted in reversals. The algorithm’s accuracy rate was abysmal, yet the financial benefits, both from unpaid claims and reduced staffing costs, meant the system continued operating despite its poor performance.
California’s Answer
California’s answer to this crisis was Senate Bill (SB) 1120 — The Physicians Make Decisions Act. This fundamental restructuring of how insurers can use AI in healthcare was signed into law on Sept. 28, 2024, by Governor Gavin Newsom, and took effect on Jan. 1, 2025. It ensures that healthcare providers throughout the state operate under a system where denials must originate from actual physician review of individual patient records rather than algorithmic processing.
SB 1120 mandates denials or delays based on medical necessity MUST be made by a licensed physician or other qualified healthcare professional. It explicitly prohibits using AI. A human must do a substantive review, and providers may demand proof that proper procedures were followed.
Texas Responds
Texas too a different but complementary approach with SB 1188 – The Texas Responsible Artificial Intelligence Governance Act became enforceable on Jan 1, 2026. The bill requires that licensed practitioners review AI-generated records and make the final decision in accordance with their scope of practice. So any denial for acupuncture treatment would have to be reviewed by an acupuncturist.
In early 2026 numerous states have introduced or implemented legislation regulating the use of AK in healthcare. Check for updates to your state laws – Be aware if you get a denial, make sure it was reviewed properly and appropriately.