H 5206

South Carolina General Assembly
126th Session, 2025-2026
Bill 5206
Indicates Matter Stricken
Indicates New Matter
(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)
A bill
TO AMEND THE SOUTH CAROLINA CODE OF LAWS BY ADDING ARTICLE
25 TO CHAPTER 71, TITLE 38 SO AS TO PROVIDE CIRCUMSTANCES THAT MUST BE
CONSIDERED WHEN A HEALTH INSURER USES ARTIFICIAL INTELLIGENCE TO MAKE
DETERMINATIONS RELATING TO PRIOR AUTHORIZATIONS, TO PROVIDE CERTAIN DISCLOSURES
TO ENROLLEES, AND TO PROVIDE DISCIPLINARY ACTIONS FOR VIOLATIONS.
Be it enacted by the
General Assembly of the State of South Carolina:
SECTION 1.  Chapter 71, Title 38 of the S.C. Code is amended by
adding:
Article 25
Prior Authorization Determinations with Artificial
Intelligence
    Section
38-71-2510.  As used in this article:
    (1)
"Artificial intelligence" means a machine-based system that may include
software or physical hardware that performs tasks, based upon dataset inputs,
which require human like perception, cognition, planning, learning,
communication, or physical action and which is capable of improving performance
based upon learned experience without significant human oversight toward
influencing real or virtual environments.
    (2)
"Department" means the Department of Insurance.
    (3)
"Enrollee" means an individual who contracts for, subscribes to, or
participates as a dependent under a health benefit plan.
    (4)
"Health benefit plan" means any individual, blanket, or group plan, policy, or
contract for healthcare services issued or delivered by
  (a)
a healthcare insurer in this State as defined in Sections 38-71-670 and
38-71-840;
  (b)
a health maintenance organization as defined in Section 38-33-20; and
  (c)
the State Health Plan as provided for in Article 5, Chapter 11, Title 1.
    (5)
"Healthcare service" means diagnosing, testing, monitoring, or treating a human
disease, disorder, syndrome, illness, or injury that may include, but not be
limited to, hospitalization, physician care, treatment, surgery, therapy,
drugs, or medical equipment.
    (6)
"Insurer" means:
       (a)
an entity that provides health insurance coverage in this State as defined in
Sections 38-71-670 and 38-71-840;
       (b)
a health maintenance organization as defined in Section 38-33-20; and
       (c)
the State Health Plan as provided for in Article 5, Chapter 11, Title 1.
    (7)
"Prior authorization" means a written or oral determination made by an insurer
that a healthcare service is a benefit covered under the applicable health
benefit plan which, under the enrollee's clinical circumstances, is medically
necessary or satisfies another requirement imposed by the insurer or law and
thus satisfies the requirements for payment or reimbursement.
    (8)
"Utilization review" means the determination of requests for prior
authorization or other issues of coverage under a health benefit plan according
to the rules, healthcare service policies, and guidelines adopted by an
insurer, or requirements imposed by law, and applicable to a health benefit
plan.
    Section
38-71-2520.  (A) An insurer that
uses artificial intelligence, an algorithm, or other software tool to make
determinations on requests for prior authorization or other decisions on
coverage under healthcare plans shall base determinations on all of the
following:
       (1)
the enrollee's medical history;
       (2)
any clinical circumstances unique to the enrollee which are presented by the
requesting healthcare provider; and
       (3)
additional clinical information about the enrollee which may be present in the
enrollee's medical record.
    (B)
An insurer shall certify annually to the department that the artificial
intelligence, algorithm, or other software tool used to make determinations on
requests for prior authorization complies with all of the following:
       (1)
does not rely solely on a group dataset to make determinations;
       (2)
is configured and applied in a fair manner for each subscriber group and
enrollee such that resulting determinations are consistent for enrollees who
present with similar clinical considerations; and
       (3)
does not discriminate directly or indirectly against any subscriber group or
enrollee in violation of state or federal law, including any regulation or
guidance issued by the federal Department of Health and Human Services.
    (C)
In addition to the requirements listed in subsections (A) and (B), a
determination to deny, reduce, or defer a request for prior authorization shall
always be made by a licensed physician or other healthcare professional who is
competent to evaluate any recommendation or conclusion of artificial
intelligence, algorithm, or other software tool in the light of the specific
clinical issues involved in the healthcare service requested which are unique
to the enrollee's circumstances or as recommended by the treating healthcare
provider.
    (D)
An insurer shall do all of the following:
       (1)
make prominent written disclosure to enrollees that artificial intelligence, an
algorithm, or other software tool is used as a tool in utilization review to
contribute information;
       (2)
certify annually to the department that:
  (a)
use of artificial intelligence, algorithms, or other software tools, and the
outcomes that they generate, are reviewed on a periodic basis to maximize
accuracy and reliability; and
  (b)
use of artificial intelligence, algorithms, or other software tools in
utilization review complies with the requirements of this section;
       (3)
make available the percentage of denials, reductions, modifications, or
deferrals of treatment in relation to the total number of requests for the same
or a similar healthcare service, upon request, to the department, healthcare
providers, and enrollees for inspection; and
       (4)
ensure that patient data used in utilization review functions by artificial
intelligence, an algorithm, or other software tool is not used beyond its
intended and stated purpose consistent with the federal Health Insurance
Portability and Accountability Act (HIPAA), 42 U.S.C. Section 1320d, et seq.
    (E)(1) When the department has
reasonable grounds to believe that an insurer has or is engaged in conduct that
violates this section, including making determinations of prior authorization
adverse to an enrollee without taking into consideration the enrollee's medical
history and relevant clinical circumstances, the department may notify the
insurer of the alleged violation and the insurer shall respond to the notice
within thirty days.
       (2)
If the department finds the response required in item (1) to be unsatisfactory,
the department may hold a hearing as provided for by law.
       (3)
If, upon hearing the case, the department determines that the insurer has or is
engaged in conduct that violates this section, including making determinations
of prior authorization adverse to an enrollee without taking into consideration
the enrollee's medical history and relevant clinical circumstances, the
department may do any of the following:
  (a)
impose a plan upon the insurer to correct procedures, policies, and guidelines
to bring the insurer's utilization review into compliance with this section; or
  (b)
for repeat violations, impose upon the insurer the disciplinary measures
provided in Section 38-71-90.
    (F)
The department may adopt rules and promulgate regulations to implement the
provisions of this article.
SECTION 2.  This act takes effect upon approval
by the Governor.
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This web page was last updated on February 18, 2026 at 01:12 PM