Did AI Handle Your Insurance Claim?

Insurance companies are increasingly relying on artificial intelligence (AI) to make decisions about health insurance claims. While AI has the potential to improve efficiency, it raises significant concerns about fairness and legality when it comes to handling claims. California law requires insurers to conduct a thorough, individualized review of every claim, and decisions made solely by AI tools may fall short of this obligation, depending on how they are used.

When insurance companies promote administrative efficiency at the expense of consumer health, they are likely violating the law at best and may even be guilty of bad faith insurance practices. Read on for a discussion of this new issue impacting patient health, and contact Gianelli & Morris to speak with a California insurance bad faith lawyer if you feel your claim was unreasonably denied.

How Insurance Companies Use AI in Claims Processing

In the interest of maximizing profits, insurance company executives put their employees under constant pressure to reduce costs and streamline their operations. AI tools promise to expedite claims processing by quickly reviewing medical records, policy details, and other relevant data. Insurers may use AI to:

• Assess the validity of claims by comparing them to past claim trends.
• Predict the likelihood of claims being approved or denied.
• Automate denials based on pre-programmed criteria or red flags.

While these processes can save insurers time and money, they often come at the expense of a fair and individualized evaluation of each claim. Using AI to handle these aspects of insurance claim processing is problematic in a number of ways, including the lack of an individualized assessment, a lack of transparency, and an increased risk of errors and bias.

Lack of Individualized Assessment

California law requires insurance companies to act in good faith and consider the specific circumstances of each claim. This includes evaluating medical necessity, policy coverage, and the claimant’s unique situation. AI algorithms, however, rely on pre-set rules and data patterns, which may not account for nuances in a person’s medical history or treatment needs.

For example, an AI tool might automatically flag an expensive treatment as “unnecessary” based on generalized guidelines, even if a doctor has determined that it is crucial for the patient’s health. This type of blanket denial violates the insurer’s duty to thoroughly review the facts of the case.

Lack of Transparency

AI tools often operate as “black boxes,” meaning their decision-making processes are opaque and difficult to understand. If your claim is denied, it can be nearly impossible to determine how the AI reached its conclusion or whether it considered all the relevant factors. This lack of transparency makes it challenging for policyholders to contest an unfair denial.

Increased Risk of Errors and Bias

AI systems are only as good as the data they are trained on. If the training data contains biases or inaccuracies, the AI may perpetuate those issues in its decisions. For instance, if the AI is trained on historical claims data that reflects patterns of improper denials, it may continue to deny valid claims in similar circumstances.

Errors in data processing or programming can also lead to incorrect denials, leaving policyholders to bear the consequences of flawed technology.

Denial of Claims by AI May Constitute Bad Faith

When an insurer denies a claim based on AI decisions without conducting a meaningful human review, it may be acting in bad faith. Under California law, bad faith occurs when an insurance company unreasonably denies a claim or fails to uphold its obligations under the policy. Relying exclusively on AI could be seen as an abdication of the insurer’s duty to act fairly and reasonably.

Legal Protections for California Consumers

California consumers have strong legal protections against bad faith practices. If your health insurance claim has been denied, and you suspect that AI played a role in the decision, you have the right to:

• Request a detailed explanation of the denial, including how the decision was made.
• Demand a manual review of your claim by a qualified representative of the insurer.
• File a complaint with the California Department of Insurance if you believe your rights have been violated.
• Pursue a lawsuit for bad faith insurance practices if the insurer’s actions caused physical, financial or emotional harm.

What You Can Do if Your Claim Is Denied

If your health insurance claim has been denied, it’s essential to act quickly. Keep records of all correspondence with your insurer, including denial letters and any communication about the use of AI in your claim. Seek legal advice to understand your rights and determine whether the denial was made in bad faith.

At Gianelli & Morris, we represent California consumers whose health insurance claims have been unfairly denied. Our experienced attorneys understand the complexities of insurance law and are committed to holding insurers accountable when they fail to meet their legal obligations.

Contact Gianelli & Morris Today

If you suspect that an AI tool improperly influenced the denial of your health insurance claim, don’t hesitate to reach out to us. We can help you fight back against unfair practices and ensure that your case receives the individualized attention it deserves. Contact us today at 212-489-1600 for a free consultation and protect your rights as a California policyholder.