Relating to the use of certain automated systems in, and certain adverse determinations made in connection with, the health benefit claims process.
CriticalImmediate action required
High Cost
Effective:2025-09-01
Enforcing Agencies
Texas Department of Insurance (TDI)
01
Compliance Analysis
Key implementation requirements and action items for compliance with this legislation
Implementation Timeline
Effective Date: September 1, 2025 (The law enters the statute books; TDI gains audit authority).
Compliance Deadline: January 1, 2026 (Operational restrictions apply to plans delivered, issued, or renewed on or after this date).
Agency Rulemaking: The Texas Department of Insurance (TDI) is expected to issue guidance between September and December 2025 regarding the scope of "automated systems" and audit protocols. Monitor the Texas Register closely during Q4 2025.
Immediate Action Plan
Immediate: Audit all claims processing software to identify any workflow where a denial is issued without a human "stop-gate."
Q2 2025: Recode adverse determination letter templates to populate both the description and source of screening criteria.
Q3 2025: Establish a "Clean Hands" protocol where human reviewers must document independent findings separate from AI suggestions.
Q4 2025: Finalize a single workflow for all claims effective Jan 1, 2026. Do not attempt to run parallel systems for legacy vs. new plans.
Operational Changes Required
Contracts
Vendor Agreements: Review all Master Services Agreements (MSAs) with InsurTech, TPA, and PBM vendors. You must insert indemnification clauses protecting your organization from penalties if a vendor’s "black box" algorithm triggers a denial without human intervention.
SLA Renegotiation: Removing auto-denials will slow throughput. You may need to renegotiate Service Level Agreements (SLAs) regarding claims processing turnaround times to account for mandatory human review.
Hiring/Training
Clinical Staffing: You must increase clinical headcount or contracted hours. Any volume of claims previously auto-denied by software must now be reviewed by a credentialed provider.
Workflow Training: Claims staff must be trained to treat AI outputs as "recommendations only." They must document independent verification of clinical data to prove the decision was not made "partly" by the ADS.
Reporting & Record-Keeping
Adverse Determination Notices: Immediate IT change required. Section 4201.303(a) now requires notices to include BOTH a description of the screening criteria AND the source of the criteria. Previous law allowed "or." Update document generation systems immediately.
Attribution Logs: You must maintain metadata logs linking every adverse determination to a specific human reviewer’s user ID and timestamp to prove manual review occurred.
Algorithm Inventory: Maintain a registry of all automated systems used in claims processing, categorized by function (Administrative vs. Clinical), ready for on-demand TDI inspection.
Fees & Costs
Operational Costs: Expect significant increases in operational expenses due to the shift from low-cost automated processing to high-cost clinical labor.
Penalties: Violations trigger standard Insurance Code administrative penalties (typically up to $25,000 per violation).
Strategic Ambiguities & Considerations
Definition of "Partly": The statute bans ADS from making a determination "wholly or partly." It is unclear if an AI tool that summarizes medical records or highlights missing data constitutes "partly" making a decision. Until TDI clarifies, assume a strict interpretation: if AI touches the file, a human must explicitly re-validate the underlying data before denying.
Medical vs. Administrative: The law exempts "administrative support." However, the line between an administrative denial (e.g., "wrong code") and a medical necessity denial is often blurred. If an algorithm denies a claim based on clinical coding mismatches, TDI may view this as a medical determination requiring human review.
Need Help Understanding Implementation?
Our government affairs experts can walk you through this bill's specific impact on your operations.
Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.
As artificial intelligence (AI) technology rapidly expands, its adoption by health insurers has outpaced the establishment of necessary guardrails, leaving consumers unprotected. While artificial intelligence has significant potential to support the healthcare system, there is limited data on its usage or accuracy, and consumer protections remain absent. AI relies on algorithms to perform tasks, an approach that minimizes the unique needs of patients. Without safeguards, algorithms risk being designed to prioritize the interests of health insurance companies over patients. Reports of AI use by insurers are increasing, with applications ranging from processing documentation to reviewing claims and prior authorization requests.
The use of AI puts patients at risk. A lack of transparency leaves them vulnerable to faulty algorithms or missing critical details. The Texas Department of Insurance (TDI) also lacks clear authority to monitor and enforce compliance, highlighting the need for regulatory guidance and oversight.
S.B. 815 adds a new section to the Insurance Code that prohibits the use of artificial intelligence algorithms as the sole basis to deny, delay, or modify health care services, in whole or in part, for medical necessity reasons. The bill gives TDI the ability to audit and inspect a health benefit plan's use of AI for utilization review in order to ensure compliance with the prohibition.
As proposed, S.B. 815 amends current law relating to use of artificial intelligence in utilization review conducted for health benefit plans.
RULEMAKING AUTHORITY
This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Subchapter D, Chapter 4201, Insurance Code, by adding Section 4201.156, as follows:
Sec. 4201.156. USE OF ARTIFICIAL INTELLIGENCE-BASED ALGORITHMS. (a) Prohibits a utilization review agent from using an artificial intelligence-based algorithm as the sole basis of a decision to wholly or partly deny, delay, or modify health care services for an enrollee on the basis of medical necessity or appropriateness of health care items and services. Authorizes only a physician or licensed health care provider acting in accordance with Chapter 4201 (Utilization Review Agents) to determine medical necessity or appropriateness of health care items and services.
(b) Authorizes the commissioner of insurance to audit and inspect at any time a utilization review agent's use of artificial intelligence for utilization review.
SB815 strictly prohibits health benefit plans and utilization review agents from using Artificial Intelligence (AI) or Automated Decision Systems (ADS) to make adverse determinations regarding medical necessity, either wholly or partly. Effective for plan years beginning January 1, 2026, all medical necessity denials must be rendered by a human reviewer, and adverse determination notices must meet heightened disclosure standards. Implementation Timeline Effective Date: September 1, 2025 (The law enters the statute books; TDI gains audit authority).
Q
Who authored SB815?
SB815 was authored by Texas Senator Charles Schwertner during the Regular Session.
Q
When was SB815 signed into law?
SB815 was signed into law by Governor Greg Abbott on June 20, 2025.
Q
Which agencies enforce SB815?
SB815 is enforced by Texas Department of Insurance (TDI).
Q
How urgent is compliance with SB815?
The compliance urgency for SB815 is rated as "critical". Businesses and organizations should review the requirements and timeline to ensure timely compliance.
Q
What is the cost impact of SB815?
The cost impact of SB815 is estimated as "high". This may vary based on industry and implementation requirements.
Q
What topics does SB815 address?
SB815 addresses topics including artificial intelligence, electronic information systems, health care providers, insurance and insurance--health & accident.
Legislative data provided by LegiScanLast updated: November 25, 2025
Need Strategic Guidance on This Bill?
Need help with Government Relations, Lobbying, or compliance? JD Key Consulting has the expertise you're looking for.
