Bipartisan State Push to Restrict AI in Health Insurance Faces Federal Preemption from Trump Administration

A growing coalition of states from across the political spectrum is moving to impose safeguards on how health insurers deploy artificial intelligence for coverage decisions, prior authorizations, and claims processing. This effort highlights widespread unease about algorithms potentially accelerating unfair denials, even as the Trump administration pursues aggressive steps to curb such state-level oversight in favor of national innovation priorities.

The issue has forged unusual alliances. Republican-led Florida under Gov. Ron DeSantis and Democratic strongholds like Maryland are aligning in opposition to unchecked AI adoption by insurers, while clashing with pro-innovation stances from President Donald Trump and California’s Gov. Gavin Newsom on broader tech policy.

State-Level Momentum Builds Against AI-Driven Denials

Public distrust of AI remains high, with surveys indicating broad concern across party lines. Recent data shows a majority of Americans express significant worry about the technology’s implications, fueling legislative action focused on transparency and human oversight in healthcare.

Key developments include:

• Enacted Laws (2024-2025): Arizona, Maryland, Nebraska, and Texas passed measures in 2025 requiring human review for AI-assisted denials or prior authorizations, prohibiting sole reliance on algorithms for adverse decisions. Illinois and California advanced similar protections in prior sessions, emphasizing equitable application and disclosure.
• Ongoing Efforts: Rhode Island lawmakers are revisiting proposals for data collection on insurer tech use after a previous stall. North Carolina saw strong Republican support for bills mandating that AI cannot standalone in coverage rulings. Additional states like Pennsylvania introduced requirements for disclosure, periodic algorithm audits, and mandatory clinician sign-off on denials.

These reforms stem from documented issues: investigative reporting has exposed rapid, high-volume claim rejections via automated tools, often with minimal physician input. Doctors and groups like the American Medical Association advocate for greater accountability, citing persistent delays in patient care and administrative burdens.

Insurers counter that AI enhances efficiency, speeds approvals, and reduces overhead—framing it as a supportive tool rather than a decision-maker. Trade organizations push for uniform federal guidelines to avoid compliance fragmentation.

Trump’s Executive Order: Prioritizing National AI Leadership

In December 2025, President Trump issued an executive order framing AI as central to a “technological revolution” and a strategic contest with global rivals for dominance. It directs federal agencies to challenge “excessive” state rules that could hinder U.S. companies’ ability to innovate freely.

The order establishes mechanisms like an AI Litigation Task Force to contest conflicting laws—potentially on constitutional grounds—and explores conditioning certain federal funding on alignment with national priorities (with carve-outs for child protection measures). Critics, including legal scholars, question its enforceability without congressional backing, noting past failures to pass statutory preemptions and potential violations of federalism principles.

This federal stance contrasts sharply with state actions, creating tension over whether oversight should remain local or shift to a lighter national framework.

Challenges and Uncertainties Ahead

Experts note limitations in current laws: many apply only to fully insured plans (not self-funded employer coverage under ERISA), and vague “human review” standards risk rubber-stamping. Insurers argue patchwork rules divert resources from patient care improvements.

Meanwhile, governors like DeSantis advance consumer-focused frameworks—Florida’s proposed AI Bill of Rights includes claim-processing limits, algorithm inspections by regulators, and bans on AI as the sole basis for adjustments or denials—to align tech with ethical standards.

As debates intensify, the balance between fostering AI-driven efficiencies and protecting patients from opaque or biased outcomes remains unresolved. States show no signs of retreating, despite federal pressure, signaling continued evolution in this rapidly changing policy landscape.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.