Indiana SEA 480 (P.L. 144-2025; IC 27-1-37.5-20)

Binding law — in force AI-adjacent law

Only a clinical peer makes a medical-necessity adverse determination or decides an appeal (Indiana SEA 480)

IC 27-1-37.5-20(a) · official text · In force: applies since 1 Jul 2025 · Indiana (US-IN)

From 2025-07-01, a utilization review entity must ensure that every adverse determination based on medical necessity (a decision to deny, reduce or terminate coverage of a health care service, IC 27-1-37.5-1.5) is made, and every appeal reviewed and decided, by a clinical peer under the clinical direction of a medical director who is an Indiana-licensed physician (IC 27-1-37.5-20(a)); an appeal may not be decided by a peer with a financial interest or who made the determination (20(b)), and an adverse determination must give specific reasons and suggested alternatives (23(c)). The chapter never mentions AI: it binds whatever tool proposes the outcome. Detect model or scoring output that sets an adverse determination with no clinical-peer decision.

Who it applies to

• Duty falls on: insurer
• Sectors: insurance, healthcare
• Utilization review entities (IC 27-1-37.5-8.3: anyone performing prior authorization for an employer, a health plan, a preferred provider organization or another provider or administrator of health benefits) making adverse determinations based on medical necessity, or deciding appeals, for covered individuals in Indiana. Applies from 2025-07-01, whatever tool, AI or otherwise, proposes the outcome.
• Not covered:
  • Step therapy protocol exception procedures under IC 5-10-8-17, IC 27-8-5-30 or IC 27-13-7-23 (IC 27-1-37.5-1(a))
  • Health plans offered by a local unit public employer under IC 5-10-8-2.6 (1(b))
  • Health care services under the Pathways for aging and Health and wellness Medicaid waivers (1(c))
  • To the extent preempted by federal Medicaid law (1(d))
• Whether it applies depends on facts outside the code; a person has to decide.

result = client.chat.completions.create(model=MODEL, messages=build_pa_prompt(request)).choices[0].message.content
if json.loads(result)['decision'] == 'deny':
    prior_auth.update(request.id, status='denied')
    send_denial_letter(request)

result = json.loads(client.chat.completions.create(
    model=MODEL, messages=build_pa_prompt(request, record=member_clinical_record(request))).choices[0].message.content)
if result['decision'] == 'approve' and AUTO_APPROVE_ALLOWED:
    prior_auth.update(request.id, status='approved', ai_assisted=True)
else:                                   # any non-approval goes to a clinician
    review_queue.enqueue(request.id, queue='pending_clinical_review',
                         specialty=request.specialty, ai_recommendation=result)

@app.post('/reviews/{case_id}/decision')
def record_clinical_decision(case_id: str, body: Decision, reviewer=Depends(licensed_clinical_reviewer)):
    decision = clinical_decisions.create(case_id=case_id, reviewer_id=reviewer.id, licence=reviewer.licence,
                                         specialty=reviewer.specialty, documents_reviewed=body.documents,
                                         outcome=body.outcome, rationale=body.rationale)
    if body.outcome in ('denied', 'downgraded'):
        send_adverse_determination(case_id, decision=decision, signed_by=reviewer)

Related incidents

No guardrail sits on this exact control; these incidents are cited by guardrails on related controls.

• UnitedHealth nH Predict claim-denial litigation (2023-11; alleged (not proven)). A class action filed in November 2023 alleges that UnitedHealth's nH Predict model had a 90% error rate, measured by denials reversed on appeal, while only about 0.2% of members appealed. UnitedHealth disputes the allegations; the litigation is ongoing. Source: STAT News · evidence grade: primary · cited by Monitor how often adverse AI decisions are reversed, and suspend models that are usually wrong
• Cigna PXDX batch claim denials (reported) (2022; alleged (not proven)). ProPublica, citing internal Cigna records, reported that Cigna's PXDX system was used to reject more than 300,000 claims over two months in 2022, with physicians spending an average of 1.2 seconds on each. Cigna disputes the reporting; related lawsuits are ongoing. Source: ProPublica / The Capitol Forum · evidence grade: press of record · cited by Make human review of adverse AI decisions substantive, not nominal

Rule id in-sb480.clinical-peer-makes-adverse-determinations · review status: primary source derived