Michigan Department of Insurance and Financial Services sets AI rules

The guidance from Michigan’s chief regulatory authority provides guidance to health plans and insurers on how they can use AI to run their businesses.

As artificial intelligence revolution takes hold across many sectors of the economy, Michigan Department of Insurance and Financial Services Director Anita Fox reminded us about health and dental plans August 7th Newsletter that existing laws and regulations continue to apply, including “laws on unfair trade practices and unfair discrimination.”

“The use of artificial intelligence is changing the way work is done across many industries, including insurance, but it is important that every decision insurers make using these systems is compliant with all applicable federal and state laws and regulations,” DIFS Director Anita Fox said in a statement. “This new bulletin clarifies DIFS’ expectations and outlines the responsibilities insurers have as they adopt these new technologies to ensure Michiganders have equitable access to insurance.”

The 10-page DIFS bulletin describes how “AI techniques are being implemented throughout the insurance lifecycle, including product development, marketing, sales and distribution, underwriting and pricing, policy servicing, claims management, and fraud detection.” The bulletin notes that the state’s insurance code applies “regardless of the methodology an insurer uses to develop rates, rate policies, and rate plans subject to these provisions.”

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“This means that an insurer is responsible for ensuring that rates, rate policies, and rate plans that are developed using AI techniques and predictive models that are based on data and machine learning do not result in excessive, insufficient, or unfairly discriminatory insurance rates,” Fox wrote in the bulletin, which establishes a regulatory framework for how Michigan health insurers should use AI.

Technological advances in artificial intelligence can help health plans and insurers “develop innovative products, improve customer interfaces and experiences, simplify and automate processes, and increase efficiency and accuracy.”

But amid these benefits, emerging technology can also “pose unique risks to consumers, including potential inaccuracies, unfair discrimination, data vulnerability, and lack of transparency and explainability,” according to the bulletin. “Insurers should take steps to minimize these risks.”

The state’s largest health insurer, Blue Cross Blue Shield of Michigan, and the trade association representing HMOs in Michigan announced the news. Crain’s Business in Grand Rapids that none of them had any objections to the department’s guidelines.

The DIFS document is “nearly identical” to guidance released in December 2023 by the National Association of Insurance Commissioners, said Brian Mills, deputy director of commercial market affairs at the Michigan Association of Health Plans.

“Our members’ plans will align with the new bulletin. We want to actively work with DIFS to answer any questions about the bulletin in the future,” Mills said.

Blue Cross Blue Shield of Michigan also “fully supports” the DIFS guidelines, said Alan Huddy, who directs the insurer’s center of excellence for analytics.

June history in a trade publication The Ministry of Health has detailed how insurers are using AI “to speed up the application process, coverage decisions and prior authorisation decisions.”

The Ministry of Health also emphasized, algorithm problems and issues that arose in 2023 when some insurers inappropriately used AI to reject medical claims or prior care authorizations for patients.

Blue Cross Blue Shield of Michigan is using AI as a business tool to improve operations and increase efficiency, Huddy said, not to assess health insurance risks or determine coverage.

Huddy said the Blues have implemented safeguards to prevent misuse of AI.

“We’ve already put in place a lot of policies around security, privacy, ethics and bias. We want to make sure that whatever we do with technology, AI or any solutions that we provide to our customers, we do it properly, we protect them and promote data integrity and accuracy,” he said. “We want to minimize any risk to our customers or any negative impacts, and we want to make sure that there’s privacy and security.”

Huddy emphasized that Blue Cross Blue Shield “does not use AI to deny coverage to its members.”

“We don’t use it to make adverse findings for our member groups or our customers,” he said. “We use it more to improve the member experience because one of our core missions here at Blue Cross is to simply improve the entire health care journey and outcomes for our members across the state of Michigan.”

Huddy said that in addition to the areas where AI can improve business operations and customer relationships, the technology has the potential to improve the quality of clinical care.

Blue Cross Blue Shield has participated in pilots with clinicians in which AI-powered predictive analytics can provide insight into how a patient’s chronic disease might progress in the coming years, he said. That knowledge could enable doctors to better treat chronic disease at its earliest stages, Huddy said.

“We’re trying to look at how we can treat or manage members in the early stages of certain chronic diseases, and you can imagine how powerful that would be,” he said. “You have all this data and you have this technology that can do a lot of great predictive models. We’re looking at it as a way to … get information from members or even our providers to help them solve problems with their patients.”

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