States Tackle AI Healthcare Utilization Management Laws Despite White House Executive Order

Key Takeaways

• A December 2025 White House Executive Order threatens to withhold remaining BEAD program funding from states that pass comprehensive artificial intelligence oversight measures, though it's unclear if this applies to standalone AI healthcare utilization management laws.
• Multiple states have introduced state AI insurance legislation in 2026 that prohibits insurers from using AI tools to deny, delay, or modify coverage determinations for healthcare services.
• Vermont's approach requires insurers to disclose when an AI tool was used to deny a prior authorization request, while most other states focus on outright prohibitions of AI in coverage decisions.
• The White House AI Executive Order requires a review of existing state laws by early to mid-March 2026 to identify measures that may conflict with federal AI policy, potentially setting up legal challenges between state and federal authorities.

---

White House Executive Order Threatens State AI Legislation

Despite a December 11, 2025 Executive Order from the White House that seeks to prohibit states from passing comprehensive artificial intelligence (AI) oversight measures, some lawmakers – at least as it relates to limiting the role of AI in utilization management practices – remain undeterred. Notably, the White House is threatening states with comprehensive AI legal frameworks (or those that pass such frameworks) with the loss of remaining funding under the Broadband Equity Access and Deployment (BEAD) Program. If the White House were to utilize such a penalty, the Executive Order would undoubtedly face legal challenge.

Federal Review Process and Timeline for State AI Laws

It remains unclear whether stand-alone measures that seek to limit only the role of AI in healthcare would be applicable to the Executive Order. However, the Executive Order requires an evaluation of existing state AI laws to identify onerous ones that, at a minimum, require AI models to alter truthful outputs or compel AI developers or deployers to disclose or report information in a manner that violates the First Amendment. Although the Executive Order leaves it open-ended as to what else may be included within the evaluation and interpreted to conflict with the intent of the Executive Order. That review is expected to be completed by early to mid-March.

State Legislative Response to AI in Healthcare Insurance

In the meantime, the state bills introduced to date in 2026 largely adhere to a theme of prohibiting insurers from leveraging an AI tool to deny, delay, or modify a determination on coverage and approval of a service. In limited other cases, such as Vermont, it is a requirement that insurers must disclose to the provider and the enrollee if an AI tool was used to deny a prior authorization request. At the beginning of February, the following states had introduced such legislation: Alabama, Hawaii (HB 1787 | SB 2167 | SB 2768 | SB 2953 | SB 3027), Indiana, Mississippi, Oklahoma (HB 3675 | SB 1967 | SB 2038), Rhode Island, Tennessee (HB 1866 | SB 2010), Virginia, and Vermont.

Tracking State AI Legislation

MultiState’s team is actively identifying and tracking AI issues so that businesses and organizations have the information they need to navigate and effectively engage. If your organization would like to further track these or other related issues, please contact us.