As artificial intelligence becomes more integrated into the healthcare industry, insurance companies are increasingly turning to automated algorithms to process claims and conduct audits. While these tools are marketed as efficiency boosters, they often result in “black box” denials that lack clinical nuance. In response, Michigan is taking a leading role in protecting providers and patients from automated decision-making.

House Bill 4536, which is currently moving through the Michigan legislature, aims to ensure that a machine never has the final word on your reimbursement.

The Human-in-the-Loop Requirement

The core of House Bill 4536 is straightforward but powerful. It states that a health insurer shall not deny, modify, or delay a claim based on a review using artificial intelligence. This legislation seeks to mandate what many in the industry call a “human-in-the-loop” requirement. Essentially, it means that while an insurer can use AI to flag potential issues, a qualified human professional must perform the actual review before a claim can be officially rejected or altered.

This legislative push aligns with recent actions from the Michigan Department of Insurance and Financial Services. In January 2026, the department issued a bulletin reminding insurers that any AI-supported decisions must comply with existing consumer protection laws. The state is clearly signaling that it will not tolerate arbitrary or discriminatory outcomes driven by unmonitored algorithms.

Why This Matters for Your Audit Defense

For physicians, pharmacists, dentists, and other healthcare professionals and entities, this bill provides a vital new layer of defense during third-party payor audits. Traditionally, defending against an audit meant challenging a human auditor’s interpretation of medical necessity or coding. However, as payors shift toward AI-driven audits, providers have found themselves fighting “ghost” logic that is difficult to decipher or contest.

If House Bill 4536 becomes law, it will provide a clear statutory basis to challenge any denial that appears to be purely automated. In the case of an administrative hearing or other legal proceeding, your defense team can demand evidence of human oversight. If the insurer cannot prove that a clinical professional actually reviewed the records and exercised independent judgment, the denial may be legally indefensible.

Protecting Clinical Judgment and Next Steps

Whether you own an independent medical practice or a pharmacy, your clinical decisions are based on the specific needs of your patients. AI tools often overlook these unique circumstances, leading to delays in care and unnecessary financial strain on your practice. By requiring human intervention, Michigan is working to ensure that clinical standards, rather than cost-saving algorithms, remain the primary driver of healthcare decisions.

As this bill moves through the Michigan legislature, we recommend that providers carefully monitor their denial patterns. If you notice a sudden spike in denials for common procedures or medications, it may be a sign of an unchecked automated system at work.

In the meantime, if you have questions about how AI is impacting your claims or if you need assistance with a third-party payor audit, please feel free to contact us at 212-668-0200, or via email at info@mdrxlaw.com.