Healthcare Access Challenge: California Bans AI Insurance Denials as Lawsuits Challenge UnitedHealth
California bans AI-only insurance denials 2025, UnitedHealth/Cigna face class action suits over 90% faulty AI rejections, 1 in 5 claims denied.
By Compens.ai Research Team
Insurance Claims Expert
Healthcare access faced a major crisis recently-2025 as AI-driven insurance denial systems harmed millions, prompting California to enact landmark legislation while major insurers face multiple class action lawsuits.
California passed the Physicians Make Decisions Act (SB 1120) effective January 1, 2025, becoming the first state to require licensed healthcare providers, not AI algorithms, to make medical necessity decisions for insurance coverage.
The law mandates that any denial, delay, or modification of care must be reviewed by a licensed physician with expertise in the specific clinical issues, establishing fair standards for AI use in medical reviews.
Major insurers face unprecedented legal challenges: UnitedHealth and Humana are sued for using nHPredict AI model to wrongfully deny medically necessary care for elderly and disabled Medicare Advantage patients, with roughly 90% of AI denials proven faulty.
Cigna faces class action lawsuit in California federal court for using PXDX algorithm to automatically deny thousands of claims, with medical directors spending only 1.2 seconds evaluating each of 300,000 denied cases.
The denial crisis intensified: insurers denied nearly 1 in 5 claims in 2021 (up from previous years), while AI tools produced denial rates 16 times higher than typical according to 2025 Senate committee report.
However, appeals succeed when patients fight back: 80-90% of denied claims get overturned on appeal, proving initial denials are often inappropriate, though patients must navigate complex appeal processes.
Healthcare discrimination persists: 14% of Black adults remain uninsured vs 8% of white adults, while 25% of Hispanic adults lack coverage and 10 states still refuse Medicaid expansion.
The crisis demonstrates how corporate AI systems prioritize profit over patient care, but also shows regulatory action and legal accountability can force insurers to respect medical necessity when communities organize for healthcare justice.