Human Review: The Last Defense Against AI Claim Denials

ROCKVILLE, MD – February 02, 2026 – Artificial intelligence was heralded as a solution to streamline the immense administrative burden of the American healthcare system. Instead, for a growing number of patients and physicians, it has become a formidable gatekeeper, denying access to care through automated, often opaque, processes. A surge in AI-driven claim denials is creating a high-stakes environment fraught with legal risk for insurers and devastating consequences for patients, prompting a fierce debate over the role of algorithms in life-or-death decisions.

In response to this growing crisis, healthcare cost-containment firm H.H.C. Group has released a new white paper, “Independent Reviews & Utilization Reviews: Payors’ Ally in an AI-Driven Claims World,” arguing that the industry's rush to automate has created a critical need for a human failsafe: independent medical reviews.

The Rise of the Algorithm and the Denial Surge

Recent data paints a stark picture of the impact of AI on healthcare claims. Industry reports indicate that care denials have skyrocketed, with some analyses showing a more than 20% increase in the last five years, a period coinciding with the widespread adoption of AI tools by payors. For government-sponsored plans, the figures are even more dramatic, with one report showing a 55.7% spike in Medicare Advantage claim denials between 2022 and 2023.

The statistics cited by H.H.C. Group in its announcement are particularly jarring: 61% of physicians report higher prior-authorization denial rates due to AI, with some automated systems producing denial rates up to 16 times higher than human-led processes. This has led to a staggering volume of rejected claims, with an estimated $262 billion in claims denied annually across the industry.

High-profile class-action lawsuits have pulled back the curtain on some of these systems. In one case, a major insurer was alleged to have used an algorithm to deny over 300,000 claims in just two months, with each review taking an average of 1.2 seconds. Another lawsuit centers on UnitedHealth Group’s use of the nH Predict algorithm for post-hospital care. Plaintiffs allege the tool has a 90% error rate, meaning most of its denials were ultimately reversed on appeal, but only after causing significant delays and distress for patients.

“As AI tools increasingly drive coverage decisions, the risk of inappropriate or unsupported denials has never been greater,” said Bruce D. Roffé, Ph.D., president and CEO of H.H.C. Group, in the company's announcement. The firm’s white paper details how these automated denials are triggering record volumes of costly appeals, audits, and litigation for healthcare payors.

When Algorithms Say No: The Human Cost

The consequences of this algorithmic shift extend far beyond balance sheets. For patients, an automated denial can mean a delay in critical surgery, a refusal to cover life-sustaining medication, or an abrupt end to rehabilitative therapy. While an appeals process exists, it is often a confusing and overwhelming ordeal for individuals already grappling with illness. Statistics show that patients appeal less than 1% of denied claims, suggesting millions are simply giving up when faced with an algorithmic “no.”

The core of the issue is that current AI models, while powerful, often lack the ability to comprehend the nuances of an individual patient's medical history, clinical context, or unique circumstances. They are trained on historical data, which may contain inherent biases, and their decision-making processes can be a “black box,” making it impossible to understand the rationale for a denial. This has led to a growing fear among medical professionals that the essential human element is being stripped from healthcare decision-making, replaced by rigid, unforgiving code.

Regulators and Lawmakers Take Notice

The explosion in AI-driven denials has not gone unnoticed by regulators and lawmakers. The Centers for Medicare & Medicaid Services (CMS) recently issued guidance clarifying that while AI can be used to assist in coverage determinations, it cannot be the sole basis for a decision. The agency stressed that medical necessity must be determined by considering a patient's individual circumstances and a physician’s recommendations, not just an algorithm's output. CMS has signaled that upcoming audits will scrutinize payors' adherence to these rules.

At the state level, a wave of legislation is emerging to rein in the technology. California’s Physicians Make Decisions Act (SB 1120), set to take effect in 2025, explicitly mandates that any denial or modification of care based on medical necessity must be reviewed and decided by a qualified healthcare provider, not just an algorithm. Several other states, including Illinois, New York, and Massachusetts, are considering similar laws that require meaningful human review and give professionals the authority to override AI-generated decisions.

This regulatory pressure, combined with the threat of costly class-action lawsuits, creates a significant compliance minefield for payors. “Even one unsupported denial can lead to penalties or legal exposure,” H.H.C. Group warns in its release, framing the issue as a critical risk management challenge for the entire industry.

A Call for Human Oversight

Amid this technological and regulatory turmoil, proponents are championing independent review as an essential solution. The process involves submitting a disputed claim to an objective, third-party organization staffed by board-certified medical specialists who were not involved in the initial decision. These experts conduct an evidence-based assessment to determine if the denied care was medically necessary, providing a legally defensible and unbiased judgment.

H.H.C. Group’s white paper argues this human-led process is the key to mitigating the risks of AI. By providing an independent, expert-driven validation of coverage decisions, payors can reduce compliance risk, defend their determinations against audits and legal challenges, and ensure fairness for patients.

“Our white paper underscores how independent reviews can restore essential human oversight—ensuring every decision is grounded in medical necessity, legal defensibility and patient care standards,” Roffé stated. The firm highlights that its URAC-accredited processes, which involve attorney-led reviewers and specialists across more than 84 fields, deliver audit-ready documentation for every case.

The debate is no longer about whether AI will be used in healthcare, but how it will be governed. As algorithms become more integrated into the claims ecosystem, the industry stands at a crossroads. The path forward will require a delicate balance between leveraging technology for efficiency and preserving the nuanced, expert human judgment that remains the bedrock of responsible medical and financial decision-making in healthcare.