The One Big Beautiful Bill Act’s Proposed Moratorium on State AI Legislation: Implications for Healthcare Organizations
As artificial intelligence (AI) continues to advance and permeate various sectors, including healthcare, the regulatory landscape surrounding its use is rapidly evolving. Recently, Congress has been deliberating on a significant proposal that could reshape AI regulation across the United States: the One Big Beautiful Bill Act (OBBBA). Passed by the House of Representatives with a narrow vote of 215-214, this budget reconciliation bill aims to impose a 10-year moratorium on the enforcement of most state and local laws targeting AI systems.
Overview of OBBBA
The primary objective of OBBBA is to pause the enforcement of existing state AI laws and regulations while also taking precedence over new AI legislation that may emerge in state legislatures. This moratorium could significantly impact healthcare providers, payors, and other stakeholders in the sector.
While some proponents argue that the moratorium could streamline AI deployment and alleviate compliance burdens, concerns have emerged regarding regulatory uncertainty and potential risks to patient safety. These factors may ultimately undermine patient trust in AI-enabled healthcare solutions.
Key Provisions of OBBBA
Section 43201 of OBBBA outlines that no state or local law or regulation can limit, restrict, or regulate AI models, systems, or automated decision systems. The act defines AI broadly as a machine-based system capable of making predictions, recommendations, or decisions based on human-defined objectives. Furthermore, the definition of automated decision systems encompasses any computational process that influences or replaces human decision-making.
If enacted, OBBBA would preempt several existing and proposed restrictions on AI use in healthcare, including:
- California AB 3030: This law mandates disclaimers when generative AI is used for communicating clinical information to patients and requires that patients are informed about how to reach a human provider.
- California SB 1120: Prohibits health insurers from using AI to deny coverage without sufficient human oversight.
- Colorado Artificial Intelligence Act: Regulates developers and deployers of AI systems deemed “high risk.”
- Utah Artificial Intelligence Policy Act: Requires regulated occupations, including healthcare professionals, to disclose when a consumer is interacting with generative AI.
- Massachusetts Bill S.46: Would require healthcare providers to disclose the use of AI in decision-making affecting patient care.
Exceptions to the Moratorium
Despite its sweeping nature, OBBBA includes exceptions that may spark debates regarding the scope of the moratorium. State AI laws and regulations will remain enforceable if they meet any of the following criteria:
- Primary Purpose and Effect Exception: The law’s primary purpose is to remove legal obstacles, facilitate AI deployment, or consolidate administrative procedures.
- No Design, Performance, and Data-Handling Imposition Exception: The regulation does not impose substantive requirements on AI systems unless mandated by federal law.
- Reasonable and Cost-Based Fees Exception: The law only imposes fees or bonds that are equitable and cost-based, treating AI systems similarly to other models.
These exceptions indicate that the moratorium primarily targets state laws that treat AI differently from other systems. Consequently, laws of general application related to anti-discrimination, privacy, and consumer protection would still regulate AI.
Implications for Healthcare Stakeholders
The proposed moratorium reflects a broader emphasis on innovation over regulation within the Trump Administration’s agenda for AI. Advocates contend that a unified federal standard would reduce compliance burdens for AI developers, fostering innovation and enhancing national competitiveness as the U.S. strives to keep pace with the European Union and China in AI advancements.
However, the tradeoffs for healthcare providers are complex. While a moratorium could ease regulatory pressures, it may also diminish transparency and oversight, leading patients to become wary of AI-assisted care in sensitive areas such as diagnosis and behavioral health. Moreover, states often respond promptly to emerging risks, and a moratorium may hinder regulators from addressing evolving clinical concerns related to AI tools.
Legal and Procedural Challenges
The OBBBA moratorium may encounter significant constitutional challenges. Legal scholars and a coalition of 40 bipartisan state attorneys general have expressed concerns that the act may infringe upon state police powers related to health and safety, potentially invoking issues under the Tenth Amendment. If passed, the moratorium is likely to face legal scrutiny in court, given bipartisan opposition.
Recommendations for Healthcare Organizations
In light of these developments, healthcare organizations are advised to maintain robust compliance practices and stay informed about laws of general application, such as HIPAA and state data privacy regulations. Even if OBBBA is not enacted, Congress has indicated a growing intent to regulate AI, either through future legislation or agency-led rulemaking by the United States Department of Health and Human Services or the Food and Drug Administration.
Healthcare organizations should focus on:
- Maintaining Compliance Readiness: Monitor and prepare for state-level AI regulations currently in effect or set to be implemented.
- Auditing Current AI Deployments: Assess how AI tools are utilized in clinical, operational, and administrative functions, ensuring alignment with broader legal frameworks.
- Engaging in Strategic Planning: Depending on the outcome of the moratorium, organizations may need to adjust compliance programs accordingly.
Regardless of the final outcome of OBBBA, the proposed federal AI enforcement moratorium represents a pivotal moment in the evolving AI regulatory landscape within healthcare. Providers must remain proactive, informed, and prepared to adapt to ongoing legal and regulatory shifts.
