On February 13, 2025, a federal court dismissed several state law claims against UnitedHealthcare but allowed breach of contract and good faith claims to proceed in a case alleging improper use of AI to deny medical coverage. More specifically, the core issue in the United States District Court for the District of Minnesota matter revolves around whether UnitedHealthcare and its co-defendants (collectively “UHC”) violated insurance agreements with plaintiffs by improperly denying Medicare Advantage post-acute care through the use of their nH Predict artificial intelligence model.
The court stated that it allowed the breach of contract and breach of implied covenant claims to survive because they focus on whether UHC complied with its specific insurance agreements with the plaintiffs and should not be preempted by the Medicare Act. The particular terms within the agreements were said to center around the question of who was to make coverage decisions. The court noted that the claims “effectively arise out of UHC’s evidence of coverage documents because the question would be whether UHC complied with its statement that claim decisions would be made by ‘clinical services staff’ and ‘physicians’ when it allegedly used artificial intelligence.”
In its analysis, the court acknowledged the challenges posed by the potential failure of the plaintiffs to exhaust administrative remedies and federal preemption. It noted that any claim “arising out of the Medicare Act is subject to administrative exhaustion” and stated that the plaintiffs’ claims, in fact, “arise under the Medicare Act and are subject to the exhaustion requirements.”
However, the court made the distinction that although the plaintiffs challenged the “process of making the denial decisions instead of the denial itself, their claims clearly arise from a denial of benefits.” It also stated that the plaintiffs alleged that they suffered irreparable harm and showed the futility of exhausting administrative remedies. The court also found that UHC’s actions that “make any attempt to fully exhaust the administrative remedies futile support a waiver determination.”
The claims that were dismissed are Unjust Enrichment, Insurance Bad Faith, Negligence Per Se, Unfair and Deceptive Insurance Practices, and California’s Unfair Competition law.
Categories: AI
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