The pace of healthcare policy change has never been faster — and its impact on payers, providers, and innovation strategies is profound. In the recent Avalon webinar AI, Biomarker Legislation and Healthcare Policy Landscape: A Strategic Update for Executives, industry experts Alex Sommer, Vice President of Government Affairs, Public Policy & Legal Counsel at Avalon, and Brett Meeks, Vice President of Government Affairs for Health Technology and AI at Jeffrey J. Kimbell & Associates, explored the evolving state and federal initiatives shaping biomarker testing mandates, artificial intelligence regulation, and broader health policy reform. The session delivered actionable insights for executives navigating these shifts.

State-Level Momentum: Biomarker Testing Coverage Mandates 

Biomarker testing has moved from emerging policy discussion to legislative priority across the U.S. A growing number of states have enacted or introduced coverage mandates modeled on the National Conference of Insurance Legislators’ 2023 framework. 

Key Provisions and Implications: 

  • Coverage Mandates: Health plans must cover biomarker testing when it demonstrates clinical utility and is supported by medical and scientific evidence
  • Definitions Matter: Variations in how states define “clinical utility” and “biomarker testing” create operational complexity and influence coverage decisions. 
  • Focus Areas: While definitions are broad, early legislative focus has centered on cancer and Alzheimer’s diagnostics. 
  • Opportunities and Risks: Expanded access can promote innovation and reduce disparities, but broad, ambiguous mandates risk higher costs, inconsistent implementation, and premium increases. 

AI Regulation: From State Patchwork to Federal Intervention 

States have moved aggressively to legislate AI in healthcare, with over 1,000 AI-related bills introduced in 2025, 150 of which targeted healthcare. Common themes include: 

  • Human Oversight: Medical necessity determinations should be made by qualified healthcare professionals, not solely by AI systems. 
  • System Governance: Clear authority to override AI outputs, especially in clinical contexts. 
  • Transparency: Disclosure around AI development, deployment, and decision-making processes. 

Examples of Divergent Approaches: 

  • Illinois: Restricts AI in utilization review when tied to medical necessity determinations. 
  • Florida (proposed): Sought to prohibit AI involvement in any claim denial — a broader scope that did not pass. 

At the federal level, debate continues over a potential moratorium on state AI enforcement to prevent a “50-state patchwork,” balanced against state rights and protections. The Trump administration’s AI Action Plan signals strong federal interest in innovation leadership, regulatory sandboxes, and tying federal funding to states with “non-burdensome” AI laws. 

Federal Policy Shifts: OB-3 and the Coverage Landscape 

The recently enacted “one big, beautiful bill” (OB-3) brings sweeping Medicaid, CHIP, and ACA marketplace changes under the banner of eliminating waste, fraud, and abuse. Key elements include: 

  • Coverage Loss Risks: CBO estimates suggest up to 10 million fewer Medicaid enrollees and 3 million fewer ACA marketplace participants over time. 
  • Premium Pressure: Loss of subsidies, coupled with sicker risk pools, is expected to drive premium increases. 
  • Implementation Challenges: New compliance requirements will phase in from 2026, prompting states, plans, and providers to adjust eligibility systems and financial strategies. 

Compounding these shifts, the enhanced ACA premium tax credits expire at the end of 2025 — potentially affecting an additional 22 million people if not renewed. 

Innovation and Oversight: WISER Model and Prior Authorization Trends 

The CMS Innovation Center’s Wasteful and Inappropriate Services Reduction (WISER) Model launches in 2026, targeting select high-cost procedures with mixed clinical value. The model explicitly encourages AI and machine learning tools to improve clinical appropriateness. 

This intersects with a broader policy tug-of-war: policymakers seek to reduce inappropriate utilization without increasing administrative burden, leading to simultaneous pushes for streamlined prior authorization and restrictions on its use. 

Executive Takeaways 

  1. Track State Definitions Closely: Legislative language on “clinical utility,” “medical necessity,” and “AI” will drive compliance obligations and operational flexibility.
  2. Prepare for Dual Pressures: Expanded coverage mandates and narrowing subsidies will create both growth opportunities and financial strain. 
  3. Engage in Policy Shaping: The fluid interplay between state and federal actions — especially around AI — makes proactive advocacy critical. 
  4. Invest in Governance and Transparency: Whether deploying biomarker testing policies or AI decision tools, credible oversight and documented evidence alignment will be essential. 

The healthcare policy environment is moving at an unprecedented speed. Organizations that combine agility, regulatory intelligence, and strategic foresight will be best positioned to navigate and capitalize on the changes ahead. 

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