Congress is weighing a sweeping proposal that could significantly reshape how artificial intelligence (AI) is regulated across the United States. At the end of May, the United States House of Representatives passed, by a vote of 215-214, the One Big Beautiful Bill Act (OBBBA), a budget reconciliation bill with a provision imposing a 10-year moratorium on the enforcement of most state and local laws that target AI systems. If enacted, OBBBA would pause the enforcement of existing state AI laws and regulations and take precedence over emerging AI legislation in state legislatures across the country.
For healthcare providers, payors, and other healthcare stakeholders, the implications are substantial. While the moratorium could streamline AI deployment and ease compliance burdens, it also raises questions about regulatory uncertainty and patient safety, potentially undermining patient trust.
What OBBBA Would Do
Section 43201 of OBBBA prohibits the enforcement of any state or local law or regulation “limiting, restricting, or otherwise regulating” AI models, AI systems, or automated decision systems. OBBBA defines AI as a “machine-based system that can, for a given set of human-defined objectives, make predictions, recommendations, or decisions influencing real or virtual environments.” The definition of “automated decision systems” is similarly broad, encompassing “any computational process derived from machine learning, statistical modeling, data analytics, or AI that issues a simplified output (e.g., a score, classification, or recommendation) to materially influence or replace human decision making.”
As proposed, OBBBA would preempt several enacted and proposed restrictions on AI use in healthcare, including:
- California AB 3030, which (with few exceptions) mandates disclaimers when generative AI is used to communicate clinical information to patients and requires that patients be informed of how to reach a human provider;
- California SB 1120, which prohibits health insurers from using AI to deny coverage without sufficient human oversight;
- Colorado Artificial Intelligence Act, which regulates developers and deployers of AI systems, particularly those considered “high risk”;
- Utah Artificial Intelligence Policy Act, which requires regulated occupations (including healthcare professionals) to prominently disclose at the beginning of any communication that a consumer is interacting with generative AI; and
- Massachusetts Bill S.46, which, as proposed, would require healthcare providers to disclose the use of AI to make decisions affecting patient care.
Importantly, however, OBBBA contains exceptions that will likely spark debate about the true scope of the moratorium. Under OBBBA, state AI laws and regulations will remain enforceable (and not preempted) if they fall under any one of the following exceptions:
- Primary Purpose and Effect Exception. The state law or regulation has the “primary purpose and effect,” with respect to the adoption of AI or automated decision systems, of: (i) removing legal impediments; (ii) facilitating deployment or operation; or (iii) consolidating administrative procedures;
- No Design, Performance, and Data-Handling Imposition Exception. The state law or regulation does not impose substantive design, performance, data-handling, documentation, civil liability, taxation, fee, or similar requirements on AI or automated decision systems, unless these requirements are imposed under federal law or are generally applicable to other models and systems that perform similar functions; or
- Reasonable and Cost-Based Fees Exception. The state law or regulation imposes only fees or bonds that are “reasonable and cost-based” and imposed equally on other AI models, AI systems, and automated decision systems that perform comparable functions.
The last two exceptions, in particular, imply that the moratorium would affect only those state laws that treat AI systems differently from other systems. As such, laws of general application at the state and federal level would continue to regulate AI, including those concerning anti-discrimination, privacy, and consumer protection. However, even with this carve-out, the moratorium would undeniably transform the AI regulatory landscape, given the absence of robust federal regulation to replace state-level restrictions.
Why It Matters for Healthcare Stakeholders
The proposed moratorium is part of the Trump Administration’s broader emphasis on innovation over regulation in the AI space. Supporters argue that a single federal standard would help reduce compliance burdens on AI developers by eliminating the need to track and implement AI rules in 50 states. This would, in turn, encourage innovation and protect national competitiveness, as the U.S. races to keep pace with the European Union and China on AI development.
But for healthcare providers, the tradeoffs are complex. State-level regulation has its advantages. For example, patients may grow wary of AI-enabled care if transparency and oversight appear to be diminished, especially in sensitive areas like diagnosis, care triage, or behavioral health. Additionally, states often act as early responders to emerging risks. A moratorium could prevent regulators from addressing evolving clinical concerns related to AI tools, especially given the lack of comprehensive federal guardrails in this area.
Legal and Procedural Challenges
The moratorium also faces significant constitutional and procedural hurdles. For example, legal scholars and 40 bipartisan state attorneys general have raised concerns that OBBBA may infringe upon state police powers related to health and safety, potentially raising issues under the Tenth Amendment. Additionally, if enacted, the moratorium is expected to face legal challenges in court, given bipartisan opposition.
What Healthcare Organizations Should Do Now
Healthcare organizations should maintain strong compliance practices and stay abreast of laws of general application, such as HIPAA and state data privacy and security laws, as AI tools are likely to remain subject to such laws, despite uncertainties that may emerge if OBBBA is enacted. Even if the moratorium does not pass the United States Senate, Congress has clearly signaled a growing intent to regulate AI—whether through future legislation or agency-led rulemaking by entities such as the United States Department of Health and Human Services or the Food and Drug Administration. As such, healthcare organizations should have a clear vision on their organization’s policies and practices involving AI compliance, including the following:
- Maintaining Compliance Readiness. Continue monitoring and preparing for state-level AI regulations that are currently in effect or soon to be implemented.
- Auditing Current AI Deployments. Evaluate how AI tools are currently used across clinical, operational, and administrative functions, and continue to assess their alignment with broader legal frameworks, including, but not limited to, HIPAA, FDCA, FTC Act, Title VI, and consumer protection laws. As discussed, AI tools will continue to remain subject to many laws of general application even if the moratorium passes.
- Engaging in Strategic Planning. Depending on whether the moratorium is approved by the United States Senate and survives legal scrutiny, organizations may need to recalibrate compliance programs.
Regardless of whether OBBBA is ultimately enacted, the proposed federal AI enforcement moratorium marks a pivotal moment in the evolving landscape of AI regulation in healthcare. Providers would be well served to remain proactive, well-informed, and prepared to adapt to evolving legal and regulatory developments.