How States Are Enforcing New AI Laws in Healthcare—and Why It Matters
Why Are States Rushing to Regulate AI in Healthcare?
Across the country, states are rapidly introducing laws to govern artificial intelligence (AI) used in high-risk areas like healthcare. New statutes address everything from mental health chatbots and AI companions to AI-generated patient communications and the improper use of regulated titles such as “AI Doctor,” “AI Nurse,” or “AI Therapist.” These laws often require disclosure protocols, escalation procedures for self-harm or violence, and defined governance standards. So, how do these new state-level AI laws get enforced?
The short answer is that enforcement penalties and mechanisms vary as much between states as the laws themselves, substantially raising the stakes for noncompliance with national, generally available healthcare AI solutions. Below is an overview of the enforcement mechanisms states currently deploy, along with recommendations for healthcare innovators to manage their risk through launch, scale, and maturation.
How Do States Enforce Healthcare AI Laws?
Each state has created its own enforcement model. Some rely on administrative fines imposed by state regulators (as high as $15,000 per day in some jurisdictions). Others empower professional licensing boards to take action, or authorize state attorneys general (AGs) to pursue monetary penalties and court orders. A few states even provide private rights of action, allowing consumers or their attorneys to bring lawsuits for damages if they believe an AI company violated the law.
Many of the most prominent state-level AI laws have just recently taken effect or are scheduled to take effect on January 1, 2026. The result? Companies offering healthcare AI solutions available nationwide will face varying degrees and types of risk across different states as enforcement actions start to unfold.
Which States Are Leading AI Enforcement in Healthcare?
Below are just a handful of examples of state-level laws that directly or indirectly regulate the development and deployment of healthcare AI systems:
California (AI Companion Law, effective Jan. 1, 2026): Requires AI companion developers to follow disclosure and escalation protocols. It also grants a private right of action, allowing individuals to seek damages of up to $1,000 per violation, or actual damages if higher, plus attorneys’ fees and injunctive relief.
New York (AI Companion Law, effective Nov. 4, 2025): Applies to operators of AI companions and authorizes the Attorney General to impose civil penalties up to $15,000 per day for violations—illustrating a state-driven enforcement model rather than individual lawsuits.
California (AI-Generated Patient Communications Law, effective January 1, 2025): Governs use of AI in patient-facing interactions. Enforcement lies with the Medical Board of California and Osteopathic Medical Board of California, which may suspend, revoke, or restrict a professional license for violations.
Illinois (AI in Psychological Resources Law, effective Aug. 1, 2025): Overseen by the Department of Financial and Professional Regulation, which can levy fines of up to $10,000 per violation for misuse of AI in psychotherapeutic or counseling contexts.
Utah (Mental Health AI Chatbot Law, effective May 7, 2025): Requires AI chatbot operators to maintain clear disclosures and internal records. The Division of Consumer Protection may issue fines of up to $2,500 per violation and pursue legal action for injunctive relief.
What Are the Real-World Risks for Healthcare AI Companies?
Enforcement doesn’t just mean fines; it can halt your business altogether. State AGs, medical boards, and consumer agencies can issue orders stopping AI operations while investigations proceed. For early-stage innovators, that can mean lost revenue, delayed fundraising, or terminated payer or provider contracts.
The same product may be legal in one state and penalized in another. A chatbot cleared in State A might trigger a licensing or disclosure violation in State B. Without a tailored rollout and compliance review, a uniform national strategy is puts your business, or your investment, at risk.
Marketing and labeling claims are high-risk zones. States are penalizing companies that imply their AI is a licensed professional when it isn’t. A single misleading tagline or investor pitch could spark a regulatory complaint.
General consumer-protection laws always apply. Even if “healthcare” isn’t mentioned, unfair or deceptive trade practice laws allow regulators to target unsafe or misleading AI tools that analyze symptoms, recommend treatments, or process patient data.
Early compliance is cheaper than crisis defense. Building an AI governance and compliance program at launch is far less costly than defending a state investigation or AG subpoena later.
What Should Healthcare AI Founders Do Right Now?
Map your AI operations across states. Identify where your products or users reside and which state AI laws apply.
Review marketing and labeling language. Avoid implying human licensure or clinical authority where none exists.
Monitor effective dates. Many laws phase in during 2025–2026, now is the time to prepare.
Establish AI governance policies. Document your model-training methods, human oversight, and escalation protocols.
Engage legal counsel early. Partner with firms experienced in AI compliance and healthcare regulation to mitigate enforcement risk.
Conclusion: Proactive AI Regulatory Adherence Protects Your Growth
The state-by-state AI regulatory wave is reshaping healthcare innovation. For companies developing or deploying healthcare AI tools, success depends on staying ahead of enforcement, not reacting to it.
Nixon Law Group helps digital health and healthcare AI innovators design scalable, compliant governance strategies that withstand evolving state scrutiny.
Contact us to schedule an AI Governance and Compliance Assessment tailored to your organization.