Trump’s Executive Order on AI and the Potential Impact on State Healthcare Laws Governing AI

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President Trump’s new executive order on artificial intelligence (“AI”) seeks to impose broad and strict impediments to state-level regulation of AI. Signed on December 11, 2025, the order establishes a “minimally burdensome national policy framework for AI” and states that fragmented state AI laws slow innovation and hinder the country’s competitiveness in the global AI market in a number of ways. According to the executive order, state-by-state laws and regulations:

• create “a patchwork of 50 different regulatory regimes“, making compliance “more challenging, particularly for start-ups”;
• are increasingly responsible for requiring entities “to embed ideological bias within models” (further stating that Colorado’s new law banning algorithmic discrimination “may even force AI models to produce false results in order to avoid ‘differential treatment or impact’ on protected groups”; and
• sometimes impermissibly regulate beyond state borders, thus “impinging on interstate commerce”.

Summary of Executive Order

The executive order contains a number of requirements:

• The order directs the Attorney General to create an AI Litigation Task Force in the next thirty days. The task force will have broad authority to challenge state AI laws inconsistent with the policy set forth in the order, “including on grounds that such laws unconstitutionally regulate interstate commerce, are preempted by existing Federal regulations, or are otherwise unlawful in the Attorney General’s judgment.” 
• Within the next ninety days, the Secretary of Commerce is instructed, and in consultation with the Special Advisor for AI and Crypto, the Assistant to the President for Economic Policy, the Assistant to the President for Science and Technology, and the Assistant to the President and Counsel to the President, to publish an evaluation of existing State AI laws that identifies onerous laws that conflict with the policy set forth in the order.
• The order gives the Secretary of Commerce and Federal Trade Commission the authority to withhold federal funding from states unwilling to comply with the order.
• The order includes limited exceptions to its mandate; these include laws related to child safety protections; AI compute and data center infrastructure, other than generally applicable permitting reforms; state government procurement and use of AI; and other topics as shall be determined. Notably missing from this list of exceptions are laws relating to the provision of healthcare.
• The order does not automatically invalidate all current state AI laws. All current and pending state and local AI laws will remain enforceable unless and until a court blocks them through an injunction, or Congress passes a federal law that preempts them. However, it causes states to rethink state initiatives and strategies for regulating the use and implementation of AI since the state will be at risk of losing funding under the Broadband Equity Access and Deployment (BEAD) Program in the event its state law is deemed to be one of the “onerous” state AI laws.

Impact of Executive Order on Healthcare-Specific AI Laws

For states like California, Colorado, Texas, New York and Utah that have enacted health care–specific AI laws, such as those requiring transparency, patient safety standards, or oversight of clinical decision support tools, the order poses significant uncertainty and challenges. In general, according to the Council of State Governments, more than 252 AI-related measures were proposed by states and U.S. territories in 2025 alone. Trump’s order directly threatens these measures, including the following:

• California has existing laws requiring transparency in AI-driven medical decision-making and patient consent for algorithmic diagnoses. These could be invalidated under federal preemption.
• Colorado has passed legislation mandating bias audits for healthcare AI systems to prevent discrimination in insurance coverage. This law was specifically called-out by Trump during his comments on the new order.
• Utah requires hospitals to disclose when AI tools are used in patient care.
• Texas established liability standards for medical malpractice involving AI-assisted diagnoses.
• New York’s “Algorithmic Pricing Disclosure Act (APDA)”, signed in May 2025, took effect on November 10. The Act requires businesses to clearly label prices set by algorithms using personal data with the label “THIS PRICE WAS SET BY AN ALGORITHM USING YOUR PERSONAL DATA” next to the price. While insurance-regulated businesses and financial institutions are exempt, as well as certain prices under subscription-based contracts, there is no clear exemption for health care providers or business associates.^[1]
• Parts of other state health data-related privacy laws, such as Washington’s My Health, My Data Act (MHMDA) restricts the use of AI with respect to biometric data and other non-HIPAA covered consumer health data.

If Trump’s order is enforced, these laws, or certain enforcement of these laws, may be challenged in court, leaving patients without state-level protections and relying solely on federal oversight. It could also threaten important “non-deployment” funding under the NTIA BEAD program for broadband funding to states, which could negatively impact high-speed connectivity needs essential to some health care providers, particularly in rural areas that may be unserved or underserved.

Private sector advocates of the executive order may applaud a federal “streamlined” framework over a “patchwork” of 50 more state laws and regulations, similar to challenges entities face with cybersecurity or privacy compliance.  As a result, hospitals and health systems may adopt AI tools more quickly under a streamlined national framework, leading to accelerated improvements in AI-assisted health care services, precision medicine breakthroughs, and health-care related research and development. Without state safeguards, however, patients could face risks such as biased algorithms or unsafe clinical applications -- which are not among the enumerated exceptions in the executive order. More specifically, the implementation of the order could result in unintended consequences in the healthcare industry. A primary concern is patient safety as it relates to the use of AI.  State laws, like the ones noted above, are intended to address risks of misdiagnosis, bias, or lack of transparency in AI-driven healthcare. Without these measures, oversight may weaken.

There is also concern that although an order intended to create competition and foster innovation, the lack of oversight in the healthcare industry could lead to unchecked corporate control over sensitive medical technologies and how the development will align with existing fraud and abuse and corporate practice of medicine laws.

In short, while this may lead to simplified compliance and accelerate investment and speed to market for those eager to adopt and deploy AI-driven technologies in the healthcare industry, it also frustrates the traditional role of states as ”laboratories of experimentation” in areas where “right-sizing” regulatory requirements is important – particularly in quickly evolving areas such as technology.

What is next?

It is almost certain that the order will be challenged in court. Several arguments likely to be raised include: (i) an argument under the 10th Amendment that states traditionally regulate employment, civil rights, and consumer protection;  (ii) an argument that the “policy” of national security and dominance underpinning the framework is not sufficiently comprehensive or detailed to justify preemption under the interstate Commerce Clause; (iii) an argument that spending clause limits and that conditioning federal funds on state behavior is coercive or not sufficiently related to the funding program’s purpose; and (iv) an argument that agency preemption is without statutory authority. Indeed, when the draft proposal was circulated several weeks ago, several states and organizations already signed a number of joint letters opposing it. Now that the executive order has been formally issued, states, industry groups and other opponents have already lined up to indicate they will challenge the reach of the order as an unconstitutional and unprecedented incursion into state and local government powers.

Meanwhile, healthcare providers should continue to comply with existing state AI laws as those continue be in effect, unless and until the courts say otherwise.  With the increased uncertainty of this executive order, agency implementation thereof, and upcoming challenges to its legitimacy and constitutionality, providers are encouraged to evaluate internal AI policies and governance structure to ensure compliance is closely monitored and any changes in the law are addressed.  The executive order does not prohibit businesses from voluntarily adopting patient/consumer safeguards from an ethical perspective that may go beyond compliance, which may serve providers well at a time when compliance may be a quickly moving target. Lastly, it is a good time to review vendor agreements relative to AI to ensure vendors are aware of the potential for a federal framework and the uncertainty surrounding state laws.

More to come… Maynard Nexsen continues to monitor these and other AI-related developments as they impact healthcare, life sciences, and other client industries. Stay tuned!

^{[1] Insurance-regulated businesses, financial institutions and affiliates subject to GLBA and NY state insurance laws, and prices under subscription-based contracts where the price is less than the subscription prices are exempt. However, there’s no express exemption for health care providers or their business associates.}