WHAT THIS BILL REGULATES · 1 REQUIREMENT TYPE
How Is This Bill Enforced
Verbatim statutory text on the left; plain-language analysis and a per-section checklist on the right. Numbered markers cross-link to the matching checklist row.
This Act may be cited as the Transparency in DowncodingDowncoding"Downcoding" means the unilateral alteration by a health insurance issuer of the level of evaluation and management service code or other service code submitted on a claim, resulting in a lower payment.Section 5 Act.
Establishes the short title of the Act as the Transparency in Downcoding Act. Imposes no compliance obligation.
(1)-(3) The General Assembly finds that: (1) Downcoding of medical claims, when done without clear justification or transparency, undermines fair payment of health care providers and threatens the stability of physician practices. (2) Improper downcodingDowncoding"Downcoding" means the unilateral alteration by a health insurance issuer of the level of evaluation and management service code or other service code submitted on a claim, resulting in a lower payment.Section 5 may result in harm to patients by disincentivizing care for individuals with complex medical conditions. (3) It is in the public interest to ensure that all coding adjustments are clinically supported, transparent, appealable, and free from discriminatory targeting.
Legislative findings explaining the policy rationale: that opaque downcoding undermines fair payment, harms patients with complex conditions, and demands clinical, transparent, appealable, non-discriminatory adjustments. No operative obligations.
As used in this Act: "CARCCARC"CARC" means Claim Adjustment Reason Codes, which provide the reason for a financial adjustment specific to a particular claim or service referenced in the transmitted Accredited Standards Committee (ASC) X12 835 standard transaction adopted by the United States Department of Health and Human Services under 45 CFR 162.1602.Section 5" means Claim Adjustment Reason Codes... "DowncodingDowncoding"Downcoding" means the unilateral alteration by a health insurance issuer of the level of evaluation and management service code or other service code submitted on a claim, resulting in a lower payment.Section 5" means the unilateral alteration by a health insurance issuer of the level of evaluation and management service code or other service code submitted on a claim, resulting in a lower payment. "Health insurance issuerHealth insurance issuer"Health insurance issuer" has the meaning given to that term in Section 5 of the Illinois Health Insurance Portability and Accountability Act.Section 5" has the meaning given to that term in Section 5 of the Illinois Health Insurance Portability and Accountability Act. "RARCRARC"RARC" means Remittance Advice Remark Codes, which provide supplemental information about a financial adjustment indicated by a CARC or information about remittance processing.Section 5" means Remittance Advice Remark Codes...
Defines CARC, RARC, downcoding, and health insurance issuer. Definitional only — these terms are surfaced in the top-level definitions object.
(a) This Act applies to the following if they are issued, amended, delivered, or renewed on or after the effective date of this Act: (1) a policy or contract for health insurance coverage as defined in the Illinois Health Insurance Portability and Accountability Act; (2) State, employee, unit of local government, or school district health plans; and (3) policies issued or delivered in this State to the Department of Healthcare and Family Services and providing coverage to persons who are enrolled under the Medical Assistance Article of the Illinois Public Aid Code or under the Children's Health Insurance Program Act. This Act does not apply to employee or employer self-insured health benefit plans under the federal Employee Retirement Income Security Act of 1974 and health care provided pursuant to the Workers' Compensation Act or the Workers' Occupational Diseases Act.
(b) This Act does not diminish a health care plan's duties and responsibilities under other federal or State law or the rules adopted thereunder.
(c) This Act is not intended to alter or impede the provisions of any consent decree or judicial order to which the State or any of its agencies is a party.
Defines the scope of policies and plans subject to the Act — Illinois-issued health insurance policies, government and school district plans, and Medicaid/CHIP-related policies. Excludes ERISA self-insured plans and workers' compensation. Includes savings clauses preserving other duties and consent decrees. No new compliance obligation arises from scope provisions alone.
(a) 1 A health insurance issuerHealth insurance issuer"Health insurance issuer" has the meaning given to that term in Section 5 of the Illinois Health Insurance Portability and Accountability Act.Section 5 shall not use an automated process, system, or tool to downcode a claim. For the purposes of this Section, use of an automated tool includes, but is not limited to, the use of artificial intelligence.
(b) 2 DowncodingDowncoding"Downcoding" means the unilateral alteration by a health insurance issuer of the level of evaluation and management service code or other service code submitted on a claim, resulting in a lower payment.Section 5 decisions shall be made by a physician licensed to practice medicine in all its branches in any United States jurisdiction and of the same or similar specialty as a physician who typically manages the medical condition or disease. The physician who makes the downcodingDowncoding"Downcoding" means the unilateral alteration by a health insurance issuer of the level of evaluation and management service code or other service code submitted on a claim, resulting in a lower payment.Section 5 decision shall perform a documented review of the clinical information supporting the billed service.
The Act's core AI provision. Subsection (a) categorically prohibits health insurance issuers from using any automated process, system, or tool — expressly including AI — to downcode a claim. Subsection (b) replaces automation with a same-or-similar-specialty licensed physician who must perform a documented clinical review for every downcoding decision.
The structure parallels CA SB 1120 and similar healthcare AI accountability statutes: AI may not be the sole or primary basis of an adverse coverage-related determination, and a credentialed human clinician must conduct the substantive review.
3 A health insurance issuerHealth insurance issuer"Health insurance issuer" has the meaning given to that term in Section 5 of the Illinois Health Insurance Portability and Accountability Act.Section 5 shall not downcode a claim based solely on the reported diagnosis codes.
Prohibits downcoding based solely on reported diagnosis codes. Reinforces the requirement that downcoding be grounded in individualized clinical evaluation rather than aggregate code-based logic — the same principle reflected in HC-01.3.
4 When a claim is downcoded, the health insurance issuerHealth insurance issuer"Health insurance issuer" has the meaning given to that term in Section 5 of the Illinois Health Insurance Portability and Accountability Act.Section 5 shall notify the physician using the appropriate CARCCARC"CARC" means Claim Adjustment Reason Codes, which provide the reason for a financial adjustment specific to a particular claim or service referenced in the transmitted Accredited Standards Committee (ASC) X12 835 standard transaction adopted by the United States Department of Health and Human Services under 45 CFR 162.1602.Section 5 and RARCRARC"RARC" means Remittance Advice Remark Codes, which provide supplemental information about a financial adjustment indicated by a CARC or information about remittance processing.Section 5 to clearly indicate that the claim has been downcoded and provide: (1) the specific reason for the downcodingDowncoding"Downcoding" means the unilateral alteration by a health insurance issuer of the level of evaluation and management service code or other service code submitted on a claim, resulting in a lower payment.Section 5, including reference to the clinical criteria used to justify the downcodingDowncoding"Downcoding" means the unilateral alteration by a health insurance issuer of the level of evaluation and management service code or other service code submitted on a claim, resulting in a lower payment.Section 5; (2) the original and revised service codes and payment amounts; (3) the National Provider Identifier of the physician who is responsible for the downcodingDowncoding"Downcoding" means the unilateral alteration by a health insurance issuer of the level of evaluation and management service code or other service code submitted on a claim, resulting in a lower payment.Section 5 decision and the physician's credentials, board certifications, and areas of specialty expertise and training; and (4) a notice of the right to appeal as described in Section 30.
Requires issuers to notify the physician of any downcoding using standardized CARC and RARC codes and to disclose the specific clinical reason, original/revised codes and payment amounts, the reviewing physician's NPI and credentials, and appeal rights. This mirrors HC-01.6 (mandatory disclosure to providers identifying the responsible human professional).
(a) 5 A health insurance issuerHealth insurance issuer"Health insurance issuer" has the meaning given to that term in Section 5 of the Illinois Health Insurance Portability and Accountability Act.Section 5 shall provide physicians with a clear and accessible process for appealing downcoded claims, including a written or electronic notice detailing how to initiate an appeal, contact information for the physician managing the appeal, reasonable timelines for submission of an appeal that are no less than 180 days, and timelines for adjudication of the appeal consistent with applicable State law or regulations governing utilization review.
(b) 5 Physicians shall have the right to appeal in batches of similar claims involving substantially similar downcodingDowncoding"Downcoding" means the unilateral alteration by a health insurance issuer of the level of evaluation and management service code or other service code submitted on a claim, resulting in a lower payment.Section 5 issues, without restriction.
(c) 5 A health insurance issuerHealth insurance issuer"Health insurance issuer" has the meaning given to that term in Section 5 of the Illinois Health Insurance Portability and Accountability Act.Section 5 must ensure that all appeals are reviewed by a physician. The physician must: (1) be licensed to practice medicine in all its branches in any United States jurisdiction; (2) be of the same or similar specialty as a physician who typically manages the medical condition or disease; (3) be knowledgeable of, and have experience providing, the health care services under appeal; (4) not have been directly involved in making the decision to downcode the claim; and (5) perform a documented review of the clinical information supporting the billed service, including, but not limited to, a review of all pertinent medical records provided to the health insurance issuerHealth insurance issuer"Health insurance issuer" has the meaning given to that term in Section 5 of the Illinois Health Insurance Portability and Accountability Act.Section 5 and any medical literature provided to the health insurance issuerHealth insurance issuer"Health insurance issuer" has the meaning given to that term in Section 5 of the Illinois Health Insurance Portability and Accountability Act.Section 5 by the appealing physician.
Establishes a physician appeal process: minimum 180-day window, batch appeals for similar claims, and review by an independent same-specialty licensed physician who was not involved in the original decision and who performs a documented review of the medical records and literature submitted. Functions as a contestation right, paralleling H-01.5 in spirit but situated in the healthcare-specific HC-01 framework with a peer-clinician review requirement.
(a) 6 A health insurance issuerHealth insurance issuer"Health insurance issuer" has the meaning given to that term in Section 5 of the Illinois Health Insurance Portability and Accountability Act.Section 5 shall not use downcodingDowncoding"Downcoding" means the unilateral alteration by a health insurance issuer of the level of evaluation and management service code or other service code submitted on a claim, resulting in a lower payment.Section 5 practices in a targeted or discriminatory manner against physicians who routinely treat patients with complex or chronic conditions.
(b) Any pattern or practice of discriminatory downcodingDowncoding"Downcoding" means the unilateral alteration by a health insurance issuer of the level of evaluation and management service code or other service code submitted on a claim, resulting in a lower payment.Section 5 identified by the Director of Insurance or another regulatory authority shall be subject to enforcement actions, including fines, restitution, or suspension of the health insurance issuerHealth insurance issuer"Health insurance issuer" has the meaning given to that term in Section 5 of the Illinois Health Insurance Portability and Accountability Act.Section 5's license in this State.
Subsection (a) prohibits issuers from using downcoding in a targeted or discriminatory manner against physicians who routinely treat patients with complex or chronic conditions. Subsection (b) authorizes the Director of Insurance to take enforcement action — fines, restitution, or license suspension — against any pattern or practice of discriminatory downcoding. Subsection (b) is enforcement infrastructure rather than a freestanding compliance duty; the obligation lives in (a).
Violations of this Act shall be enforceable by the Department of Insurance and may include, but are not limited to: (1) monetary penalties of up to $50,000 per violation; and (2) orders to reprocess improperly downcoded claims with interest.
Vests enforcement in the Department of Insurance, with monetary penalties up to $50,000 per violation and authority to order reprocessing of improperly downcoded claims with interest. Enforcement infrastructure — creates no independent compliance duty.
The provisions of this Act are severable under Section 1.31 of the Statute on Statutes.
Standard severability clause. No compliance obligation.
This Act takes effect upon becoming law.
Provides that the Act takes effect upon becoming law. No compliance obligation.