WHAT THIS BILL REGULATES · 3 REQUIREMENT TYPES
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. No substantive obligations are created.
(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.
States the General Assembly's findings regarding the harms of opaque downcoding practices, including threats to fair provider payment, disincentivization of care for complex patients, and the public interest in transparent, clinically supported, appealable coding adjustments. These findings establish legislative purpose but impose no compliance 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, 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. "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, which provide supplemental information about a financial adjustment indicated by a 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 or information about remittance processing.
Defines key terms used throughout the Act, including Downcoding, Health insurance issuer, CARC, and RARC. The definition of downcoding is notable for its breadth — it covers any unilateral alteration of an evaluation-and-management code or other service code resulting in lower payment, without limiting the definition to AI-driven alterations. This section creates no independent compliance obligations.
(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 Act's scope: it applies to health insurance policies, state and local government employee health plans, and Medicaid/CHIP managed care policies issued, amended, delivered, or renewed on or after the effective date. ERISA self-insured plans and workers' compensation are excluded. A savings clause preserves existing duties under other law, and the Act does not alter existing consent decrees or judicial orders. This section sets jurisdictional boundaries but creates no independent compliance obligations.
(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.
This section contains the Act's core AI-related prohibition: health insurance issuers may not use any automated process, system, or tool — expressly including artificial intelligence — to downcode a claim. All downcoding decisions must instead be made by a licensed physician of the same or similar specialty as the physician who typically manages the relevant medical condition. The reviewing physician must perform a documented review of the clinical information supporting the billed service. Together, subsections (a) and (b) establish a dual obligation: a categorical ban on automated downcoding and an affirmative requirement that a qualified human physician make the decision based on individualized clinical 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 health insurance issuers from downcoding a claim based solely on the reported diagnosis codes. This prevents issuers from using diagnosis codes as a proxy for reducing service-level codes without reviewing the clinical services actually rendered. The prohibition complements Section 15's requirement for individualized physician review by ensuring that no automated or manual process shortcuts the analysis to diagnosis codes alone.
(1)–(4) 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 health insurance issuers to provide detailed notification to physicians when a claim is downcoded. Notification must use appropriate CARC and RARC codes and must include: the specific reason for the downcoding with clinical criteria references, the original and revised service codes and payment amounts, the National Provider Identifier and credentials of the reviewing physician, and a notice of the right to appeal. This creates a structured transparency obligation for every downcoding decision, ensuring providers receive sufficient information to understand and challenge the adjustment.
(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)(1)–(5) 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 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.
Requires health insurance issuers to provide a clear and accessible appeal process for downcoded claims. The appeal process must include written or electronic instructions, contact information for the managing physician, a minimum 180-day submission window, and timelines for adjudication consistent with state utilization review law. Physicians may appeal in batches of similar claims. All appeals must be reviewed by a physician who is licensed, specialty-matched, experienced in the relevant services, independent from the original downcoding decision, and who performs a documented clinical review including all pertinent medical records and literature provided by the appealing physician.
(a) 7 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) 7 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.
Prohibits health insurance issuers from using downcoding practices in a targeted or discriminatory manner against physicians who routinely treat patients with complex or chronic conditions. Any pattern or practice of discriminatory downcoding identified by the Director of Insurance or another regulatory authority triggers enforcement actions including fines, restitution, or license suspension. This provision addresses a specific discrimination concern: that insurers may systematically downcode claims from physicians who treat sicker patient populations, effectively penalizing providers for the acuity of their patients.
(1)–(2) 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.
Establishes that violations of the Act are enforceable by the Department of Insurance, with available remedies including monetary penalties of up to $50,000 per violation and orders to reprocess improperly downcoded claims with interest. This section creates no new compliance obligation on health insurance issuers beyond what is imposed by the substantive sections; it provides the enforcement framework.
The provisions of this Act are severable under Section 1.31 of the Statute on Statutes.
Standard severability provision incorporating Section 1.31 of the Statute on Statutes. No compliance obligations are created.
This Act takes effect upon becoming law.
The Act takes effect upon becoming law — i.e., immediately upon the Governor's signature. No compliance obligations are created.