TRANSPARENCY IN DOWNCODING ACT

Illinois General Assembly - Full Text of SB3114

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SB3114 - 104th General Assembly

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SB3114 Enrolled
LRB104 19668 BAB 33117 b
1

AN ACT concerning regulation.

2

Be it enacted by the People of the State of Illinois,
3
represented in the General Assembly:

4

Section 1.
Short title.
This Act may be cited as the
5
Transparency in Downcoding Act.

6

Section 2.
Findings.
The General Assembly finds that:
7

(1) Downcoding of medical claims, when done without
8

clear justification or transparency, undermines fair
9

payment of health care professionals and threatens the
10

stability of medical practices.
11

(2) Improper downcoding may result in harm to patients
12

by disincentivizing care for individuals with complex
13

medical conditions.
14

(3) It is in the public interest to ensure that all
15

coding adjustments are clinically supported, transparent,
16

appealable, and free from discriminatory targeting.

17

Section 5.
Definitions.
As used in this Act:
18

"CARC" means Claim Adjustment Reason Codes, which provide
19
the reason for a financial adjustment specific to a particular
20
claim or service referenced in the transmitted Accredited
21
Standards Committee (ASC) X12 835 standard transaction adopted
22
by the United States Department of Health and Human Services

SB3114 Enrolled
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LRB104 19668 BAB 33117 b
1
under 45 CFR 162.1602.
2

"Downcoding" means the unilateral alteration by a health
3
care payor of the level of evaluation and management service
4
code or other service code submitted on a claim, resulting in a
5
lower payment. "Downcoding" does not include the practice of
6
addressing instances when providers submit multiple codes for
7
2 or more services that must be included in one group code
8
pursuant to federal and State program integrity requirements.
9

"Excepted benefits" has the meaning given to that term in
10
42 U.S.C. 300gg-91(c) and implementing regulations.
11

"Group health plan" has the meaning given to that term in
12
Section 5 of the Illinois Health Insurance Portability and
13
Accountability Act.
14

"Group health plan sponsor" means the plan sponsor of a
15
group health plan.
16

"Health care payor" means a group health plan sponsor,
17
health insurance issuer, or Medicaid managed care
18
organization.
19

"Health care professional" means a physician licensed to
20
practice medicine in all its branches under the Medical
21
Practice Act of 1987, a physician assistant licensed under the
22
Physician Assistant Practice Act of 1987, or an advanced
23
practice registered nurse licensed under the Nurse Practice
24
Act.
25

"Health insurance issuer" has the meaning given to that
26
term in Section 5 of the Illinois Health Insurance Portability

SB3114 Enrolled
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LRB104 19668 BAB 33117 b
1
and Accountability Act.
2

"Medicaid managed care organization" has the meaning given
3
to the term "managed care organization" in Section 5H-1 of the
4
Illinois Public Aid Code.
5

"Plan sponsor" has the meaning given to that term in 29
6
U.S.C. 1002(16)(B).
7

"RARC" means Remittance Advice Remark Codes, which provide
8
supplemental information about a financial adjustment
9
indicated by a CARC or information about remittance
10
processing.

11

Section 10.
Applicability; scope.
12

(a) This Act applies to the following if they are issued,
13
amended, delivered, or renewed on or after the effective date
14
of this Act:
15

(1) a policy or contract for health insurance coverage
16

as defined in the Illinois Health Insurance Portability
17

and Accountability Act;
18

(2) State, employee, county, municipality, or school
19

district group health plans; and
20

(3) subject to federal law, rules, regulations, and
21

guidance, policies issued or delivered in this State to
22

the Department of Healthcare and Family Services and
23

providing coverage to persons who are enrolled under
24

Article V of the Illinois Public Aid Code or under the
25

Children's Health Insurance Program Act. This Act does not

SB3114 Enrolled
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LRB104 19668 BAB 33117 b
1

diminish the ability of the Department of Healthcare and
2

Family Services' Office of the Inspector General to
3

prevent, detect, and eliminate fraud, waste, abuse,
4

mismanagement, and misconduct.
5

This Act does not apply to employee or employer
6
self-insured health benefit plans under the federal Employee
7
Retirement Income Security Act of 1974 and health care
8
provided pursuant to the Workers' Compensation Act or the
9
Workers' Occupational Diseases Act, and excepted benefits,
10
including stand-alone dental plans.
11

(b) This Act shall not diminish a health care payor's
12
duties and responsibilities under other federal or State law
13
or the rules adopted thereunder.
14

(c) This Act is not intended to alter or impede the
15
provisions of any consent decree or judicial order to which
16
the State or any of its agencies is a party.
17

(d) The regulation of downcoding of medical claims in
18
policies issued, amended, delivered, or renewed on or after
19
January 1, 2028 is an exclusive power and function of the
20
State. A home rule unit may not regulate downcoding of medical
21
claims in policies issued, amended, delivered, or renewed on
22
or after January 1, 2028. All home rule units must comply with
23
this Act. This subsection is a denial and limitation of home
24
rule powers and functions under subsection (h) of Section 6 of
25
Article VII of the Illinois Constitution.

SB3114 Enrolled
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LRB104 19668 BAB 33117 b
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Section 15.
Prohibition of automatic downcoding.
2

(a) A health care payor shall not implement any policy or
3
use any algorithm or other automated process, system, or tool
4
that bypasses the evaluation of information included by the
5
billing health care professional to downcode a claim.
6

(b) A health care payor may use an automated process to
7
identify claims that may justify a downcoding determination
8
following American Medical Association Current Procedural
9
Terminology (CPT) coding guidelines in effect at the time of
10
service. All downcoding determinations must be made or
11
reviewed by a natural person following American Medical
12
Association Current Procedural Terminology (CPT) coding
13
guidelines in effect at the time, and the health care payor
14
must maintain and implement policies and procedures requiring
15
a natural person to consider information included by the
16
billing health care professional on the claim submission in
17
such determination.

18

Section 20.
Prohibition on diagnosis-based downcoding.
A
19
health care payor shall not downcode a claim based solely on
20
the reported diagnosis codes.

21

Section 25.
Notification requirements for downcoded
22
claims.
When a claim is downcoded, the health care payor shall
23
notify the billing health care professional using the
24
appropriate CARCs and RARCs to clearly indicate that the claim

SB3114 Enrolled
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LRB104 19668 BAB 33117 b
1
has been downcoded and provide:
2

(1) the specific reason for the downcoding, including
3

reference to the clinical information and coding guidance
4

used to justify the downcoding;
5

(2) the original and revised service codes and payment
6

amounts; and
7

(3) the process to initiate a dispute for a downcoding
8

decision.

9

Section 30.
Dispute process for downcoded claims.
10

(a) A health care payor shall provide health care
11
professionals with a clear and accessible process for
12
disputing downcoded claims, including a written or electronic
13
notice detailing how to initiate a dispute, contact
14
information for the entity or department managing the dispute,
15
reasonable timelines for submission by the billing health care
16
professional of a dispute that are no less than 90 days, and
17
timelines for adjudication of the dispute consistent with
18
applicable State law or regulations governing utilization
19
review.
20

(b) A health care payor must ensure that all downcoding
21
disputes are reviewed by a natural person. The reviewing
22
natural person must:
23

(1) be knowledgeable of, and have experience
24

providing, the health care services under dispute;
25

(2) not have been directly involved in making the

SB3114 Enrolled
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LRB104 19668 BAB 33117 b
1

decision to downcode the claim;
2

(3) perform a document review of the clinical
3

information supporting the billed service, including, but
4

not limited to, a review of all pertinent medical records
5

provided to the health care payor and any medical
6

literature provided to the health care payor from the
7

billing health care professional; and
8

(4) follow American Medical Association Current
9

Procedural Terminology (CPT) coding guidelines in effect
10

at the time of service.
11

(c) Use of a dispute process for downcoded claims does not
12
preclude the health care professional's or enrollee's right to
13
appeal any adverse determination under applicable State and
14
federal law, rules, or regulations governing utilization
15
review.

16

Section 35.
Protections for patients with chronic
17
conditions.
A health care payor shall not use downcoding
18
practices in a targeted or discriminatory manner against
19
health care professionals who routinely treat patients with
20
complex or chronic conditions.

21

Section 40.
Administration and enforcement.
22

(a) The Department of Insurance shall enforce the
23
provisions of this Act pursuant to the enforcement powers
24
granted to it by law, including, but not limited to, any powers

SB3114 Enrolled
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LRB104 19668 BAB 33117 b
1
granted to enforce the Illinois Insurance Code. Such
2
enforcement shall extend to health care payors' compliance
3
with this Act's procedural requirements and restrictions,
4
compliance with this Act's standards for personnel and
5
automated processes, and any pattern or practice of violating
6
Section 20 of this Act. Nothing in this Act shall authorize the
7
Department of Insurance to conduct any process under which a
8
health care provider may submit an appeal for the purpose of
9
receiving a determination from the Department of Insurance
10
that is binding on the health care payor and the billing health
11
care professional about the correctness of any particular
12
downcoding decision under applicable coding guidelines, but
13
the Department of Insurance shall have the authority to use
14
any of its powers, including, but not limited to, the
15
investigation of complaints, to enforce subsection (b) of
16
Section 15.
17

(b) A health care payor shall be responsible for the
18
compliance with this Act by any third party to whom the health
19
care payor delegates any functions related to downcoding.
20

(c) The Department of Healthcare and Family Services shall
21
enforce the provisions of this Act, subject to federal laws,
22
rules, regulations, and regulatory guidance, as it applies to
23
all Medicaid managed care organizations serving persons
24
enrolled under Article V of the Illinois Public Aid Code or
25
under the Children's Health Insurance Program Act.

SB3114 Enrolled
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LRB104 19668 BAB 33117 b
1

Section 500.
The Illinois Public Aid Code is amended by
2
adding Section 5-5.12g as follows:

3

(305 ILCS 5/5-5.12g new)
4

Sec. 5-5.12g.
Compliance with the Transparency in
5
Downcoding Act.
Notwithstanding any other provision of law to
6
the contrary, all managed care organizations shall comply with
7
the requirements of the Transparency in Downcoding Act.

8

Section 997.
Severability.
The provisions of this Act are
9
severable under Section 1.31 of the Statute on Statutes.

10

Section 999.
Effective date.
This Act takes effect January
11
1, 2028.

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