Maryland Medical Assistance Program and Health Insurance - Claims for Reimbursement - Downcoding

EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
*sb0797*

SENATE BILL 797
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By: Senator Lam
Introduced and read first time: February 6, 2026
Assigned to: Finance

A BILL ENTITLED

AN ACT concerning 1

Maryland Medical Assistance Program and Health Insurance – Claims for 2
Reimbursement – Downcoding 3

FOR the purpose of prohibiting insurers, nonprofit health service plans, health 4
maintenance organizations, and managed care organizations from downcoding a 5
claim for reimbursement under certain circumstances; establishing certain 6
procedures that insurers, nonprofit health service plans, health maintenance 7
organizations, and managed care organizations are required to follow if the insurer, 8
nonprofit health service plan, or health maintenance organization intends or makes 9
a final decision to downcode a claim; providing that a decision to downcode a claim 10
leading to nonpayment constitutes a coverage decision and may be appealed under 11
certain pr ovisions of law; and generally relating to health insurance claims and 12
downcoding. 13

BY repealing and reenacting, with amendments, 14
Article – Health – General 15
Section 15–102.3(b) and 19–712(b) 16
Annotated Code of Maryland 17
(2023 Replacement Volume and 2025 Supplement) 18

BY repealing and reenacting, with amendments, 19
Article – Insurance 20
Section 15–113(b), 15–10A–06(a)(1), and 15–10D–02(d) 21
Annotated Code of Maryland 22
(2017 Replacement Volume and 2025 Supplement) 23

BY adding to 24
Article – Insurance 25
Section 15–1005.1 26
Annotated Code of Maryland 27
(2017 Replacement Volume and 2025 Supplement) 28
2 SENATE BILL 797

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 1
That the Laws of Maryland read as follows: 2

Article – Health – General 3

15–102.3. 4

(b) The provisions of [§ 15–1005] §§ 15–113(B), 15–1005, AND 15–1005.1 of the 5
Insurance Article shall apply to managed care organizations in the same manner they apply 6
to health maintenance organizations. 7

19–712. 8

(b) (1) A person who holds a certificate of authority to operate a health 9
maintenance organization under this subtitle and who enters into any administrative 10
service provider contract, as defined in § 19 –713.2 of this subtitle, with a person or entity 11
for the provision of health care services to subscribers shall be responsible for all claims or 12
payments for health care services: 13

(i) Covered under the subscriber’s contract; and 14

(ii) Rendered by a provider, who is not the person or entity which 15
entered into the administrative service provider contract with the health maintenance 16
organization, pursuant to a referral by a person or entity which entered into the 17
administrative service provider contract with the health maintenance organization. 18

(2) Responsibility for claims and payments under this subsection is subject 19
to the provisions of [§ 15–1005] §§ 15–113(B), 15–1005, AND 15–1005.1 of the Insurance 20
Article. 21

Article – Insurance 22

15–113. 23

(b) A carrier: 24

(1) may not reimburse a health care practitioner in an amount less than 25
the sum or rate negotiated in the carrier’s provider contract with the health care 26
practitioner; AND 27

(2) SHALL COMPLY WITH § 15–1005.1 OF THIS TITLE BEFORE 28
REDUCING A CLAIM SUBMITTED BY A HEALTH CARE PROVIDER TO A LO WER LEVEL 29
OF EVALUATION AND MA NAGEMENT SERVICE COD E OR OTHER SE RVICE CODE 30
RESULTING IN A LOWER PAYMENT FOR SERVICE. 31

SENATE BILL 797 3

15–1005.1. 1

(A) (1) IN THIS SECTION THE F OLLOWING WORDS HAVE THE MEANINGS 2
INDICATED. 3

(2) “DOWNCODE” MEANS THE UNILATERAL ALTERATION BY AN 4
INSURER, A NONPROFIT HEALTH S ERVICE PLAN , OR A HEALTH MAINT ENANCE 5
ORGANIZATION, OR BY ANY ENTITY WOR KING ON BEHALF OF AN INSURER, A 6
NONPROFIT HEALTH SERVICE PLAN, OR A HEALTH MAINTENA NCE ORGANIZATION, 7
OF THE LEVEL OF EVAL UATION AND MANAGEMENT SERVICE CODE OR AN Y OTHER 8
SERVICE CODE SUBMITTED BY A HEALTH CARE PROVIDER, RESULTING IN A LOWER 9
PAYMENT. 10

(3) “HEALTH CARE PROVIDER” MEANS: 11

(I) AN INDIVIDUAL WHO IS LICENSED UNDER THE HEALTH 12
OCCUPATIONS ARTICLE TO PROVIDE HE ALTH CARE SERVICES I N THE ORDINARY 13
COURSE OF BUSINESS O R PRACTICE OF A PROF ESSION AND IS A TREA TING 14
PROVIDER OF THE MEMBER; 15

(II) A HOSPITAL , AS DEFINED IN § 19–301 OF THE HEALTH – 16
GENERAL ARTICLE; OR 17

(III) A FREESTANDING MEDIC AL FACILITY , AS DEFINED IN § 18
19–3A–01 OF THE HEALTH – GENERAL ARTICLE. 19

(B) IN PAYING A CLAIM FOR REIMBURSEMENT UNDER § 15–1005 OF THIS 20
SUBTITLE, AN INSURER , A NONPROFIT HEALTH S ERVICE PLAN , OR A HEALTH 21
MAINTENANCE ORGANIZATION MAY NOT: 22

(1) USE A PROCESS , SYSTEM, OR TOOL , INCLUDING ARTIFICIAL 23
INTELLIGENCE, ALGORITHMS, SOFTWARE TOOLS , OR MACHINE LEARNING , TO 24
DOWNCODE A CLAIM WIT HOUT A REVIEW OF CLI NICAL DOCUMENTATION AS 25
REQUIRED UNDER THIS SECTION; 26

(2) DOWNCODE A CLAIM BAS ED SOLELY ON THE REP ORTED 27
DIAGNOSIS CODE; 28

(3) FOR A CLAIM INVOLVING EMERGENCY SERVICES, AS DEFINED IN § 29
15–1A–14 OF THIS TITLE, DOWNCODE THE CLAIM BASED ON THE FINAL DIAGNOSIS 30
RATHER THAN THE SYMP TOMS PRESENTED, AS DOCUMENTED BY A HEALTH CA RE 31
PROVIDER AND MEASURED AGAINST THE STANDARD OF A PRUDENT LAYPERSON; OR 32

4 SENATE BILL 797

(4) USE DOWNCODING PRACT ICES THAT TARGET HEA LTH CARE 1
PROVIDERS WHO ROUTIN ELY TREAT PATIENTS W ITH COMPLEX OR CHRON IC 2
CONDITIONS THAT MAY HAVE A GREATER INCIDENCE OF HIGHER EVALUATION AND 3
MANAGEMENT AND OTHER SERVICE CODES. 4

(C) (1) WITHIN 30 DAYS AFTER RECEIVING A CLAIM FOR 5
REIMBURSEMENT, IF AN INSURER , A NONPROFIT HEALTH S ERVICE PLAN , OR A 6
HEALTH MAINTENANCE ORGANIZATION INTENDS ON DOWNCODING THE CLAIM, THE 7
INSURER, NONPROFIT HEALTH SER VICE PLAN , OR HEALTH MAINTENANC E 8
ORGANIZATION SHALL P ROVIDE NOTICE TO THE HEALTH CARE PROVIDER OF THE 9
INTENT TO DOWNCODE THE CLAIM. 10

(2) THE NOTICE PROVIDED U NDER PARAGRAPH (1) OF THIS 11
SUBSECTION SHALL INCLUDE: 12

(I) THE SPEC IFIC REASON FOR DOWN CODING THE CLAIM , 13
INCLUDING REFERENCE TO CLINICAL CRITERIA AND ESTABLISHED FEDE RAL OR 14
STATE CODING GUIDELINES USED TO JUSTIFY THE DOWNCODING; 15

(II) THE ORIGINAL CODES S UBMITTED BY THE HEAL TH CARE 16
PROVIDER AND THE REV ISED SERVICE CODE S SELECTED BY THE IN SURER, 17
NONPROFIT HEALTH SERVICE PLAN, OR HEALTH MAINTENANCE ORGANIZATION AND 18
CORRESPONDING REIMBURSEMENT AMOUNTS; AND 19

(III) A STATEMENT INFORMING THE HEALTH CARE PROVIDER OF 20
THE OPPORTUNITY TO RESPOND AND PROVIDE ADDITIONAL DOCUMENTATION: 21

1. AS NECESSARY TO SUPPORT THE CLAIM; AND 22

2. WITHIN 90 DAYS AFTER THE DATE THE HEALTH CARE 23
PROVIDER RECEIVED THE NOTICE. 24

(3) AN INSURER, A NONPROFIT HEALTH SERVICE PLAN, OR A HEALTH 25
MAINTENANCE ORGANIZATION MAY REQUEST ADD ITIONAL INFORMATION FROM A 26
HEALTH CARE PROVIDER FOR A CLAIM BEING CO NSIDERED FOR DOWNCOD ING IF 27
THE INSURER , NONPROFIT HEALTH SER VICE PLAN , OR HEALTH MAINTENANC E 28
ORGANIZATION: 29

(I) CONFIRMS THAT REQUES TED INFORMATION WAS NOT 30
PREVIOUSLY SUBMITTED WITH THE CLAIM FOR R EIMBURSEMENT BEFORE 31
REQUESTING ADDITIONAL INFORMATION FROM THE HEALTH CARE PROVIDER; AND 32

SENATE BILL 797 5

(II) COMPLIES WITH § 15–1005(C)(2)(II) OF THIS SUBTITLE AND 1
REGULATIONS ADOPTED UNDER § 15–1003(D)(1)(II) OF THIS SUBTITLE. 2

(D) A FINAL DETERMINATION OF WHETHER TO DOWNCODE A CLAIM SHALL 3
BE MADE BY A PHYSICIAN WHO IS: 4

(1) BOARD CERTIFIED OR ELIGIBLE TO BE BOARD CERTIFIED IN THE 5
SAME SPECIALTY AS THE SERVICE OR TREATMENT UNDER REVIEW; AND 6

(2) KNOWLEDGEABLE ABOUT THE HEALTH CARE SERV ICE OR 7
TREATMENT UNDER REVIEW THROUGH ACTUAL CLINICAL EXPERIENCE. 8

(E) IF AN INSURER , A NONPROFIT HEALTH S ERVICE PLAN, OR A HEALTH 9
MAINTENANCE ORGANIZATION MAKES A FINAL D ECISION TO DOWNCODE A CLAIM, 10
THE INSURER , NONPROFIT HEALTH SER VICE PLAN , OR HEALTH MAINTENANC E 11
ORGANIZATION SHALL PROVIDE A FINAL NOTIC E TO THE HEALTH CARE PROVIDER 12
THAT OUTLINES THE RIGHT TO APPEAL THE FINAL DECISION IN ACCORDANCE WITH 13
SUBSECTION (F) OF THIS SECTION. 14

(F) A FINAL DECISION TO DO WNCODE A CLAIM THAT LEADS TO THE 15
NONPAYMENT OF A CLAI M OR PORTION OF A CL AIM UNDER § 15–1005 OF THIS 16
SUBTITLE CONSTITUTES A COVERAGE DECISION FOR PURPOSES OF AN A PPEAL 17
UNDER SUBTITLE 10D OF THIS TITLE. 18

(G) IN ADDI TION TO PENALTIES IM POSED UNDER § 15–1005 OF THIS 19
SUBTITLE, AN INSURER , A NONPROFIT HEALTH S ERVICE PLAN , OR A HEALTH 20
MAINTENANCE ORGANIZATION THAT VIOLATES THIS SECTION IS SUBJECT TO A FINE 21
NOT EXCEEDING $10,000 FOR EACH VIOLATION. 22

15–10A–06. 23

(a) (1) On a quarterly basis, each carrier shall submit to the Commissioner, on 24
the form the Commissioner requires, a report that describes the following information 25
aggregated by zip code as required by the Commissioner: 26

(i) the number of members entitled to health care benefits under a 27
policy, plan, or certificate issued or delivered in the State by the carrier; 28

(ii) 1. the number of clean claims for reimbursement processed 29
by the carrier; 30

2. THE NUMBER OF NOTICE S SENT TO HEALTH CAR E 31
PROVIDERS INDICATING AN INTENT TO DOWNCODE A CLAIM UNDER § 15–1005.1 OF 32
THIS TITLE; AND 33
6 SENATE BILL 797

3. THE NUMBER OF CLAIMS THAT WERE DOWNCODED BY 1
THE CARRIER; 2

(iii) the activities of the carrier under this subtitle, including: 3

1. the outcome of each grievance filed with the carrier; 4

2. the number and outcomes of cases that were considered 5
emergency cases under § 15–10A–02(b)(2)(i) of this subtitle; 6

3. the time within which the carrier made a grievance 7
decision on each emergency case; 8

4. the time within w hich the carrier made a grievance 9
decision on all other cases that were not considered emergency cases; 10

5. the number of grievances filed with the carrier that 11
resulted from an adverse decision involving length of stay for inpatient hospitalization as 12
related to the medical procedure involved; 13

6. the number of adverse decisions issued by the carrier 14
under § 15 –10A–02(f) of this subtitle, whether the adverse decision involved a prior 15
authorization or step therapy protocol, the type of service at issue in the adverse decisions, 16
and whether an artificial intelligence, algorithm, or other software tool was used in making 17
the adverse decision; 18

7. the number of adverse decisions overturned after a 19
reconsideration request under § 15–10B–06 of this title; and 20

8. the number of requests made and granted under § 21
15–831(c)(1) and (2) of this title; and 22

(iv) the number and outcome of all other cases that are not subject to 23
activities of the carrier under this subtitle that resulted from an adverse decision involving 24
the length of stay for inpatient hospitalization as related to the medical procedure involved. 25

15–10D–02. 26

(d) (1) A member, a member’s representative, or a health care provider filing 27
a complaint on behalf of a member may file a complaint with the Commissioner without 28
first filing an appeal with a carrier [only] if the coverage decision involves an urgent 29
medical condition, as defined by regulation adopted by the Commissioner, for which care 30
has not been rendered. 31

SENATE BILL 797 7

(2) A HEALTH CARE PROVIDER MAY FILE A COMPLAINT WITH THE 1
COMMISSIONER WITHOUT FIRST FILING AN APP EAL WITH A CARRIER I F THE 2
COVERAGE DECISION IS THE RESULT OF A FINAL DETERMINATION TO DOWNCODE A 3
CLAIM UNDER § 15–1005.1. 4

SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 5
October 1, 2026. 6