Transparency in Downcoding Act (SB 3114)

Lets health insurers use automated tools to flag claims for possible downcoding but requires a natural person to make or review every downcoding determination, and bars downcoding based solely on reported diagnosis codes.

A health-care statute with an AI core: it draws the human-in-the-loop line through insurance claims adjudication. “Downcoding” — an insurer reassigning a claim to a lower-paying code — may still be flagged by an automated system, but under the Transparency in Downcoding Act the determination itself must be made or reviewed by a natural person applying the AMA’s CPT guidelines, and it can never rest on the reported diagnosis codes alone.

For a payor the work is procedural and dated to January 1, 2028: route every algorithmic downcoding flag to a human reviewer, tell the clinician when and why a claim was cut, and stand up an accessible dispute process. The Department of Insurance enforces it, and home-rule units are pre-empted from writing their own downcoding rules. Carried by Sen. Dave Koehler with physician-legislator Rep. Bill Hauter, it cleared both chambers without a dissenting vote.

What it requires

Ensure every downcoding determination is made or reviewed by a natural person following the AMA CPT coding guidelines then in effect — automation may flag a claim, but not decide it.

Do not downcode a claim based solely on the reported diagnosis codes.

Do not apply downcoding in a targeted or discriminatory manner against clinicians who routinely treat complex or chronic patients.

Notify the clinician when a claim is downcoded and reimbursed at a lower level, including the clinical reason, and provide an accessible process to dispute it.

Transparency in Downcoding Act

What it requires

Who is covered

What the exposure is

Key dates

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