These states are pushing back against insurer ‘downcoding’

Modern Healthcare – Wednesday, November 12, 2025
By Noah Tong

The furor over accusations that health insurance companies are automatically “downcoding” medical claims has reached state capitals.

Arkansas and Virginia adopted new laws this year to address downcoding, which is often conducted using artificial intelligence and other digital tools. Physician societies such as the American Medical Association are gathering allies in several state legislatures. The AMA expects more progress in 2026, according to a spokesperson.

Health insurance companies such as Cigna and CVS Health subsidiary Aetna maintain they deploy AI and other technologies to target providers with established patterns of overbilling, or “upcoding.” This practice affects a “small subset of outlier physicians that are out of step with their peers,” the insurance trade group AHIP said in a statement.

These are the states that have enacted or debated legislation to curb downcoding this year.

Arkansas

Under a law that took effect in August, insurers must notify providers within 30 days of processing a downcoded claim.

Physicians generally say they are unaware of claims adjustments unless they observe that payments are lower than expected when reviewing claims.

Virginia

A statute took effect in July that requires insurers to disclose downcoding and payment bundling policies to providers in their network contracts, and specify the services that may be subject to downcoding or bundling, either in the contracts or on a public website.

The Virginia General Assembly is likely to take aim at downcoding again next year through legislation that would direct insurance companies to offer greater detail about downcoding decisions and appeals processes, a Medical Society of Virginia spokesperson said.

Ohio

Ohio legislators are weighing a measure that would ban insurers from automatically downcoding claims solely based on diagnosis codes or the duration of patient visits.

The Ohio State Medical Association supports the bill. The Ohio General Assembly is likely to hold more hearings on the issue next year, said Monica Hueckel, vice president of advocacy of the physician society.

“The coalition around this bill in the [state] Senate is very large,” Hueckel said. “It includes chiropractors, counselors, social workers, psychologists — lots of individuals that are also experiencing issues in their dealings with the insurers.”

New York

Empire State lawmakers considered a bill this year to bar downcoding that has the effect of “reversing or altering” medical necessity determinations. The measure hasn’t advanced past the committee stage.

“I don’t think that consumer groups are aware of this, because if they were, I think there would be more conversations,” said state Assemblymember Pamela Hunter (D), who sponsored a separate bill to govern the use of AI in utilization reviews.

Connecticut

A proposal to prohibit insurers from using software tools to engage in pre-paid claims downcoding did not move forward this year.

The Connecticut State Medical Society will make a new push in 2026 that utilizes reports from primary care providers on the percentage of their claims that are adjusted and the share of appeals that succeed, a spokesperson said.

New Jersey

A pair of measures to ban downcoding died in committee this year.

Utah

Utah enacted a law limiting downcoding in dental claims but there is no legislation to address the practice in health insurance, state Rep. Jim Dunnigan (R), who sponsored the dentistry bill, wrote in an email.

The Utah Medical Association is seeking help from Jon Pike, who leads the Utah Insurance Department. “We are talking with the Utah insurance commissioner about these issues and looking to see what can be done already when insurers are violating statute,” Michelle McOmber, the group’s CEO, wrote in an email. But state regulators are circumscribed because the federal government has jurisdiction over large group health plans, she wrote.

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