The Illinois Downcoding Law: Who It Doesn't Cover

Since June 1, 2026, insurers in Illinois have been barred from putting heavier documentation demands on CPT 90837 than on any other psychotherapy code, and from auditing it more often. That is Public Act 104-0446, and it answers a complaint therapists have been repeating for years: the slow, unspoken squeeze off the 60-minute session and onto the 45-minute one, accomplished not by a denial but by making one code expensive to defend.

Five weeks later, on July 10, 2026, Illinois signed a much bigger, much louder law. The Transparency in Downcoding Act cleared the Senate 59-0 and the House 111-0, with no recorded opposition in either chamber, and it does something no Illinois statute had done before: it defines downcoding, bans the algorithmic version of it, and attaches penalties.

Then it gave the payors eighteen months to keep doing it, and excluded the self-funded plans that cover 67% of workers with employer-sponsored coverage.

Quick answer: the Illinois downcoding law, Public Act 104-0568, requires that any downcoding of a claim be made or reviewed by a human being rather than an algorithm, but it does not take effect until January 1, 2028, and it excludes self-insured ERISA plans, which cover 67% of workers with employer coverage (KFF, 2025). The Illinois law already helping therapists is the other one, Public Act 104-0446, effective June 1, 2026.

The short version, before the detail:

• PA 104-0446 (in force now): 60-minute psychotherapy billed as 90837 must be covered when medically necessary, with no extra documentation burden and no more frequent audits than other psychotherapy codes.
• PA 104-0568 (January 1, 2028): downcoding determinations must be made or reviewed by a natural person, with itemized notice and a dispute window of no less than 90 days.
• The gap: self-funded employer plans are excluded, and 67% of covered workers are in them (KFF, 2025).
• The precedent: Maryland fined Cigna $80,000 on March 13, 2026 using authority it already had, and extended the ban statewide three weeks later.

How do Illinois’ two downcoding laws compare?

Two Illinois laws now touch downcoding, and they barely overlap. Public Act 104-0446 took effect June 1, 2026 and names CPT 90837 directly. Public Act 104-0568 waits until January 1, 2028 and excludes the self-funded plans holding 67% of covered workers (KFF, 2025). One is live. One is scheduled.

	PA 104-0446 (HB 1085)	PA 104-0568 (SB 3114)
What it covers	60-minute psychotherapy billed as CPT 90837	Any downcoded evaluation and management or other service code, every specialty
Core requirement	Cover it when medically necessary. No heavier documentation demands and no more frequent audits than other psychotherapy codes	Every downcoding determination made or reviewed by a natural person. No algorithm that bypasses the information the billing professional submitted
Who it binds	Illinois insurers, on behavioral health coverage	Group health plan sponsors, health insurance issuers, Medicaid managed care organizations
Effective	June 1, 2026, in force now	January 1, 2028
What it excludes	No carve-out written into the Act. ERISA still limits what any state insurance law can reach (KFF, May 6, 2026)	Self-insured ERISA plans, workers’ compensation, and excepted benefits including stand-alone dental, by its own terms
Behavioral health language	Names CPT 90837 by number	None. No mental health or behavioral health reference anywhere in the text
Also in the law	Behavioral health reimbursement rate floors, 60-day credentialing deadline	Itemized notice of codes and amounts, dispute window of no less than 90 days, no diagnosis-only downcoding, Department of Insurance fines, restitution, or license suspension

Read the table left to right and the asymmetry is obvious. The smaller law is narrower, faster, and aimed at the exact code therapists fight over. The bigger law is broader, later, and full of holes where most employer coverage sits. If your practice is in Illinois and you bill 90837, the column on the left is the one that changes your Monday. We’ve written before about how insurers turn documentation demands into a rate cut, and PA 104-0446 makes that specific asymmetry unlawful in Illinois.

The 90837 rule already in force

Public Act 104-0446, effective June 1, 2026, requires Illinois insurers to cover medically necessary 60-minute psychotherapy billed as CPT 90837, and prohibits them from imposing more onerous documentation requirements on that code or auditing it more frequently than other psychotherapy codes (Illinois General Assembly). It also sets behavioral health reimbursement rate floors and a 60-day credentialing deadline, which matters because behavioral health has long been paid below medical and surgical rates.

Read that middle clause again, because it is the whole point. The pressure therapists describe was almost never a flat refusal to pay 90837. It was the audit letter. It was the extra note requirement that applied to the 60-minute code and nothing else. It was the sense that billing your actual session length put a target on your file, so you started billing 90834 for a session that ran an hour.

That is a rate cut executed through paperwork. Nobody had to say no. The parity language in PA 104-0446 names the mechanism directly and makes the asymmetry itself unlawful, which is a different and more useful thing than saying “90837 is covered.”

Here is the part worth sitting with. This law arrived quietly, took effect in five months rather than eighteen, and is specific to behavioral health. The law that got the press release does not mention mental health at all.

What is downcoding, and why doesn’t it show up in denial data?

Illinois now defines downcoding in statute as “the unilateral alteration by a health care payor of the level of evaluation and management service code or other service code submitted on a claim, resulting in a lower payment” (Illinois General Assembly). The claim gets paid. It is simply paid at a lower level than what was billed, without the provider agreeing to the change.

That is why it stays invisible in the data everyone quotes. Denial rates count claims that were refused, which is why even the denial-rate numbers we’ve tracked across the largest insurers cannot show you a downcode. A downcoded claim was accepted. It clears your clearinghouse, posts to your ledger, and shows up as revenue, just less of it than you earned. We wrote about the mechanics of this at length in The Invisible Pay Cut, so we will not relitigate the whole thing here.

The named programs are published policies, not allegations. UnitedHealthcare’s evaluation and management downcoding policy dates to the second quarter of 2019, aimed at Level 4 and Level 5 services (AAFP, January 28, 2019). Cigna’s Policy R49 took effect October 1, 2025. Both were public. Neither was hidden. They simply never generated a number anyone had to report.

What the Illinois downcoding law actually requires

Public Act 104-0568 bars payors from implementing any policy or using “any algorithm or other automated process, system, or tool that bypasses the evaluation of information included by the billing health care professional,” and requires that “all downcoding determinations must be made or reviewed by a natural person,” following the AMA CPT guidelines in effect at the time (Illinois General Assembly). Sen. David Koehler sponsored it, with co-sponsors Morrison, Castro, and Peters.

The operative requirements are narrow and concrete:

• No algorithmic bypass. Automated tools may still flag claims for review. They may not make the call.
• A named human decision-maker. Every downcoding determination gets made or reviewed by a natural person.
• No diagnosis-only downcoding. A payor may not downcode based solely on the reported diagnosis codes.
• Itemized notice. The original and revised codes, the original and revised payment amounts, the clinical information and coding guidance relied on, and instructions for disputing it.
• A dispute window of no less than 90 days.
• An anti-pattern clause. No downcoding pattern that targets clinicians who routinely treat complex or chronic patients.
• Enforcement. The Department of Insurance may impose fines, order restitution, or suspend a license. Home rule units are preempted as of January 1, 2028.

Note what the statute does not say. It contains no reference to artificial intelligence, no reference to mental health, and no reference to behavioral health. The operative phrase is “algorithm or other automated process, system, or tool.” It regulates automation, not intelligence, and it applies to every specialty equally. It is a claims statute that happens to catch therapy claims, not a therapy law.

The scope of who is covered is stated in the Act itself, and the table above has the full list. Hold that list in your head. The next section is about what is missing from it.

Who the Illinois downcoding law does not cover

The Act excludes, by its own terms, employee and employer self-insured health benefit plans under ERISA, workers’ compensation, and excepted benefits including stand-alone dental. Sixty-seven percent of covered workers are in self-funded plans (KFF Employer Health Benefits Survey, 2025). That single number is the difference between a law that changes your practice and a law that changes some of your claims.

KFF’s own analysis of state AI and claims-review laws puts the preemption problem plainly. ERISA “generally exempts self-insured plans established by private employers from most state insurance laws, including claims review protections, and would likely preempt state AI laws that relate to the claims review process,” with the conclusion that “many consumers are not guaranteed state protections” (KFF, May 6, 2026).

Now run that through a Tuesday afternoon in 2028. A remittance advice lands. Your 90837 came back as 90834. Whether Illinois law protects you depends entirely on whether your client’s employer funds its own plan or buys insurance, and that fact appears nowhere on the claim, nowhere on the card, and nowhere in the portal. The card often carries the same insurer’s logo either way, because self-funded employers hire those same carriers as third-party administrators.

So the honest description of this law is a real protection with a coin flip attached, and the coin is weighted against you two to one. That is not a reason to dismiss it. It is a reason to stop calling the problem solved. Whether a federal backstop ever fills that gap is a separate fight, and we’ve been tracking the parity enforcement side of it all year.

Why does a law that passed 59-0 wait until 2028?

Signed July 10, 2026. Effective January 1, 2028 (Illinois General Assembly). That is roughly eighteen months of runway, granted to a practice a legislature had just voted against 59-0 in the Senate and 111-0 in the House, with not one recorded no vote in either chamber.

Implementation runways are normal. Payors rebuild claims systems, retrain staff, rewrite policy documents. Fine. But it is worth naming what the runway means in practice: every automated downcoding program operating in Illinois today keeps operating, lawfully, for another year and a half. The unanimity of the vote and the length of the delay tell two different stories about how urgent anyone considered this.

Meanwhile the underlying practice keeps scaling. 84% of responding insurers reported using AI in utilization management in a NAIC survey of 93 companies across 16 states, as reported by KFF (KFF, May 6, 2026). Whatever those systems are doing in Illinois in the summer of 2026, they are permitted to keep doing it until New Year’s Day 2028.

Illinois also has no enacted AI-in-claims-review statute at all. House Bill 0035, the Artificial Intelligence Systems Use in Health Insurance Act, passed the House 79-35 on April 9, 2025, then died in Senate Assignments on June 2, 2025 (Illinois General Assembly). If you have read that Illinois requires insurers to disclose when AI drove a denial, you have read about a bill that never became law.

How did Maryland move faster without passing anything?

On March 13, 2026, the Maryland Insurance Administration fined Cigna $80,000 and ordered it to stop automatically downcoding evaluation and management claims under Policy R49, effective October 1, 2025, which stepped 99205 to 99204, 99215 to 99214, and 99245 to 99244 when the carrier’s internal criteria judged the documentation insufficient (ADA News, April 2026).

Twenty-five days later, on April 7, 2026, the agency issued Bulletin 26-9, extending the prohibition to every insurer operating in the state (Becker’s Payer Issues).

Set the two timelines side by side. A regulator using authority it already held went from an enforcement order against one carrier to a statewide prohibition in three weeks. A legislature took a full session to pass a bill, then attached an eighteen-month delay to it. Same practice, same year, two very different clocks.

That contrast is the most useful thing in this story for anyone deciding where to spend advocacy energy. Statutes are durable and slow. Insurance departments already hold unfair-claims-practices authority in most states, and they can act on a complaint file. If you are in a state with no downcoding bill moving, the department of insurance is not the consolation prize. In Maryland it was the faster lane.

The courts are the third lane, and they are moving too. Cigna’s PxDx review system denied more than 300,000 claims in two months, at an average of 1.2 seconds of physician review per claim, according to ProPublica reporting, and the resulting class action was allowed to proceed on March 31, 2025 (CBS News). In March 2026, a federal judge ordered UnitedHealth to produce internal documents including AI source code and denial-rate data.

What are the other states doing?

Six states enacted laws in 2026 restricting AI in insurer claims decisions: Alabama SB 63 (effective October 1, 2026), Indiana HB 1271 (July 1, 2026), Utah SB 319 (January 1, 2027), Washington SB 5395, Maryland HB 1563 (June 1, 2026), and Georgia SB 544 (January 1, 2027), joining California’s SB 1120, effective January 1, 2025 (Holland & Knight, May 26, 2026; Fenwick).

On downcoding specifically, the American Medical Association reports that Illinois joined Indiana and Virginia in enacting downcoding legislation in 2026, with “more than a dozen” states introducing bills during the session (AMA State Advocacy Update, June 18, 2026).

There is no authoritative national tally of downcoding laws, and we are not going to invent one. The accurate picture is roughly a half-dozen states, arriving one legislature at a time, on effective dates that stretch into 2028. If you practice in any of the other forty-something, the current answer to “what protects me from an automated downcode” is your contract, your appeal rights, and your state insurance department.

Indiana’s statute is the one most often misquoted as Illinois’s. Indiana HB 1271, effective July 1, 2026, is where the “sole basis” and “human employee or contractor” and “medical record” language lives. Illinois used different words for a related idea. If you are quoting statutory text in an appeal letter, quote your own state’s.

Dentistry, worth noting, is further along than behavioral health. The ADA counted more than 100 dental insurance reform bills across 37 states in 2026, with 14 states enacting 21 laws, downcoding among them (ADA News, July 2026).

Why did physicians get this law and therapists didn’t?

Every downcoding bill we traced in 2026 leads back to a state medical society or to AMA model legislation. In Illinois that was ISMS. And the AMA’s flagship prior authorization survey, fielded among 1,000 practicing physicians and released May 13, 2026, does not break out behavioral health at all (AMA, May 13, 2026).

That survey is the evidence base legislators cite, and its findings are hard to argue with. 74% of physicians say denials have increased over the past five years, 60% are concerned AI will increase them further, and only 24% agree that denials are consistently reviewed by qualified clinicians. Every one of those numbers describes something therapists experience too. None of them was collected from a therapist.

Here is the uncomfortable part. We went looking for behavioral health downcoding prevalence data at any credible tier and found none. Not a national survey, not an association study, not a state department analysis. Billing vendors publish numbers, but they cite their own unpublished internal data with no methodology and no sample, which makes those figures unusable in an appeal and unusable here.

So the coalition that won this law is not the coalition that needed it most. Physicians had a trade association with a lobbying arm, model bill language, and a repeatable survey. Behavioral health, spread across LCSWs, LMFTs, LPCs, psychologists, and a dozen state chapters that do not share a legislative agenda, mostly had anecdotes. Statutes get written from the thing that can be cited.

And notice what happened when someone did write behavioral health language. PA 104-0446 named CPT 90837 by number and took effect in five months. Specificity moved faster than category. The lesson is not that therapists lack a case. It is that the case has never been counted.

What should a therapist do before 2028?

Only 24% of physicians agree denials are consistently reviewed by qualified clinicians (AMA, May 13, 2026). That number, more than any statute, describes the environment you are billing into right now. Until January 2028 in Illinois, and indefinitely almost everywhere else, the practical protections are the ones you build yourself.

Reconcile every remittance against what you billed. Not the total. The code. A downcode is invisible on a deposit summary and obvious on a line item. If nobody in your practice compares submitted code to paid code, you cannot know whether this is happening to you, which is precisely why it works.

Write down the pattern before you write the appeal. Dates, codes submitted, codes paid, payor, plan. A single downcode is an anecdote. Forty of them, on the same code, from the same payor, is a complaint file a regulator can act on. Maryland’s action started with somebody documenting Policy R49.

Find out whether the plan is self-funded. Ask during benefits verification. It determines whether your state’s protections apply at all, and it is the one fact that never appears on the claim.

Bill the session you provided. If the hour was clinically indicated and the note supports it, 90837 is the correct code. In Illinois, as of June 1, 2026, an insurer cannot lawfully make that code more expensive to defend than any other. Elsewhere, a clinician downcoding themselves preemptively is the cheapest possible outcome for the payor, because it costs them nothing and generates no record.

Send the complaint. Departments of insurance act on volume. A regulator with existing authority moved faster than a unanimous legislature in 2026, and it moved because a file existed.

The part the vote count hides

A bill that passes 59-0 and 111-0 looks like consensus. It is worth asking what kind. Nobody in Springfield stood up to defend automated downcoding, and nobody had to, because the version that passed lets automation keep flagging claims and simply moves the final signature to a person, starting in eighteen months, and only for the roughly one-third of covered workers who are not in self-funded plans.

The payors’ argument deserves a fair hearing. Automated code review does catch genuine upcoding, and human-review mandates do raise administrative cost. The Illinois Act concedes half of that by design. The fight was never over whether software is in the loop. It was over who makes the call, and who has to be told what happened.

What changed in 2026 is that the practice has a legal name, a definition, and a penalty attached to it in at least three states. What did not change is the arithmetic. Sixty-seven percent of covered workers sit in plans that state insurance law mostly cannot reach (KFF, 2025), and the therapist reading a remittance in 2028 will still have no way to tell which side of that line the client is on.

Naming the thing was the hard part, and it is done. Covering everyone is the part still outstanding.

If you’re weighing how much of your caseload should sit on the insured side of that line at all, our breakdown of the gap between insurance rates and private pay is the next thing to read. And if you’re a clinician trying to build a practice that doesn’t depend on which side of that line your clients land on, book a call.

FAQ

What is downcoding? Illinois law defines it as “the unilateral alteration by a health care payor of the level of evaluation and management service code or other service code submitted on a claim, resulting in a lower payment.” The claim still gets paid, so it never appears in denial statistics. The amount is just smaller. We covered the mechanics in The Invisible Pay Cut.

What did Illinois actually pass? SB 3114, the Transparency in Downcoding Act, became Public Act 104-0568 when Gov. JB Pritzker signed it on July 10, 2026. It passed the Senate 59-0 and the House 111-0, and it gives providers no less than 90 days to dispute a downcoded claim.

When does it take effect? January 1, 2028, about eighteen months after signing. Public Act 104-0446, the behavioral health law protecting CPT 90837 from selective audits, took effect earlier, on June 1, 2026.

Does it ban insurers from using AI? No. Automated tools may still flag claims for review. What the law prohibits is any algorithm or automated process that “bypasses the evaluation of information included by the billing health care professional,” and it requires that every downcoding determination be made or reviewed by a natural person.

Does it protect me if my client’s insurance is through a large employer? Often not. The Act excludes self-insured ERISA plans by its own terms, and 67% of covered workers are in self-funded plans (KFF, 2025). The funding arrangement does not appear on the claim. For the federal layer sitting above all of this, see our piece on the 2026 parity rollback.

Is there anything protecting therapists in Illinois right now? Yes. Public Act 104-0446, effective June 1, 2026, requires coverage of medically necessary 60-minute psychotherapy billed as CPT 90837 and bars insurers from imposing more onerous documentation requirements on it or auditing it more often than other psychotherapy codes.

What about the other states? Six states enacted laws in 2026 restricting AI in insurer claims decisions: Alabama, Indiana, Utah, Washington, Maryland, and Georgia, joining California’s SB 1120, effective January 2025. On downcoding specifically, the AMA reports Illinois joined Indiana and Virginia in 2026, with more than a dozen states introducing bills.

Has any regulator actually penalized an insurer for this? Yes. On March 13, 2026, the Maryland Insurance Administration fined Cigna $80,000 and ordered it to stop automatically downcoding evaluation and management claims under its Policy R49. On April 7, 2026, it extended the prohibition to all insurers in the state via Bulletin 26-9.

Sources

• Illinois General Assembly, Public Act 104-0568, the Transparency in Downcoding Act, full statutory text: definition of downcoding, algorithmic bypass prohibition, natural-person review requirement, 90-day dispute window, ERISA and workers’ compensation exclusions, January 1, 2028 effective date.
• Illinois General Assembly, SB 3114 bill status: Senate 59-0, House 111-0, sponsor Sen. David Koehler, signed July 10, 2026.
• Illinois General Assembly, Public Act 104-0446 (HB 1085), effective June 1, 2026: CPT 90837 coverage, documentation and audit parity, behavioral health rate floors, 60-day credentialing.
• Illinois General Assembly, HB 0035 bill status: the Artificial Intelligence Systems Use in Health Insurance Act passed the House 79-35 on April 9, 2025 and died in Senate Assignments on June 2, 2025.
• KFF, Regulation of AI in Prior Authorization and Claims Review (May 6, 2026): NAIC survey finding 84% of responding insurers use AI in utilization management (93 companies, 16 states), plus ERISA preemption analysis.
• KFF, 2025 Employer Health Benefits Survey: 67% of covered workers are in self-funded plans.
• American Medical Association, 2025 Prior Authorization Physician Survey (n=1,000, released May 13, 2026): 74% report denials rose over five years, 60% concerned AI will increase denials, 24% agree denials are consistently reviewed by qualified clinicians.
• American Medical Association, State Advocacy Update, June 18, 2026: Illinois joins Indiana and Virginia on downcoding, more than a dozen states introduced bills.
• ADA News, Maryland orders Cigna to stop automatic downcoding, issues $80,000 fine: March 13, 2026 order, Policy R49 effective October 1, 2025, code pairs 99205/99204, 99215/99214, 99245/99244.
• Becker’s Payer Issues, Maryland fines Cigna $80K, demands halt to automatic downcoding: Bulletin 26-9, April 7, 2026.
• Holland & Knight, States Continue Efforts to Regulate AI in Healthcare (May 26, 2026): six states enacting AI-in-claims laws in 2026.
• Fenwick, California’s SB 1120: effective January 1, 2025.
• AAFP, UnitedHealthcare moves from denial to downcoding (January 28, 2019): E/M downcoding policy beginning Q2 2019, Level 4 and 5 services.
• CBS News, Cigna algorithm and patient claims lawsuit: PxDx review, more than 300,000 claims in two months at an average of 1.2 seconds each, class action allowed to proceed March 31, 2025.
• ADA News, State dental insurance reforms continue momentum in 2026: more than 100 bills across 37 states, 14 states enacting 21 laws.
• WAND-TV, Pritzker signs downcoding transparency bill into law (July 10, 2026).

Figures current as of July 24, 2026.

Disclaimer

This article is for educational and informational purposes only. It does not constitute medical, clinical, legal, billing, or therapeutic advice, and reading it does not create a therapist-client relationship with Matthew Sexton, LCSW or Mental Wealth Solutions, Inc.

Statutes, effective dates, insurer policies, and regulatory guidance change, and they may change after this article is published. Coverage rules, coding requirements, audit practices, and appeal rights vary by state, by payor, by plan, and by contract. Nothing here is a substitute for reading your own payor contracts, confirming current requirements with your state department of insurance or a qualified billing professional, or obtaining advice from licensed counsel about your specific situation.

If you are in immediate emotional crisis, you can reach the 988 Suicide & Crisis Lifeline by calling or texting 988 (US). If you are experiencing domestic violence or are in physical danger, contact the National Domestic Violence Hotline at 1-800-799-7233 or visit thehotline.org. In a life-threatening emergency, call 911.