Illinois Transparency in Downcoding Act
Summary
The Illinois House of Representatives has introduced HB4735, the Transparency in Downcoding Act, which aims to regulate health insurance downcoding practices. The bill prohibits certain automated downcoding and discriminatory practices, requiring physician review for downcoding decisions and establishing notification, appeal, and enforcement provisions.
What changed
House Bill 4735, the Transparency in Downcoding Act, has been introduced in the Illinois House of Representatives and is currently in the House Rules Committee. This proposed legislation seeks to regulate how health insurance issuers handle claim downcoding. It prohibits the use of automated processes for downcoding, prevents downcoding based solely on diagnosis codes, and forbids discriminatory practices against physicians treating complex conditions. Key provisions require that downcoding decisions be made by a physician licensed in the US with a similar specialty. The bill also outlines requirements for notifying providers about downcoded claims, establishes an appeal process, and grants the Department of Insurance enforcement powers, including fines, restitution, and license suspension for patterns of discriminatory downcoding.
This bill, if enacted, will require health insurance issuers to revise their claims processing and review procedures. Compliance officers should monitor its progress through the legislative process. If passed, affected entities will need to implement physician-led review for downcoding decisions, update notification and appeal protocols, and ensure their systems do not engage in discriminatory downcoding practices. The effective date is upon becoming law, with immediate effect, but the bill is currently in draft status and subject to legislative changes.
What to do next
- Monitor legislative progress of HB4735.
- Review current downcoding processes for compliance with proposed physician review and non-discriminatory practice requirements.
- Prepare to update claims processing and appeals procedures if the bill is enacted.
Penalties
Fines, restitution, or suspension of the health insurance issuer's license in this State.
Source document (simplified)
IL HB4735 | 2025-2026 | 104th General Assembly
Illinois House Bill 4735
IL State Legislature page for HB4735
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Status
Sponsorship: Slight Partisan Bill (Democrat 2-1)
Status: Introduced on January 30 2026 - 25% progression
Action: 2026-03-27 - Rule 19(a) / Re-referred to Rules Committee
Pending: House Rules Committee
Text: Latest bill text (Introduced) [HTML]
Summary
Creates the Transparency in Downcoding Act. Provides that the Act applies to certain policies of health insurance amended, delivered, issued, or renewed on or after the effective date of the Act, except for employee or employer self-insured health benefit plans under the federal Employee Retirement Income Security Act of 1974 and health care provided pursuant to the Workers' Compensation Act or the Workers' Occupational Diseases Act. Prohibits a health insurance issuer from using an automated process, system, or tool to downcode a claim; from downcoding a claim based solely on the reported diagnosis codes; and from using downcoding practices in a targeted or discriminatory manner against physicians who routinely treat patients with complex or chronic conditions. Requires downcoding decisions to be made by a physician licensed to practice medicine in all its branches in any United States jurisdiction and of the same or similar specialty as a physician who typically manages the medical condition or disease. Sets forth provisions concerning notification requirements for downcoded claims; the appeal process for downcoded claims; enforcement by the Department of Insurance; and penalties. Provides that any pattern or practice of discriminatory downcoding identified by the Director of Insurance or another regulatory authority shall be subject to enforcement actions, including fines, restitution, or suspension of the health insurance issuer's license in this State. Effective immediately.
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Title
TRANSPARENCY IN DOWNCODING ACT
Sponsors
| Rep. Sharon Chung [D] | Rep. Dagmara Avelar [D] | Rep. Ryan Spain [R] |
History
| Date | Chamber | Action |
| --- | --- | --- |
| 2026-03-27 | House | Rule 19(a) / Re-referred to Rules Committee |
| 2026-03-12 | House | Assigned to Insurance Committee |
| 2026-03-03 | House | Added Co-Sponsor Rep. Ryan Spain |
| 2026-02-27 | House | Added Co-Sponsor Rep. Dagmara Avelar |
| 2026-02-06 | House | Referred to Rules Committee |
| 2026-02-06 | House | First Reading |
| 2026-01-30 | House | Filed with the Clerk by Rep. Sharon Chung |
Illinois State Sources
| Type | Source |
| --- | --- |
| Summary | https://www.ilga.gov/Legislation/BillStatus?DocNum=4735&GAID=18&DocTypeID=HB&SessionID=114&GA=104 |
| Text | https://www.ilga.gov/Legislation/BillStatus/FullText?LegDocId=207198&DocName=10400HB4735&DocNum=4735&DocTypeID=HB&LegID=165852&GAID=18&SessionID=114&SpecSess=&Session= |
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