Assembly BillIntroducedHealth and Safety
AB 2431: Downcoding medical claims.
What AB 2431 does, verified May 16, 2026
The bill aims to regulate downcoding practices in healthcare, where payers unilaterally alter service or procedure codes on claims to lower payments. The bill would require plans and insurers to set forth requirements and limitations for downcoding decisions and provide specified information to billing providers for disputing downcoded claims. It prohibits plans and insurers from using downcoding practices in a discriminatory manner against certain physicians, and authorizes departments to take action against plans or insurers that engage in discriminatory downcoding. The bill also requires plans and insurers to reimburse billing providers for downcoded claims.
Bill journey
1IntroducedCurrent
2In CommitteePending
3First Chamber FloorPending
4Second ChamberPending
5GovernorPending
6ChapteredPending
Last action: In committee: Held under submission. (2026-05-14)Alert me
Author and sponsors
Full contact details, staff, and committees with Connect, $16/moUnlockRecent actions9 total · showing 5
| May. 14, 2026 | In committee: Held under submission. |
| May. 06, 2026 | In committee: Set, first hearing. Referred to APPR. suspense file. |
| Apr. 13, 2026 | Re-referred to Com. on APPR. pursuant to Assembly Rule 96. |
| Apr. 13, 2026 | Re-referred to Com. on P. & C.P. |
| Apr. 09, 2026 | Read second time and amended. |
Latest bill textAmended version, April 9, 2026 · 2,436 words
| Amended IN Assembly April 09, 2026 |
CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION
Assembly Bill
No. 2431
| Introduced by Assembly Member Patel (Coauthor: Assembly Member Aguiar-Curry) |
February 20, 2026 |
An act to add Section 1371.01 to the Health and Safety Code, and to add Section 10123.148 to the Insurance Code, relating to health care coverage.
LEGISLATIVE COUNSEL'S DIGEST
AB 2431, as amended, Patel. Downcoding medical claims.
Existing law, the Knox-Keene Health Care Service Plan Act of 1975, provides for the licensure and regulation of health care service plans by the Department of Managed Health Care, and makes a willful violation of the act a crime. Existing law provides for the regulation of health insurers by the Department of Insurance. Existing law sets forth requirements by which a health care service plan or health insurer reimburses a provider for health care services.
This bill would prohibit a health care service plan or an insurer issuing group or individual policies of health insurance from using an automated process, system, or tool require a determination to downcode a claim, which is the unilateral alteration by a payer of the service or procedure code submitted on a claim resulting in a lower payment. payment, to include a documented review of the clinical information supporting the billed service. The bill would set forth requirements for and limitations of downcoding decisions, and, if a claim is downcoded, would require a plan or insurer to provide a billing provider with specified information and a clear and accessible process for disputing downcoded claims. The bill would prohibit a plan or insurer from using downcoding practices in a targeted or discriminatory manner against physicians or other health care providers who routinely treat patients with high acuity, complex, or chronic conditions, and would authorize the departments to take action against a plan or insurer that engages in a pattern or practice of discriminatory downcoding or that otherwise violates these provisions. Because a willful violation of these provisions by a health care service plan would be a crime, the bill would impose a state-mandated local program. The bill would require the departments to collect data on coding and claims adjustment practices, evaluate the information, and submit a report with specified information to the Legislature.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
The people of the State of California do enact as follows:
SECTION 1.
The Legislature finds and declares all of the following:(a) Downcoding of medical claims, when done without clear justification or transparency, undermines fair payment of health care providers and threatens the stability of physician practices.
(b) Improper downcoding may result in harm to patients by disincentivizing care for individuals with complex medical conditions.
(c) It is in the public interest to ensure that all coding adjustments are clinically supported, transparent, appealable, and free from discriminatory targeting.
SEC. 2.
Section 1371.01 is added to the Health and Safety Code, to read:(a)(1)A health care service plan shall not use an automated process, system, or tool to downcode a claim.
(2)Downcoding decisions shall be made only by a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services included in the claim and who has performed
1371.01.
(a) A determination to downcode shall include a documented review of the clinical information supporting the billed service, which is relevant to determining the propriety of the billed code pursuant to(b) A health care service plan shall not downcode a claim based solely on information reported on the claim form, including, but not limited to, the reported diagnosis or procedure codes.
(c) If a claim is downcoded, the health care service plan shall notify and provide the billing provider with an accurate and clear written explanation of the specific reasons for the action taken, to clearly indicate that the claim has been downcoded, and provide all of the following:
(1) The specific reason for the downcoding, including all of the following in sufficient detail to enable a billing provider to determine what additional documentation or claim corrections would be necessary for the claim to be reimbursed:
(A) Reference to the coding criteria used to justify the downcoding.
(B) The specific criterion deemed to be not met.
(C) A description of the specific deficiency at issue in the claim.
(2) The original and revised service codes and payment amounts.
(3) A notice of the provider dispute resolution mechanism described in subdivision (d).
(d) (1) If a claim is downcoded, the health care service plan shall provide the billing provider with a clear and accessible process for disputing downcoded claims, including all of the following:
(A) A written notice detailing how to initiate a provider dispute.
(B) Contact information for the individual managing the provider dispute.
(C) The timeline for submission of a provider dispute that is no less than 365 days from the plan’s or the plan’s capitated provider’s most recent action or, in the case of inaction, that is less than 365 days after the most recent time for contesting or denying claims has expired.
(D) The timeline, not to exceed 45 working days after receipt of a provider dispute or amended provider dispute, for adjudicating the provider dispute and issuing a written determination to the provider stating the pertinent facts and explaining the reasons for the determination.
(2) Billing providers shall have the right to appeal in batches of similar claims involving substantially similar downcoding issues, without restriction.
(3) A health care service plan shall resolve provider disputes for downcoded claims in accordance with any other applicable state or federal law.
(e) (1) A health care service plan shall not use downcoding practices in a targeted or discriminatory manner against physicians or other health care providers who routinely treat patients with high acuity, complex, or chronic conditions.
(2) A pattern or practice of discriminatory downcoding identified by the director shall be subject to enforcement actions, including fines, restitution, or suspension of licensure under this chapter.
(f) The department shall leverage existing data and authority pursuant to this chapter to collect data on coding and claims adjustment practices, including the percentage of adjusted claims, the percentage that are adjusted utilizing an automated system, the percentage rate at which they are disputed by the provider, the outcomes of provider disputes, and other data as determined by the department. The department shall evaluate the information described in this subdivision and submit a report to the Legislature that demonstrates the prevalence and impact of coding and claims adjustment practices, including downcoding and `upcoding, on the claims process, cost of care, financial viability of provider practices, and care delivery. The report shall be submitted in compliance with Section 9795 of the Government Code.
(f)
(g) (1) A violation of this section is enforceable by the department. Upon a final determination by the director that a health care service plan has violated this section, the director may do all of the following:
(A) Impose monetary penalties as permitted under this chapter.
(B) Order the health care service plan to reprocess improperly downcoded claims with interest pursuant to Section 1371 or 1371.35, as applicable.
(C) Order the health care service plan, for a period of three years from the date of the director’s determination, or for a shorter period prescribed by the director, to pay complete and accurate claims from the provider within a shorter period of time than that required by Section 1371 or 1371.35, as applicable.
(D) Make a claim for costs incurred by the department in an administrative or judicial action, including investigative expenses and the cost to monitor compliance by the plan.
(2) The enforcement remedies provided in this section are not exclusive and shall not limit or preclude the use of any available basis for enforcement or criminal, civil, or administrative remedy.
(g)For purposes of this section:
(1)“Automated tool” includes, but is not limited to, an artificial intelligence, algorithm, or other software tool.
(2)“Downcode”
(h) For purposes of this section, “downcode” or “downcoding” means the unilateral alteration by a payer of the service or procedure code submitted on a claim resulting in a lower payment.
SEC. 3.
Section 10123.148 is added to the Insurance Code, to read:(a)(1)An insurer issuing group or individual policies of health insurance shall not use an automated process, system, or tool to downcode a claim.
(2)Downcoding decisions shall be made only by a licensed physician or a licensed health care professional who is competent to evaluate the specific clinical issues involved in the health care services included in the claim and who has performed
10123.148.
(a) A determination to downcode shall include a documented review of the clinical information supporting the billed service, which is relevant to determining the propriety of the billed code pursuant to(b) An insurer issuing group or individual policies of health insurance shall not downcode a claim based solely on information reported on the claim form, including, but not limited to, the reported diagnosis or procedure codes.
(c) If a claim is downcoded, the insurer shall notify and provide the billing provider with an accurate and clear written explanation of the specific reasons for the action taken, to clearly indicate that the claim has been downcoded, and provide all of the following:
(1) The specific reason for the downcoding, including all of the following in sufficient detail to enable a billing provider to determine what additional documentation or claim corrections would be necessary for the claim to be reimbursed:
(A) Reference to the coding criteria used to justify the downcoding.
(B) The specific criterion deemed to be not met.
(C) A description of the specific deficiency at issue in the claim.
(2) The original and revised service codes and payment amounts.
(3) A notice of the provider dispute resolution mechanism or appeal process described in subdivision (d).
(d) (1) If a claim is downcoded, the insurer shall provide the billing provider with a clear and accessible process for disputing downcoded claims, including all of the following:
(A) A written notice detailing how to initiate a provider dispute.
(B) Contact information for the individual managing the provider dispute.
(C) The timeline for submission of a provider dispute that is no less than 365 days from the insurer’s most recent action or, in the case of inaction, that is less than 365 days after the most recent time for contesting or denying claims has expired.
(D) The timeline, not to exceed 45 working days after receipt of a provider dispute or amended provider dispute, for adjudicating the provider dispute and issuing a written determination to the provider stating the pertinent facts and explaining the reasons for the determination.
(2) Billing providers shall have the right to appeal in batches of similar claims involving substantially similar downcoding issues, without restriction.
(3) An insurer shall resolve provider disputes or appeals for downcoded claims in accordance with any other applicable state or federal law.
(e) (1) An insurer issuing group or individual policies of health insurance shall not use downcoding practices in a targeted or discriminatory manner against physicians or other health care providers who routinely treat patients with high acuity, complex, or chronic conditions.
(2) A pattern or practice of discriminatory downcoding identified by the commissioner shall be subject to enforcement actions, including fines, restitution, or suspension of licensure or certificate of authority under this code.
(f) The department shall leverage existing data and authority pursuant to this part to collect data on coding and claims adjustment practices, including the percentage of adjusted claims, the percentage that are adjusted utilizing an automated system, the percentage rate at which they are disputed by the provider, the outcomes of provider disputes, and other data as determined by the department. The department shall evaluate the information described in this subdivision and submit a report to the Legislature that demonstrates the prevalence and impact of coding and claims adjustment practices, including downcoding and upcoding, on the claims process, cost of care, financial viability of provider practices, and care delivery. The report shall be submitted in compliance with Section 9795 of the Government Code.
(f)
(g) (1) A violation of this section is enforceable by the department. Upon a final determination by the commissioner that an insurer has violated this section, the commissioner may do all of the following:
(A) Impose monetary penalties as permitted under this code.
(B) Order the insurer to reprocess improperly downcoded claims with interest pursuant to Section 10123.13 or 10123.147, as applicable.
(C) Order the insurer, for a period of three years from the date of the commissioner’s determination, or for a shorter period prescribed by the commissioner, to pay complete and accurate claims from the provider within a shorter period of time than that required by Section 10123.13 or 10123.147, as applicable.
(D) Make a claim for costs incurred by the department in an administrative or judicial action, including investigative expenses and the cost to monitor compliance by the insurer.
(2) The enforcement remedies provided in this section are not exclusive and shall not limit or preclude the use of any available basis for enforcement or criminal, civil, or administrative remedy.
(g)For purposes of this section:
(1)“Automated tool” includes, but is not limited to, an artificial intelligence, algorithm, or other software tool.
(2)“Downcode”
(h) For purposes of this section, “downcode” or “downcoding” means the unilateral alteration by a payer of the service or procedure code submitted on a claim resulting in a lower payment.
SEC. 4.
No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.Text of AB 2431 as amended, from the official record. Connect Plus keeps every version and highlights what changed.Compare versions