CMA-Sponsored Bill Seeks to Prohibit Automatic Downcoding by Insurers
- 1 day ago
- 3 min read
What’s happening: Assembly Bill 2431, introduced by Assemblymember Darshana Patel and sponsored by the California Medical Association (CMA), would prohibit health insurers from automatically downcoding physician claims without documented clinical review. The legislation aims to protect physician practices from unjust payment reductions and preserve patient access to care.
Across California, physicians are reporting a growing pattern: claims submitted accurately and supported by documentation are being unilaterally reduced to lower-paying codes through automated “claim-editing” systems.
Downcoding occurs when an insurer alters a submitted claim to a lower reimbursement level than the service provided. Increasingly, this is being done through algorithm-driven processes rather than individualized clinical review of medical records. For physicians, the result is significant administrative burden, delayed payment, and revenue loss tied directly to the complexity of care delivered.
AB 2431 would prohibit insurers from automatically downcoding claims without documented clinical review and would establish clear standards for transparency, appeals, and enforcement.
Why This Matters for Los Angeles Physicians
Los Angeles County physicians operate in one of the most complex payer environments in the country. With more than one-third of residents enrolled in Medi-Cal, widespread delegated risk arrangements, and a mix of commercial HMO and PPO products, reimbursement integrity is critical to practice sustainability.
For independent practices and small groups in particular, automatic downcoding can create cumulative financial strain. Physicians who routinely treat patients with multiple chronic conditions or high social complexity may be disproportionately affected, as algorithmic tools often rely heavily on diagnosis patterns rather than full clinical context.
When reimbursement does not reflect the care delivered, the impact extends beyond practice margins. It influences network participation decisions, contract negotiations, and long-term practice viability. In communities already facing projected physician shortages, destabilizing reimbursement models can directly affect patient access and continuity of care.
The Policy That Raised Alarms
Concern intensified in October 2025 when Cigna implemented its Evaluation and Management (E/M) Coding Accuracy Policy nationwide. The policy permits automated reductions of certain E/M service levels based on internal criteria.
Following advocacy by CMA and engagement with California regulators, Cigna agreed to pause implementation of the policy for certain fully insured commercial HMO products in California pending review by the Department of Managed Health Care (DMHC). The pause does not apply to all plan types, including self-insured products, and the policy proceeded outside California.
The episode heightened scrutiny of insurers’ use of algorithm-driven claims management tools and reinforced the need for statutory guardrails.
What AB 2431 Would Do
Prohibit automatic downcoding without documented clinical record review
Ban service-level reductions based solely on diagnosis codes
Prohibit the use of claim-editing algorithms to automatically downcode claims
Require insurers to notify physicians of any downcoding and clearly explain the rationale
Establish a defined appeals process and allow batching of similarly downcoded claims
Prohibit discriminatory downcoding practices targeting physicians who treat complex or chronically ill patients
Create enforcement mechanisms, including administrative penalties and claim reprocessing orders
CMA President René Bravo, M.D., emphasized the broader stakes: insurers must follow nationally recognized coding standards and respect physician expertise. As California faces a projected physician shortage, policies that undermine practice sustainability threaten patient access statewide.
Protecting Clinical Judgment and Practice Stability
At its core, AB 2431 is about restoring balance. Cost containment strategies cannot override clinical documentation, nationally recognized coding standards, or physician judgment.
For Los Angeles physicians navigating evolving Medi-Cal rules, commercial payer changes, and increasing administrative requirements, fair and transparent reimbursement practices are essential.
LACMA+CMA will continue advocating to ensure that payment policies support sustainable physician practice and protect access to care for the patients who rely on us.
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