Indiana has banned the use of solo AI claim downcoding, requiring human review of medical records. Clinicians have reported growing automatic downcoding and limited explanations, raising concerns about administrative burden, reimbursement, and access to complex care.
Indiana Law
An Indiana law enacted in March bars many health plans from using AI-powered processes and systems as the sole basis to downcode a claim. Insurers can use AI in assessing claims but must have an employee or contractor review the medical record.
The law, which began as HB 1271, also sets the same restriction on clinicians in preparing their claims, requiring them to keep humans in the loop. The law says AI-driven processes and systems may not be used to submit billing requests to insurers without the intervention of the clinician or other person involved in the development of the claim.
Related: Spider Man faces medical ethics dilemmas
Clinician Concerns
Clinicians have reported an increase in downcoding, with insurers often providing little insight for these decisions. Justin D. Harris, chief executive officer of Daviess Community Hospital in Washington, Indiana, spoke of the frustrations of downcoding during a January state House Committee on Insurance hearing.
Carrie Davis, MD, said there has been an increase in the past few years of insurers determining a patient’s case was less complex than a physician reported. “This decision is being made automatically, often with AI or third-party vendors, often using just the diagnosis code and without a review of the patient’s full medical record,” Dr. Davis said.
Clinicians report an increase in downcoding, with insurers providing little insight. The California Medical Association questions how insurers use automated “claim-editing” algorithms for downcoding claims.
State Legislation
Several states are looking to prevent insurers from relying on AI alone in downcoding claims from clinicians. Indiana and Illinois prohibit many insurers from using automated processes alone to downcode claims, requiring human review of medical records.
Related: User Account Blocked by Social Media Platform
States have passed more than a dozen laws this year seeking to define the role of AI in healthcare, according to the Mid-Year AI Legislation Report from the nonprofit Transparency Coalition.
Future Developments
As the use of AI in healthcare continues to grow, more states will likely follow Indiana’s lead in regulating its use in claim downcoding. By requiring human review of medical records, these laws aim to ensure that clinical expertise, not computer algorithms, dictates the level of care provided.
They will help prevent insurers from relying solely on AI for downcoding.