S.F. 2226 Section 1. NEW SECTION . 514M.1 Definitions. 1 As used in this chapter, unless the context otherwise 2 requires: 3 1. “Automated adjudication system” means any software, 4 algorithm, artificial intelligence, machine-learning system, 5 or rule-based automated process used by a health carrier or 6 third-party administrator to evaluate, adjust, approve, deny, 7 or downcode a claim submitted by a health care provider. 8 2. “Claim” means a request for payment or reimbursement 9 submitted by a health care provider to a health carrier for 10 health care services rendered to a covered person enrolled in a 11 health benefit plan of the health carrier. 12 3. “Clinical reviewer” means an individual employed by a 13 health carrier to review and decide insurance claims submitted 14 to the health carrier. 15 4. “Code” means a current procedural terminology code, 16 international classification of diseases code, health care 17 common procedure coding system code, a diagnosis-related group 18 code, or any other procedure or diagnosis code. 19 5. “Commissioner” means the commissioner of insurance. 20 6. “Covered person” means the same as defined in section 21 514J.102. 22 7. “Deny” means rejection of a claim, in whole or in part, 23 submitted by a health care provider to a health carrier for 24 reimbursement of health care services, including rejection 25 based on alleged lack of medical necessity, incorrect coding, 26 insufficient documentation, or policy exclusion, when such 27 determination is made by an automated adjudication system 28 without human oversight. 29 8. “Downcode” means the adjustment, alteration, or 30 reassignment of a code submitted by a health care provider 31 to a lower complexity, lower cost, or less intensive code, 32 including a change that reduces the reimbursement rate, without 33 individualized review by a clinical reviewer of the health 34 care provider’s documentation and the medical necessity of the 35 -1- LSB 5237XS (4) 91 nls/ko 1/ 8

S.F. 2226 health care services provided by the health care provider. 1 “Downcode” includes reassignment of a code to a lesser 2 alternative code by an automated adjudication system. 3 9. “Facility” means the same as defined in section 514J.102. 4 10. “Health care professional” means the same as defined in 5 section 514J.102. 6 11. “Health care provider” means a health care professional 7 or a facility. 8 12. “Health care services” means the same as defined in 9 section 514J.102. 10 13. “Health carrier” means an entity subject to the 11 insurance laws and regulations of this state, or subject 12 to the jurisdiction of the commissioner, including an 13 insurance company offering sickness and accident plans, a 14 health maintenance organization, a nonprofit health service 15 corporation, a plan established pursuant to chapter 509A 16 for public employees, or any other entity providing a plan 17 of health insurance, health care benefits, or health care 18 services. 19 Sec. 2. NEW SECTION . 514M.2 Downcoding and denial of 20 claims. 21 1. A health carrier shall not use an automated adjudication 22 system to downcode or deny a claim unless the health carrier 23 first performs a documented individualized review, conducted 24 by a clinical reviewer, of the claim, supporting medical 25 documentation, and applicable clinical criteria. 26 2. For a claim that a health carrier intends to downcode 27 or deny, the health carrier shall provide written notice to 28 the health care provider of the proposed downcoding or denial, 29 including, at a minimum, all of the following: 30 a. The originally billed code and health care service. 31 b. The proposed adjusted code or reason for the denial. 32 c. The clinical, contractual, or administrative 33 justification for the downcode or denial, including a specific 34 citation to the health carrier’s applicable policy, guideline, 35 -2- LSB 5237XS (4) 91 nls/ko 2/ 8

S.F. 2226 or contract provision that permits the downcode or denial. 1 d. Identification of the clinical reviewer responsible for 2 the downcode or denial, including the clinical reviewer’s name, 3 credentials, and the date and time of the review. 4 e. A detailed explanation of the health care provider’s 5 right to appeal the downcode or denial. The health care 6 provider must be given no less than thirty calendar days 7 from the date of the health care provider’s receipt of the 8 notice under this subsection, to appeal the decision or submit 9 additional documentation pursuant to section 514M.4, before the 10 downcode or denial is finalized. If a health care provider 11 does not appeal a downcode or denial within the required time 12 period, and the health carrier finalizes the downcode or 13 denial, the downcode or denial must be clearly identified in 14 the explanation of benefits or remittance advice and labeled as 15 “code adjustment”, “downcoding”, or “denial due to [reason]”, 16 with all associated documentation and justification. 17 3. An automated adjudication system shall not be used by a 18 health carrier as the sole basis for any of the following: 19 a. Denying a claim based on lack of medical necessity. 20 b. Rejecting a claim due to missing or insufficient 21 documentation. 22 c. Modifying a code without verification by a clinical 23 reviewer. 24 d. Flagging or withholding payment of a claim for health 25 care services that are routine, commonly accepted, or 26 historically validated from the same health care provider or 27 group of health care providers. 28 Sec. 3. NEW SECTION . 514M.3 Disclosure requirements. 29 1. A health carrier shall disclose to the division the 30 health carrier’s use of an automated adjudication system in the 31 processing of claims. The disclosure must include all of the 32 following: 33 a. A description of the health carrier’s automated 34 adjudication system, including whether the automated 35 -3- LSB 5237XS (4) 91 nls/ko 3/ 8

S.F. 2226 adjudication system performs downcoding or automated denials. 1 b. The criteria, threshold, or decision rules used by the 2 health carrier’s automated adjudication system. 3 c. The health carrier’s oversight process by clinical 4 reviewers, including the frequency of internal and external 5 audits conducted of automated decisions by the automated 6 adjudication system. 7 d. Measures taken by the health carrier to ensure fairness, 8 accuracy, and prevention of unlawful bias or disparate impact 9 on health care providers and covered persons. 10 2. A health carrier shall maintain documentation for each 11 claim that is downcoded by an automated adjudication system 12 that shows the submitted code, the adjusted code, the reason 13 for the downcode, and whether a clinical reviewer conducted a 14 review. The health carrier shall retain the documentation for 15 a minimum of five years from the date of payment of the claim. 16 Sec. 4. NEW SECTION . 514M.4 Appeals. 17 1. If a health care provider receives a notice of a 18 proposed denial or downcode of a claim under section 514M.2, 19 subsection 2, the health care provider may appeal the downcode 20 or denial no later than thirty calendar days following the date 21 the health care provider received the notice. A health care 22 provider may appeal by submitting additional documentation to 23 the health carrier or requesting that the health carrier’s 24 clinical reviewer review the claim. A health carrier shall 25 respond to an appeal from a health care provider no later 26 than forty-five calendar days from the date of receipt of the 27 appeal. 28 2. After a health carrier performs a review by a clinical 29 reviewer as required by subsection 1, if the health carrier 30 determines that the code originally billed for the health 31 care service is supported by proper documentation, the health 32 carrier shall readjust the claim to the code originally 33 billed and shall provide the health care provider with written 34 explanation for the reversal. 35 -4- LSB 5237XS (4) 91 nls/ko 4/ 8

S.F. 2226 3. Upon request by a health care provider, a health carrier 1 shall provide an annual report to the health care provider 2 that summarizes the following for the claims submitted to the 3 health carrier by the health care provider for the immediately 4 preceding calendar year: 5 a. The total number of claims the health carrier processed 6 by an automated adjudication system. 7 b. The number and percentage of claims that the health 8 carrier denied or downcoded by an automated adjudication 9 system. 10 c. The number and percentage of claims that the health care 11 provider appealed, and the number of claims that were adjusted 12 after review by a clinical reviewer. 13 Sec. 5. NEW SECTION . 514M.5 Enforcement —— penalties. 14 1. The commissioner may, if the commissioner finds that 15 a health carrier has intentionally or recklessly processed 16 claims by an automated adjudication system in violation of this 17 chapter, impose a penalty of not more than ten thousand dollars 18 per violation. A penalty collected under this subsection shall 19 be deposited as provided in section 505.7. 20 2. A health care provider or person injured by a violation 21 of this chapter may bring a civil action in district court 22 against a health carrier for violation of this chapter to 23 recover damages, to enjoin the health carrier from further 24 violations, and to seek any other relief available by law. 25 In addition to damages, a health care provider or person 26 who prevails in an action against a health carrier shall be 27 entitled to an award of court costs and reasonable attorney 28 fees. 29 Sec. 6. NEW SECTION . 514M.6 Rules. 30 The commissioner shall adopt rules pursuant to chapter 17A 31 to administer this chapter, including but not limited to rules 32 that specify all of the following: 33 1. The standards for the review process by a clinical 34 reviewer. 35 -5- LSB 5237XS (4) 91 nls/ko 5/ 8

S.F. 2226 2. The form and content of notices provided by health 1 carriers to health care providers as required by section 2 514M.2, subsection 2. 3 3. The requirements for the appeals process pursuant to 4 section 514M.4. 5 4. The recordkeeping and audit standards applicable to 6 health carriers that use automated adjudication systems. 7 EXPLANATION 8 The inclusion of this explanation does not constitute agreement with 9 the explanation’s substance by the members of the general assembly. 10 This bill relates to the use of automated adjudication 11 systems by health carriers. 12 The bill prohibits a health carrier (carrier) from using 13 an automated adjudication system (system) to downcode or 14 deny a claim unless the carrier first performs a documented 15 individualized review of the claim, conducted by a clinical 16 reviewer (reviewer), including a review of the supporting 17 medical documentation and applicable clinical criteria. 18 “Automated adjudication system”, “claim”, “deny”, and 19 “downcode” are defined by the bill. 20 For each claim a carrier intends to downcode or deny, the 21 carrier shall provide notice to the health care provider 22 (provider) of the proposed downcoding or denial that includes 23 the required information detailed in the bill, and shall allow 24 the provider a minimum of 30 days to appeal the decision or 25 submit additional documentation. If no appeal is submitted and 26 the downcode or denial is finalized, the downcode or denial 27 must be clearly identified in the explanation of benefits 28 or remittance advice, labeled, and include all associated 29 documentation and justification. 30 A system shall not be used by a carrier as the sole basis for 31 denying a claim based on lack of medical necessity, rejecting a 32 claim due to missing or insufficient documentation, modifying 33 a code without verification by a reviewer, or flagging or 34 withholding a claim for health care services that are routine, 35 -6- LSB 5237XS (4) 91 nls/ko 6/ 8

S.F. 2226 commonly accepted, or historically validated. 1 A carrier shall disclose to the insurance division the use 2 of a system in the processing of claims that includes the 3 information detailed in the bill. A carrier shall maintain 4 documentation for each claim for which reimbursement is 5 decreased by a system that shows the submitted code, the 6 adjusted code, the reason for the downcode, and whether a 7 review by a reviewer was conducted, and shall retain the 8 documentation for a minimum of five years. 9 If a provider receives a notice of a proposed denial or 10 downcode of a claim, the provider may appeal the denial or 11 downcode within 30 days by submitting additional documentation 12 to a carrier or requesting the carrier to provide a review by 13 a reviewer. A carrier shall respond to an appeal within 45 14 days. If, after review, it is determined that the originally 15 billed code was supported by proper documentation, the carrier 16 shall readjust the claim to the original code and provide the 17 provider with a written explanation of the readjustment. Upon 18 request by a provider, a carrier shall provide an annual report 19 that summarizes the total number of claims processed under the 20 carrier’s system, the number and percentage of claims that 21 were denied or downcoded by the carrier’s system, the number 22 and percentage of claims the provider appealed, and the number 23 of claims that were adjusted after performing a review by a 24 reviewer. 25 The commissioner of insurance may, upon a finding that a 26 carrier intentionally or recklessly processed claims by a 27 system in violation of the bill, impose a penalty of not more 28 than $10,000 for each violation. A provider or person damaged 29 by a violation of the bill may bring a civil action against a 30 carrier for violation of the bill to recover damages, to enjoin 31 the carrier from further violations, and to seek any other 32 relief available by law. A provider or person who prevails in 33 an action against a carrier shall be entitled to an award of 34 court costs and reasonable attorney fees. 35 -7- LSB 5237XS (4) 91 nls/ko 7/ 8