Blue Cross Illinois Downcoding Squeezes Pediatricians, Therapists as Patients Pay More

Blue Cross Blue Shield of Illinois has been paying some therapists, pediatricians and other clinicians less money for the same services they've always billed, after quietly changing how it evaluates medical claims starting July 1. Doctors and mental health advocates across the state say the shift, known as downcoding, is already straining practices and could push some providers out of the insurer's network altogether.

The insurer announced on its website back in March that claims for dates of service beginning July 1 would be reimbursed at a lower validated service level whenever it determined the billed services did not support the billed level, according to the Chicago Sun-Times. The policy applies across office, inpatient and outpatient settings and targets higher-complexity visit codes, including CPT 99204-99205 and 99214-99215, according to the American Osteopathic Association. Those evaluation and management codes are the primary billing mechanism for outpatient office visits, therapy sessions and pediatric consultations.

Dr. Josh Levin, who runs a suburban pediatric practice, told the Sun-Times that about 40% of his claims for higher-level sick visits were downcoded in recent weeks. He said the reductions are unsustainable and could eventually cause access problems, adding that algorithms focused only on diagnosis miss the nuance doctors observe when treating patients — a concern he says matters most with children, who may be unable to describe symptoms and may have developmental or behavioral issues that complicate a visit.

Therapists and Psychiatrists Say Cuts Are Piling Up

Derek Phillips, director of psychiatry at Arcus Behavioral Health and Wellness in Chicago, said Blue Cross Blue Shield reduced dozens of his claims in recent weeks. Lower insurer reimbursement, he said, means lower earnings for him and his practice. One Chicago-area psychiatrist told the paper that BCBS reduced claims without reviewing records or requesting additional documentation, and one Chicago practice reported that 2,400 of its claims were reduced in July alone.

Stephen Gillaspy, deputy chief for health policy and healthcare financing at the American Psychological Association, said the claims involve commonly used evaluation and management reimbursement codes. Medical professional organizations report that downcoding is most acute in mental health and pediatric practices, and Chicago-area providers say Blue Cross Blue Shield is automatically decreasing claims for complex or longer visits.

Blue Cross Blue Shield defended its enhanced claims review process and said it remains committed to expanding access to quality health care, but it did not comment on whether it was using an artificial intelligence tool to make the downcoding decisions. Providers can appeal each decreased claim individually, though clinicians and advocates say many affected claims are too burdensome to appeal given the administrative workload involved.

Illinois' New Law Won't Take Effect Until 2028

Illinois lawmakers have already passed a law prohibiting automatic reductions in reimbursements by health insurers. Governor JB Pritzker signed Senate Bill 3114, the Transparency in Downcoding Act, into law as Public Act 104-0568 after it cleared the state Senate 59-0 and the House 111-0, according to the Illinois State Medical Society. The bill was sponsored by Sen. Dave Koehler and Rep. Sharon Chung following widespread complaints from medical practices across the state.

The law requires that any downcoding decision be made or reviewed by a live, licensed physician of the same or similar specialty using Current Procedural Terminology guidelines, and it gives providers a minimum 90-day window to dispute reduced claims, per Capitol City Now. Insurers will also have to notify doctors of the specific clinical reasons for reducing a claim rather than issuing automated payment cuts, and the statute is meant to prevent downcoding from being used to discriminate against doctors who treat patients with complex or chronic conditions. It also prohibits insurers from relying on automated processes such as artificial intelligence or algorithms to decide whether a doctor's or physician assistant's claim should be reduced.

But the Transparency in Downcoding Act does not take effect until 2028 — leaving an 18-month gap during which BCBSIL's policy, already in place since July 1, can continue unless the Illinois Department of Insurance steps in using existing unfair claims practices rules. Julietta Mkrtychian, chief of staff for state Rep. Lindsey LaPointe, said the new law will not protect all medical providers; the statute does not cover prescribing psychologists, and Illinois lawmakers may consider another downcoding bill to close remaining gaps.

Most Insured Workers Fall Outside the Law's Reach

The law's scope is also limited by federal preemption. It applies to fully insured commercial plans, state government plans and Medicaid managed care, but excludes self-insured employer health plans governed by federal ERISA law — plans that cover roughly 67% of insured workers nationwide, according to Becker's Payer Issues. Federal ERISA preemption prevents state insurance laws from regulating those self-insured plans at all, meaning most insured patients in Illinois won't be shielded by the new statute even once it takes effect.

An Illinois State Medical Society survey of over 330 clinicians found that 72% of medical practices had experienced automatic downcoding and insurer underpayment, and a broader version of that same June survey found 77% of respondents had seen automatic downcoding increase over the past five years, with 72% saying downcoding remittance notices rarely or never explain the reason for a payment reduction. Many practices report that appealing individual downcoded claims takes too much time to pursue given the administrative burden involved.

Other States Have Already Cracked Down

Illinois isn't alone in confronting the practice. The Maryland Insurance Administration fined Cigna $80,000 in March and ordered the insurer to halt its automatic downcoding of evaluation and management claims, ruling that unilaterally lowering reimbursement without a formal claim denial or a request for supporting documentation violated state insurance law. The following month, Maryland regulators issued Bulletin 26-9, extending that ban on automatic downcoding without clinical record review to every health insurer operating in the state.

Illinois had already moved once before to protect a specific group of providers: Public Act 104-0446 took effect June 1, shielding mental health professionals from selective insurer audits when billing CPT code 90837 for 45-to-60-minute psychotherapy sessions. The American Medical Association has separately warned that automated claim-editing algorithms can inappropriately cut physician revenue without clinical review, recommending that downcoding programs target only true statistical outlier practices rather than broad categories of visits.

Patients Are Already Feeling the Squeeze

Tony Ohlhausen, director of research and policy for the National Alliance on Mental Illness-Illinois, said his organization has heard from independent clinicians and larger providers coping with reduced claims. He said providers may become less likely to accept clients with complex needs when intensive services bring lower reimbursement — a dynamic advocates warn could shrink access at a moment when, per a KFF analysis cited in Illinois, 32% of adults needing counseling or therapy already could not get it.

For Rachel, a Chicago woman with BCBS insurance who typically sees her psychiatrist twice a year, the policy has already changed her care. She said her psychiatrist may stop treating BCBS patients while the policy remains in effect, and she now plans to pay nearly $200 per session out of pocket to keep seeing him. Clinicians and advocates warn that reduced payments like these could lead to broader patient access problems or staff-retention issues across Illinois practices, echoing similar strains Hoodline has tracked as dentists exit Medicaid networks and hospital systems weigh leaving Blue Cross's network entirely.