DATE: April 7, 2026
TO: All Health Insurers, Nonprofit Health Service Plans, Health Maintenance Organizations, and Third Party Administrators
RE: Prompt Payment of Claims - Downcoding Practices Prohibited
The purpose of this Bulletin is to remind third party payors
[1] that the practice of “downcoding" is not permitted under § 15-1005 of the Insurance Article
[2]. Downcoding is a term that has been given to the practice of modifying service codes submitted by providers or other persons entitled to reimbursement based on the third party payor's own assessment prior to obtaining the necessary information from the provider to justify a downgrade to the submitted code. For example, a uniform policy to adjust a service level code without regard to information submitted by the provider is not permitted by Maryland law.
Section 15-1005 permits only certain specific responses on the part of third party payors after receipt of a claim:
- Pay the amount of the claim, or
- Send notice that reimbursement is being denied or partially denied, include the reasoning for the denial or partial denial, and request information needed in order for full reimbursement to be made on the submitted claim.
Under current Maryland law, a third party payor may not proactively modify a service code on its own assessment and send payment for a lower code, placing the burden on the provider or other person entitled to reimbursement to resubmit the initial claim and higher billing code. Such action on the part of the third party payor is subject to penalty under § 4-113 of the Insurance Article which permits the Commissioner to impose a penalty upon an insurer for delaying payment of a claim without cause.If a third party payor has a reasonable belief that a claim has been improperly coded, §§ 15-1004 and 15-1005 and Code of Maryland Regulations (“COMAR") 31.10.11.11A(8) permit a third party payor to request additional information on a disputed claim. The third party payor must send a notice of receipt and status of that claim which indicates that the legitimacy of the claim or the appropriate amount of reimbursement is in dispute, and what additional information is necessary to determine whether the claim will be reimbursed. When the third party payor receives the additional information, the third party payor has authority to pay or deny the claim, and an enrollee or provider may then appeal the determination to deny payment per § 15-10D-02.
If a payor has conducted an audit that demonstrates the provider has a pattern of improper coding, then COMAR 31.10.11.10A(10) permits the third party payor to require documentation to support the code to be attached to the claim to be considered a clean claim, but may not unilaterally alter the billing code of a submitted claim.
Questions or comments may be sent to Mary Kwei, Associate Commissioner of Market Regulation and Professional Licensing, Maryland Insurance Administration, 200 Saint Paul Place, Suite 2700, Baltimore, MD 21202, or call 410-468-2113, or email to
[email protected] MARIE GRANT
Commissioner
By: Signature on Original
Mary M. Kwei
Associate Commissioner
Market Regulation & Professional Licensing
[1] “Third party payor" has the meaning in COMAR 31.10.11.02B(22).
[2] All statutory citations herein are to the Insurance Article of the Maryland Code, unless otherwise noted.
