A new Indiana law aimed at increasing transparency around medical billing and limiting certain insurance payment practices has now been ceremonially signed by Governor Mike Braun. House Bill 1271 requires hospitals to notify patients about available financial assistance programs before medical bills are sent to collections and includes new restrictions on how insurers can use automated systems and artificial intelligence when adjusting claims.
Indiana lawmakers said the legislation comes amid growing concerns over medical debt across the state. According to state officials, nearly one in five Hoosiers carries medical debt, totaling more than $2 billion. Indiana reportedly ranks highest in the Midwest and 11th nationally for residents with health care bills in collections.
Under HEA 1271, hospitals must provide written notice about payment assistance programs at several points during the patient experience, including:
- During registration or intake
- At discharge
- With the initial billing statement
The notices must include:
- Descriptions of available financial assistance or charity care programs
- Eligibility criteria
- Instructions on how to apply
- Contact information for assistance completing applications
Hospitals are also required to post signage about payment assistance programs in registration areas and emergency departments and make information available through patient portals.
Before beginning a collection action, hospitals must make a “reasonable effort” to notify patients about available payment assistance programs and provide an application form. The law defines a collection action as the sale or assignment of a bill to a collection agency or the pursuit of litigation for medical debt.
The law also creates a new section of Indiana code regulating “downcoding,” where insurers alter billing codes or reimbursement levels in ways that reduce payments to providers.
Among the new requirements:
- Insurers cannot rely solely on automated systems or AI to downcode claims based on medical necessity without human review of medical records.
- Insurers must disclose when AI is used in downcoding or prior authorization adverse determinations.
- Providers must receive detailed notices explaining downcoding decisions and appeal rights.
- Providers must be given at least 180 days to appeal downcoded claims.
The legislation also shortens the timeframe insurers and health maintenance organizations have to seek repayment of overpayments from two years to 180 days and requires at least 60 days’ notice before reimbursement rate reductions for CPT codes take effect.
Gov. Braun said the law is part of a broader effort to address health care affordability, medical debt, and billing transparency in Indiana.
