Newsom Makes California's Contractor Claims Process Permanent and Opens Shared Solar to Warehouses; Illinois Limits Insurer Downcoding

The bottom line today

Seven percent. That is the annual interest a California public agency owes on a contractor’s claim it fails to pay on time, and it was due to vanish with the rest of the state’s public works claim process on January 1, 2027 [2]. Gov. Newsom signed SB 33 on Thursday, July 16, and the process stays [1, 2]. It was one of 18 bills he signed that day, and three others also trim costs for business: shared solar for warehouses and factories, a firm refund window for builders’ recycling deposits, and a report card on rejected regulations [1]. In Illinois, a law Gov. Pritzker signed July 10 tells health insurers that a person, not a program, must stand behind every reduced claim [6, 7]. Good news for business on both counts.

CA California SB 33: the public works claim process becomes permanent

What it does. SB 33, by Sen. Dave Cortese, removes the January 1, 2027 repeal date from Public Contract Code section 9204 and makes the claim resolution process permanent [2]. It makes no other substantive change [2].

The process applies to contracts entered on or after January 1, 2017. When a contractor files a claim on a public works project, a city, county or other covered public entity must review it and, within 45 days, say in writing which parts it disputes. Undisputed amounts are paid within 60 days [2]. If the contractor disagrees, it can demand a meet-and-confer within 30 days, then nonbinding mediation with costs split equally; the agency may require arbitration after that [2]. A subcontractor without privity can have the general contractor present its claim, and late amounts carry 7% interest [2]. Several state departments, including Caltrans, Water Resources and the High-Speed Rail Authority, are excluded from the definition of a public entity [2].

Where it stands. The Senate passed it 39-0 [2]. Signed July 16 [1].

Pratt’s read. Plain credit. The analysis describes the world before 2016: a general contractor facing overruns it did not cause could only arbitrate or sue, and a subcontractor that supplied extra work had no direct claim at all [2]. Contractors carried payroll, benefits and materials while they waited, sometimes for years, according to the labor organizations that backed the bill [2]. Every bidder prices that risk into the next job, so the cost of slow payment lands on the public owner anyway. Cortese’s own case is the right one: contractors need to know “they will be paid properly and without delay when they accept public contracts” [2]. The analysis records no opposition, and the original 2016 law was, in the supporters’ words, a negotiated compromise that “resolved public agency opposition” [2]. Small and mid-size specialty firms gain the most, because they have the least working capital to float a disputed change order.

CA California AB 2175: warehouses and factories can aggregate meters behind one solar system

What it does. AB 2175, by Assemblymember Robert Garcia, directs the Public Utilities Commission to ensure that logistics and manufacturing businesses are eligible customer-generators for multiple-meter aggregation, if the commission extends that part of the net billing program [3]. Aggregation lets a customer install one renewable facility, up to 1 megawatt, sized to serve the load of several meters on the same and adjacent property it solely owns, leases or rents, instead of a separate system at each meter [3].

Where it stands. Newsom signed it July 16 [1]. The commission kept its aggregation subtariff in a 2023 decision while noting that statute did not require it [3]. Utilities reported about 13,000 properties on the program, with roughly 1,000 megawatts of solar [3].

Pratt’s read. Credit, with an asterisk. A distribution center on several parcels can now plan one array instead of five, which is a real saving in equipment, interconnection and paperwork for the businesses with the most roof and the biggest bills [3]. The committee itself said it was “not clear” these businesses had ever been shut out; the bill makes eligibility explicit [3]. The asterisk is that the whole benefit depends on the commission keeping the program. The other side deserves its sentence: aggregation was always conditioned on a finding that it would not raise costs for customers who do not participate, and the California State Association of Electrical Workers and the Coalition of California Utility Employees are listed as opposed [3]. Holding the commission to that finding is the right guardrail.

CA California AB 2559: builders get three years to reclaim recycling deposits

What it does. AB 2559, by Assemblymember Christopher Ward, requires a city or county that collects a deposit to secure compliance with construction and demolition debris diversion rules to return the full amount if the permit holder documents compliance within three years of final inspection [4]. A city may still deny a refund when the documents show noncompliance [4].

Where it stands. On the governor’s July 16 list [1]. The Senate analysis lists no opposition; the California Apartment Association, California YIMBY and Habitat for Humanity California are among the supporters [4].

Pratt’s read. Credit. CALGreen already requires most covered projects to divert 65% of nonhazardous debris [4]. The problem was the clock. San Diego’s ordinance gives 180 days after final inspection to claim the deposit, and final inspection can come before the work is truly finished, so builders who recycled as required lost the money anyway [4]. The committee wondered whether cities could have fixed this themselves [4]. They had years to do it.

CA California SB 1204: rejected regulations get reported

What it does. SB 1204, by Sen. Rosilicie Ochoa Bogh, requires the Office of Administrative Law to report to the Legislature, within 60 days of returning a regulation to the agency, that it disapproved the rule and why [5]. Today the office tells only the agency [5].

Where it stands. Passed the Senate 38-0; signed July 16 [1, 5]. The Roofing Contractors Association of California and the California Apartment Association support it [5].

Pratt’s read. Modest and welcome. The office rejects rules that lack required cost estimates or economic impact assessments, among other defects [5]. Putting those rejections in front of lawmakers gives the businesses that would have paid for a flawed rule one more place to be heard. It costs an agency a letter.

IL Illinois SB 3114: a person must review every downcoded claim

What it does. SB 3114, by Sen. Dave Koehler and Rep. Sharon Chung, creates the Transparency in Downcoding Act [6, 7]. Downcoding is a payor’s unilateral change of a billed service code to one that pays less [7]. A payor may not use an algorithm or automated tool that bypasses the information the billing professional submitted; software may flag claims, but every downcoding determination must be made or reviewed by a natural person following AMA CPT guidelines [7]. Payors may not downcode based solely on diagnosis codes, or target professionals who routinely treat complex or chronic patients [7]. Each downcode must come with the reason, the original and revised codes and payments, and a dispute process allowing at least 90 days [7]. The Department of Insurance enforces the law, and home rule units are barred from regulating the subject [7].

Where it stands. It cleared the Senate 59-0 and the House 111-0. Pritzker signed it July 10 as Public Act 104-0568, effective January 1, 2028 [6]. He signed it the same day as the cosmetics law this release covered on July 13.

Pratt’s read. This is a fight between two kinds of business, and the medical practices have the better of it. A physician group is a small employer whose margin depends on being paid for the service it billed. The Illinois State Medical Society said the act would ensure that “a live person — not an automated system” reviews claims [8]. The American Medical Association counts Illinois among several states acting on downcoding this year [9].

The insurers’ interest is real: automated review is cheaper, and the cost of more human review will find its way into premiums for fully insured employers. Still, the drafting is careful. Software stays allowed for flagging, the department cannot issue binding rulings on individual coding disputes, self-insured ERISA plans are exempt, and statewide preemption spares payors a patchwork of local rules [7]. The two roll calls recorded no votes against it [6].

On the calendar

California’s claim process no longer ends January 1, 2027 [2]. AB 2175’s benefit waits on the Public Utilities Commission’s next decision on aggregation [3]. Illinois payors have until January 1, 2028 to build the notices and dispute process the downcoding law requires [7].