Denied or adjusted insurance claims are usually tagged with either or both of the following codes — CARCs and RARCs. Read on to learn more about what these codes represent, how to differentiate between them, the latest RARCs, and more.
What’s a CARC?
CARC stands for Claim Adjustment Reason Code and provides the reason for a claim adjustment made by the payer. They help you understand why the claim amount differs from the billed amount. If no adjustment has been made, the claim will not have a CARC. There are several hundred CARCs and what they represent is standard across the industry.
CARC descriptions are often available on electronic remittance advice (ERA) and explanation of benefits (EOB) displays. CARCs can also be used to identify which ERAs need to be posted manually. This can bring certain claims to your attention and help you review these adjusted claims.
CARCs have group codes represented by two alpha characters. These include:
- CO: contractual obligation
- PR: patient responsibility
- OA: other adjustment
- PI: patient initiated reduction
- CR: corrections and/or reversal
What’s a RARC?
RARC stands for Remittance Advice Remark Code and was first created as a proprietary list by Medicare, but it was later included in the HIPAA rules and has since become an industry standard. RARCs are now used by most insurance providers.
RARCs provide supplemental information regarding a rejected or adjusted claim. For example, if the CARC for a denied claim indicates that additional information is required, then the RARC will pinpoint exactly what information needs to be provided so the claim can be reconsidered.
RARCs can also provide miscellaneous information like appeal rights concerning the claim. Based on their utility, RARCs are of two types:
- Supplemental: Most RARCs are supplemental or RARCs without further distinction. These codes give additional information regarding why a claim was adjusted or denied.
- Informational: These are less common and usually start with alerts (usually mentioned in bold and red-lettered font). They provide information regarding remittance processing and not a specific adjusted claim or CARC.
What’s the difference between CARCs and RARCs?
All adjusted claims are likely to have a CARC, but they may not always have a RARC. This is because CARCs convey the primary reason for a claim adjustment, whereas RARCs provide supplemental or additional information regarding the adjusted claim.
Top ten CARCs
Here’s a list of the 10 most popular CARCs:
This denial code indicates that the claim received lacks information or contains submission and/or billing error(s) needed for adjudication. Because of its generic description, CO-16 is almost always accompanied by a RARC that explains what information is missing or what error has been made.
This denial code is applicable when two or more insurance providers work together to provide compensation in such a way that avoids duplicate payments. This code is used when the cost of care may be covered by a secondary or alternate payer and not the one that has been billed.
This denial code indicates that the benefit for this service is included in the payment/allowance for another service/procedure that has already been adjudicated. This means that the billed amount for this claim has already been compensated for another charge or service. In this case, you could resubmit the claim after modification, or you’ll have to accept the adjustment.
This adjustment code indicates that the charge exceeds the fee schedule/maximum allowable or contracted/legislated fee arrangement. This implies that the billed amount may be more than the scheduled payment amount. The group codes PR or CO are often used with this code, depending upon the liability. You may need to write off the indicated amount.
This code indicates the impact of prior payers’ adjudication, including payments and/or adjustments. If you receive this code, you don’t need to take any action, as the amount listed is equivalent to that allowed by the primary payer.
This code indicates that the procedure code is inconsistent with the modifier used or a required modifier is missing. You’ll need to resubmit the claim after applying the appropriate modifier for the selected procedure.
This denial code indicates that the patient policy wasn’t active on the date of service. This implies that the healthcare services may have been rendered after the patient’s insurance policy was terminated. This can be avoided by checking the patient’s eligibility and coverage span at their first appointment.
This denial code indicates that the service billed is statutorily excluded from coverage under the Medicare program. You’ll receive this code for items not covered by Medicare (e.g., diapers). You may also get this code through billing errors like not applying the correct modifier.
This code indicates that the injury/illness is covered by the liability carrier. If you receive this code, check whether the patient has received a work or accident-related injury. In such cases, you may need to submit this claim to a liability provider. You may also need to alter or clarify the diagnosis if you want to resubmit the claim.
This denial code indicates that this service, equipment, and/or drug is not covered under the patient's current benefit plan.
New RARCs as a result of the No Surprises Act
The No Surprises Act was formulated to help patients anticipate their medical bills and minimize unforeseen expenses. Here’s a list of the new RARCs included due to this act:
No Surprises Act provisions apply to the claim
This group includes the codes N864, N865, and N866, which apply to emergency services, non-emergency services furnished by non-participating providers, and non-participating providers of air ambulance services, respectively.
Cost sharing calculated under the No Surprises Act
This group includes the codes N862, N867, N868, N869, and N870, all of which are informational RARCs (i.e., they provide alerts). These codes explain how cost sharing was calculated based on parameters like state laws or payment models.
Initial payment amount
This group includes the codes N871 and N72, which are both informational RARCs. They explain how the initial payment was calculated based on state law in accordance with the No Surprises Act. They also allow negotiation for a higher out-of-network rate.
Final payment amount
This group includes the codes N863, N872, N73, N874, and N875, all of which are informational RARCs. These codes explain how the final payment (final out-of-network rate) was calculated based on parameters like state laws or payment models in accordance with the No Surprises Act.
Denial of payment
This group includes the code N876, which is an informational RARC. This code allows the payer or facility to initiate an open negotiation for a higher out-of-network rate than that paid by the patient through cost sharing.
Notice and consent
This group includes the codes N878 and N79, which are both informational RARCs. These codes indicate whether notice and consent for balance billing were provided as per Federal law. They ensure that cost sharing and the total amount paid were calculated as per the No Surprises Act and prohibit balance billing.
CARCs and RARCs list
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