Was your claim denied, or did you receive a lower payment than expected? If yes, then it can quickly become mind-boggling to figure out the exact reason for denial, especially if you do not understand the difference between RARC and CARC denial codes.
Insurance payers use standardized CARC and RARC codes on the electronic or paper-based remittance advice to explain why a claim amount was adjusted or denied. While both code sets are part of the Health Insurance Portability and Accountability Act (HIPAA) rulebook and are implemented by government and private insurance payers, their purpose and application are distinct, making it necessary to understand their differences.
What is a Remittance Advice Remark Code (RARC)?
Insurance payers use Remittance Advice Remark Codes (RARCs) in conjunction with CARCs to explain in detail why a claim was denied or adjusted (reduced payment). Medicare was the first to issue these, and the policy became effective in 2007 to standardize remittance advice in paper and electronic formats. Later, using RARCs became a HIPAA rule, and now, it is the standardized industry practice.
RARCs are of two types – supplemental and informational. The purpose is to offer the provider additional information on adjusted and denied claims, including their rights to appeal, what paperwork is missing, and what documents the provider must refer to.
Always take note of them to understand how your claim was adjudicated and what your next possible course of action should be.
| Type | Explanation |
|---|---|
| Supplemental | Supplemental RARCs provide additional information for an adjusted or denied claim. These are also known as RARCs without further distinction. |
| Informational | Informational RARCs are often referred to as Alerts. These are less common and usually start with an “Alert” mentioned in bold, red font. You can refer to them to understand how the remittance was processed. |
10 Common RARCs in Medical Billing
The complete list of RARCs contains 1,185 codes, each pointing towards a different message, additional explanation, or the next steps the provider must take.
They are listed in the following order:
M1 – M144 = A total of 145 codes
MA01 – MA134 = A total of 135 codes
N1 – N904 = A total of 905 codes
However, only a few of these are appended frequently with the CARC denial codes. You can find the most common ones below.
M17
M-17 is an informational RARC or Alert. It notifies the provider that the payment was approved earlier. However, the provider was unaware of this and did not expect the service to be covered for the patient. Moreover, it states that the provider will be liable for all the charges of the same service in the future if the circumstances remain the same.
M20
M-20 is a supplemental Remittance Advice code and denotes that the HCPCS code stated in the claim is missing, incomplete, or invalid.
M27
M-27 is another commonly used informational RARC. The alert indicates that the provider is responsible for all the patient’s waived charges, including coinsurance because the products and services were not medically necessary or constituted custodial care. Hence, the provider knew beforehand that the patient’s plan did not cover the rendered services or supplies.
According to the limitation of liability provision of the law, the patient is relieved of all expenses. However, the provider can appeal this denial, and the request must be filed within 120 days of the date of receiving this alert. A request must be sent through the same office that sent the M-27 RARC.
M31
M-31 is a supplemental RARC. It is used when the provider submits the claim without the radiology report. Therefore, this remark code indicates “missing radiology report”.
M127
M-127 is another commonly reported supplemental remark code. It tells the provider that the claim was denied because the patient’s medical record is missing. It prompts the provider to send the patient’s complete medical record with the claim form because it is mandatory for this service.
MA68
MA-68 is also an alert or informational RARC. The payer triggers this alert to explain to the provider that his claim was not crossed over to the secondary insurance payer because the information of the secondary insurance payer on the claim form was incomplete. The provider is instructed to supply the secondary payer’s complete information or use their plan ID for correct and timely claim crossover.
N65
The payer issues an N-65 supplemental remark code to inform the provider that they were unable to determine the procedure code or rate count mentioned on the claim form for that particular provider or date of service.
N130
N-130 is also a supplemental RARC. It instructs the provider to review the plan benefit documents or guidelines to understand why this service was excluded (not covered) or for any restrictions/limitations on this service.
N517
N-517 is usually used with a ‘CO’ CARC denial code to indicate that the provider did not follow the contractual obligations or misunderstood contract terms. It denotes that the provider failed to provide the information specifically requested by the payer in the contract. Hence, the provider must “resubmit a new claim with the requested information”.
N871
Another alert (informational RARC) seen frequently on denial letters is N-871. It is used to explain that according to the No Surprises Act, the “initial payment was calculated based on the specified state law”. That’s why the reimbursement amount is different from the expected amount.
What is a Claim Adjustment Reason Code (CARC)?
Claim Adjustment Reason Codes (CARCs) explain why an insurance payer adjusted or denied the claim. These are standardized codes frequently used in the healthcare industry to help providers comprehend and manage claim denials.
CARCs and their descriptions often appear in the Explanation of Benefits (EOBs) and Electronic Remittance Advice (ERAs). Providers can study the CARC descriptions to identify the claims that must be posted manually, reworked & resubmitted, or billed to the patient instead of the insurance payer.
The Claim Adjustment Reason Codes are segregated into five denial group codes. Each group code is represented by two alpha characters, as shown below.
| Characters | Explanation |
|---|---|
| CO | Contractual Obligation |
| PR | Patient Responsibility |
| OA | Other Adjustment |
| PI | Payer Initiated Reduction |
| CR | Corrections and/or Reversals |
10 Common CARCs in Medical Billing
The American National Standards Institute (ANSI) Accredited Standards Committee (ASC) X12’s complete list of CARCs includes around 358 codes, which were selected by HIPAA and are now a mandatory part of electronic transactions in the healthcare industry.
The alphanumeric reason codes are listed in the following order:
Codes 1 – 306 = A total of 306 codes
A1 – A8 = A total of 5 codes
B1 – B4 = A total of 2 codes
B7 – B23 = A total of 13 codes
P1 – P32 = A total of 32 codes
Let’s take a look at some common CARC denial codes that healthcare providers receive in response to their claim filing.
CO-18
The insurance payer triggers a CO-18 CARC denial code when the claim is an exact duplicate of a previously submitted claim. It means that the newly filed claim mentions the same service rendered to the same patient by the same provider on the same date at the same place of service. Hence, the payer rejects this claim as the provider has already received compensation for the service.
Denial code 18 can also appear frequently with group code OA – other adjustments, except when state workers’ compensation regulations require CO as the prefix.
CO-22
Denial code CO-22 is flagged as a result of confusion in the coordination of benefits. The payer denies the claim because the patient has multiple health insurance coverages and another payer is responsible for the cost of billed services or products. So, in other words, the healthcare provider sent the claim to the wrong insurance company.
CO-45
A CO-45 denial code is issued when the provider charges more than the agreed-upon rate. In the contract, the provider and payer set rates for each service, equipment, or medication, known as the provider’s fee schedule. However, when the provider bills the payer higher than the maximum allowable amount, CO-45 is flagged. Please note that code 45 can also appear with the group code PR – patient responsibility (depending upon liability).
CO-97
Sometimes, providers perform two or more related procedures on the same day and bill them separately for double reimbursements. However, payers can deny the second claim with a CARC denial code CO-97 if the payment for the service is included in the adjudicated claim for the first procedure. This error usually occurs in the case of bundled services or when minor surgeries are performed during the global period.
CO-226
The provider-payer contract terms clearly state the information that the payer expects from the provider on or with the claim form. However, if this requested information is not provided or was provided but is inadequate or given late, a CO-226 denial code is triggered. The CO-226 is always accompanied by at least one supplemental RARC or NCPDP Reject Reason Code (in the case of pharmacies) to offer more explanation.
PR-32
Most private health insurance plans extend coverage to the beneficiaries’ dependants (parents, spouses, or children). The insurance policyholders must list their dependants, and insurers save the names and details in their records. However, when a healthcare provider files a claim for a patient who is not an eligible dependent (as per the company’s records) under that specific policy number, the claim is rejected with the denial code PR-32.
PR-204
The CARC PR-204 denial code is triggered when the patient’s current benefit plan does not cover the service, equipment, or drug the provider is billing. The payer issues this denial code to indicate that the billed service or product is excluded from the benefits, and the patient must cover its cost.
OA-23
Denial code OA-23 is flagged when the patient has two or more payers, and there is confusion in the coinsurance amount. The payer adjusts the payment when the primary insurance payer’s allowable amount is higher than the secondary payer, but they pay less than the secondary payer’s maximum allowable amount. Therefore, the “impact of prior payer’s adjudication” triggers the adjustment.
OA-27
OA-27 is another frequently triggered CARC denial code. It indicates that the patient was rendered services after the expiration of the insurance coverage. Therefore, the insurance payer is no longer responsible for the expenses incurred.
PI-16
Denial code PI-16 is a payer-initiated reduction because the provider failed to give the information that the payer might have requested or needed to process the claim. In simple words, it explains that the claim “lacks information or has submission/billing errors”. However, you must note that this code is not flagged for missing attachments or documentation. Moreover, the payer will use at least one supplementary RARC or NCPDP Reject Reason Code with PI-16 to give additional information to the provider.
Key Differences in RARC and CARC Application
Medicare’s policy states that CARC and RARC should be used on all adjusted remittance advice and coordination of benefits transactions regardless of the electronic or paper formats. The HIPAA rulebook also makes their use compulsory on all electronic data ERA transactions. CARC and RARC codes’ primary purpose is to offer guidance to the healthcare provider for denial management and resolution.
However, both code sets are applied for distinct reasons in specific situations. Let’s study their key differences to understand why, where, and how CARC and RARC are applied.
All Adjusted Claims Have CARCs, But Not RARCs
Any claim that was adjusted and the reimbursement amount was different than the billed amount or was rejected, resulting in zero payment, will be sent back with a Claim Adjustment Reason Code to tell the provider why the payer adjudicated the claim in this manner. There could be hundreds of reasons for a claim denial or payment reduction, and each CARC will reflect a specific reason. Hence, CARCs appear on all adjusted or denied claims.
However, RARCs (supplemental and informational) are only used with the CARCs when the payer thinks the provider should get more information on why the final payment was not the same as the amount mentioned on the bill. Therefore, RARCs only appear on some adjusted or denied claims.
CARCs Are Generic, While RARCs Are Specific
Claim Adjustment Reason Codes offer general explanations about the denial or payment adjustment. For example, “exact duplicate claim/service” or “expenses incurred prior to coverage”. The provider does not know what part of the claim or service was a duplicate or why the patient’s plan benefits became effective after the date of service, even though the patient provided the correct policy number. So, the provider has to review all the claim details to detect the exact error the CARC is pointing at.
However, in the case of Remittance Advice Remark Codes, the provider is given specific and additional information that may be beneficial for accepting or appealing the claim denial. For example, RARC M8 states, “We do not accept blood gas test results when the test was conducted by a medical supplier or taken while the patient is on oxygen.”
CARC Has Group Codes, While RARCs Are Supplemental Or Informational
CARCs are divided into five Group Codes (CO, OA, PI, PR, and CR), explaining who is financially responsible for the amount the payer refuses to reimburse. It is the simplest and most standardized way of communication between the payer and the provider to hold the correct party responsible for the charges.
On the other hand, RARCs are segregated into supplemental and informational codes. Supplemental RARCs are reported more frequently and provide extra information regarding denials or adjustments, whereas informational RARCs or ‘Alerts’ offer insights into remittance processing.
RARC Alerts Offer Information on Remittance Processing, But CARCs Don’t
Between RARC and CARC, only RARCs have alerts. An alert notifies the healthcare provider how the adjustment was calculated, which laws and regulations were applied during claim adjudication, and what steps should be considered (e.g., appeal the decision, refund/collect the amount to/from the patient, or visit the payer’s official website).
In contrast, and as mentioned before, CARCs are general descriptions of denial codes (without the alerts), highlighting the broader reason. For example, uncovered service, incorrect/missing modifier, or expired health insurance plans.
Fight Claim Denials Like a Pro with MediBill MD
Even the most seasoned in-house medical billing teams face claim denials. They must read through CARC and RARC on electronic remittance advice to rework claims and reverse the denials. However, navigating RARC and CARC can be challenging, especially for solo and independently-owned practices. First, they may not know what the codes indicate, and even if they do, detecting the exact error due to which the claim was denied or the payment was reduced could take days.
MediBill MD’s end-to-end denial management services are available nationwide at some of the lowest industry rates. A team of medical claim denial managers expertly processes CARC and RARC codes to correctly identify the errors in claim submission and supporting documentation. Claims are reworked and submitted within a week of receiving the denial codes, or an appeal process is initiated promptly if the provider finds the adjudication unjust.
