CARC and RARC Codes in Claims Management

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.

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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 nine CARCs

Here’s a list of the nine most popular CARCs from the Medicare JL page of Novitas Solutions:

CO-18

Healthcare insurers use this code to indicate a duplicate submission of an already processed claim. Ensuring each claim is unique avoids unnecessary delays in payment processing.

CO-22

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.

CO-26

This denial code states, "Expenses incurred prior to coverage." It is applied when a claim is submitted for services rendered before the patient's health insurance coverage was active. Verifying insurance coverage dates before scheduling avoids denials.

CO-50

This denial code indicates services are not covered because the payer deems them medically unnecessary. This code identifies when insurance coverage criteria does not mesh with treatment provided.

CO-96

Payers use this code to indicate, non-covered charge(s). This code is a key alert for both healthcare providers and patients, highlighting the need to understand the specifics of insurance coverage and to confirm eligibility for certain services or items to avoid claim denials related to coverage limitations.

CO-97

This code signifies that the service was bundled in a payment/allowance for another service/procedure that has already been adjudicated. Essentially, this code indicates that the payment for a particular service or procedure is bundled into the payment of another service or procedure previously settled. 

CO-109

This code applies when the claim is not covered by this payer/contractor. You must send the claim to the correct payer/contractor. This code is used to inform the healthcare provider or billing party that the submitted claim was directed to the wrong insurance company or payer, indicating the need to resubmit the claim to the appropriate entity for processing and reimbursement.

CO-170

Payers use this code to signify that they denied because the services were rendered or billed by a provider type that is not authorized under the patient's current insurance plan.

B-15

This code indicates that the claim has been denied because it lacks a prerequisite service or procedure that must be performed and covered as a condition for the billed service's coverage.

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

X12 is a consensus-based non-profit organization chartered by the American National Standards Institute for more than 40 years. Its members include technologists and business process experts in health care, insurance, finance, government, transportation, supply chain, and other industries.

X12 is responsible for developing and maintaining industry standards to facilitate the consistent electronic interchange of business transactions. They can enable all facets of business-to-business transactions like order placement and processing, invoicing, payment, cash application, and shipping.

At present, X12 provides more than 320 transaction standards, including a list of all current CARCs and RARCs.

Streamline your claims management with MD Clarity

MD Clarity brings transparency to the revenue cycle. We can guide you on how to comply with the No Surprises Act and send out good-faith estimates to your patients, which can help them make upfront payments based on your estimates.

MD Clarity can help track underpayments and denials from payers without having to do manual analysis each time to discover new issues. To learn more, schedule a demo today.

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