What Are CARC Codes in Medical Billing?

Decoding CARC Codes

Claim Adjustment Reason Codes (CARCs) are standardized codes used in medical billing to explain why a healthcare claim was not paid as expected. These codes clarify adjustments, denials, or partial payments from insurance companies or healthcare payers. CARCs are typically found on an Explanation of Benefits (EOB) statement or an Electronic Remittance Advice (ERA) document. Understanding these codes helps individuals interpret their healthcare costs and financial obligations.

CARC codes provide the primary reason for a claim adjustment and are an industry standard. They consist of a two-letter group code followed by a numeric value, ranging from 1 to over 300. For instance, “CO” (Contractual Obligation) indicates an adjustment based on provider-payer contract terms. “PR” (Patient Responsibility) shows the portion of the claim the patient owes.

A CARC code is often accompanied by a Remittance Advice Remark Code (RARC). RARCs offer additional explanations or context that supplement the CARC. For example, a CARC might state a service was not medically necessary, while a RARC could provide details about missing documentation. CARC and RARC codes are universally used by all payers, as mandated by HIPAA regulations for electronic healthcare transactions.

These codes are usually located in specific sections of an EOB or medical bill, often alongside the line items for services rendered. Every adjusted claim will have at least one CARC, but RARCs are only present when further clarification is needed. Their presence helps clarify claim adjustments, allowing for clearer communication between payers and healthcare providers.

Common CARC Categories and Meanings

CARC codes clarify various situations that impact how a medical claim is processed, from patient financial responsibilities to administrative issues. One common category relates to patient responsibility, detailing amounts a patient owes before insurance coverage begins or after the insurer pays its share.

For example, CARC 1 indicates a deductible amount, the sum the patient must pay before their insurance starts covering costs. CARC 2 signifies a coinsurance amount, representing the percentage of the medical bill the patient is responsible for after the deductible is met. CARC 3 denotes a copayment amount, a fixed fee the patient pays for a specific healthcare service. These codes help patients understand their out-of-pocket expenses.

Another category involves services not covered by an insurance plan. CARC 96 indicates a non-covered charge, meaning the service falls outside the patient’s insurance coverage limits. This could be due to the service being experimental, not medically necessary, or lacking prior authorization.

CARC 50 specifies that services are non-covered because they are not deemed “medical necessity” by the payer, often due to an incompatible diagnosis or lack of supporting documentation. CARC 18 signifies a duplicate claim or service, indicating the claim has already been processed.

Administrative issues also generate CARC codes. For instance, CARC 29 means the time limit for filing the claim has expired, often due to delayed submission or incomplete documentation. CARC 97 indicates that the benefit for a service is included in the payment or allowance for another service that has already been adjudicated, often referred to as “bundling.”

Using CARC Information for Billing Resolution

Understanding CARC codes helps individuals navigate their medical bills and Explanation of Benefits (EOB) statements. By interpreting these codes, patients can verify the accuracy of the charges and payments outlined by their insurance company. This includes confirming that their financial obligations, such as deductibles, coinsurance, and copayments, align with their policy terms.

Deciphering CARC codes also helps identify potential billing errors or discrepancies. If a service is denied with a code indicating “non-covered,” but the patient believes it should be covered, they can investigate further. This allows individuals to contact their insurance company or healthcare provider with specific questions and references to the codes.

Knowing the meaning behind a CARC code informs patients when to seek clarification or inquire about an appeal process. For example, a denial due to “lack of medical necessity” (CARC 50) might prompt a discussion with the provider about documentation. A “duplicate claim” (CARC 18) indicates an administrative issue needing correction by the provider.

This knowledge streamlines communication with billing departments and insurance representatives, often leading to quicker resolution. Understanding CARC codes provides the necessary context to determine whether a claim should be disputed or if the stated financial responsibility is accurate.