Many physician practices recognize the Health Information Portability and Accountability Act (HIPAA) as both a patient information privacy law and electronic patient information security law. However, HIPAA actually encompasses a number of regulations. As such, the federal government has published several “rules” that instruct the health care industry on how to comply with the law. HIPAA began as a bipartisan effort to provide portability of health insurance benefits to individuals who left the employment of a company that provided group health insurance (that is why HIPAA is the “Health Information Portability and Accountability Act”). In response to this initiative and the additional expense of billing individuals for continuation of coverage, the health insurance industry requested standardization and promotion of electronic health care transactions. The health insurance industry argued that electronic health care transactions would reduce administrative cost and justify the new costs associated with premium billing and administration that portability would create. The health insurance industry’s request became the “administrative simplification” component, called “Health Insurance Reform: Standards for Electronic Transactions.” Following are the common terminology used in the transactions between providers, health payers and clearinghouses. These are generally conveyed on ERAs (Electronic Remittance Advices) or EOBs (Explanation of Benefits). Claims Adjustment Group Codes (CAGC) consist of two alpha characters that assign the responsibility of a Claim Adjustment on the insurance EOBs. These 5 EOB Claim Adjustment Group Codes are:

• CO Contractual Obligation
• CR Corrections and Reversal
• OA Other Adjustment
• PI Payer Initiated Reductions
• PR Patient Responsibility

These Group Codes are combined with Claim Adjustment Reason Codes that can be numeric or alphanumeric, ranging from 1 to W2. Claim Adjustment Reason Codes are associated with an adjustment, meaning that they must communicate why a claim or service line was paid differently than it was billed. If there is no adjustment to a claim/line, then there is no adjustment reason code. Top 5 examples of EOB Claim Adjustments are:

• CO-45 indicates the claim amount that must be written off based on payer contracted fee schedule.
• CO-97 indicates the benefit for this service is included in the payment/allowance for another service/procedure that has already been adjudicated.
• OA-23 indicates the impact of prior payer(s) adjudication, including payments and/or adjustments.
• PR-1 indicates amount applied to patient deductible.
• PR-2 indicates amount applied to patient co-insurance.

Claim Adjustment Reason Codes (CARC) communicate an adjustment, meaning that they must communicate why a claim or service line was paid differently than it was billed. If there is no adjustment to a claim/line, then there is no adjustment reason code. For example:

• 1-Deductible
• 2-Coinsurance Amount
• 3-Co-payment Amount
• 45-Charge Exceeds Fee Schedule/Maximum Allowed
• 96-Non Covered Charges
• 119-Benefit Max for this time period

Remittance Advice Remark Codes (RARCs) are used to provide additional explanation for an adjustment already described by a Claim Adjustment Reason Code (CARC) or to convey information about remittance processing. There are two types of RARCs, supplemental and informational. The majority of the RARCs are supplemental; these are generally referred to as RARCs without further distinction. Supplemental RARCs provide additional explanation for an adjustment already described by a CARC. The second type of RARC is informational; these RARCs are all prefaced with Alert: and are often referred to as Alerts. Alerts are used to convey information about remittance processing and are never related to a specific adjustment or CARC. For example:

• M25 – The information furnished does not substantiate the need for this level of service…
• N185 – Alert: Do not resubmit this claim/service.
• N525 – These services are not covered when performed within the global period of another service.
• N185 – Alert: Do not resubmit this claim/service.
• N179 – Additional information has been requested from the member. The charges will be reconsidered upon receipt of that information.
• N525 – These services are not covered when performed within the global period of another service.

Claim Status Category codes indicate the general category of the status (accepted, rejected, additional information requested, etc.) which is then further detailed in the Claim Status Codes. For example:

• A0 – Acknowledgement/Forwarded-The claim/encounter has been forwarded to another entity.
• A1 – Acknowledgement/Receipt-The claim/encounter has been received. This does not mean that the claim has been accepted for adjudication.
• A2 – Acknowledgement/Acceptance into adjudication system-The claim/encounter has been accepted into the adjudication system.

Health Care Claim Status Codes – convey the status of an entire claim or a specific service line. For example:

• 0 – Cannot provide further status electronically.
• 1 – For more detailed information, see remittance advice.
• 2 – More detailed information in letter.
• 3 – Claim has been adjudicated and is awaiting payment cycle.
• 6 – Balance due from the subscriber.

AMA has a very useful tool to identify the CAGC, CARC and the RARC codes. You can use this tool to identify claims adjustment group, reason and remark codes that describe the reasons for claim denials received on electronic remittance advices (ERA) or paper EOBs. You can use this tool at http://cwa.ama-assn.org/AMADenialManagement/Default.aspx For a complete list of claim adjustment reason codes, visit Washington Publishing Company’s website at http://www.wpc-edi.com/reference/

Glossary of Insurance Reimbursement Terms

ABN The advanced beneficiary notice (ABN) is a notice given to patients to convey that the payer is not likely to provide coverage in a specific case. Although the ABN originated in Medicare, many commercial payers have instituted their own ABN policies and forms. CAGC The claim adjustment group code (CAGC) is a code that identifies the general category of adjustment made to the claim or service line: Patient responsibility, Contractual obligation, Payer initiated, Corrections/reversals, or Other adjustments. CARC The claim adjustment reason code (CARC) is a code that indicates the reasons that the payer made the adjustment or denial. If the payer does not report a CARC on the ERA, this indicates that no adjustment was made. DOS (Date of Service) The date on which the medical service was provided. HIPAA The Administrative Simplification provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA, Title II) require the Department of Health & Human Services (HHS) to establish national standards for electronic health care transactions and national identifiers for physicians and other health care professionals, health insurers and employers. HIPAA also addressed the security and privacy of health data. HIPAA non-privacy complaint form The Office of E-Health Standards and Services (OESS) in the Centers for Medicare & Medicaid Services (CMS), the federal agency responsible for overseeing the non-privacy provisions of the Administrative Simplification Act, will use a complaint-driven approach for enforcement. Visit www.cms.hhs.gov/enforcement/downloads/complaintinwriting.pdf to view the written HIPAA non-privacy complaint form. Visit https://htct.hhs.gov/aset/ to access CMS’ electronic tool for complaints. PR (Patient Responsibility) The patient’s financial responsibility for any deductibles, co-insurance or co-payment amounts, or the patient’s obligations for payment of non-covered services. PMS (Practice Management System) The software or system the physician practice uses for billing. Pre auth, pre-cert Also referred to as prior authorization, pre-certification or pre-determination. These terms refer to any payer programs that employ prior review of the quality, medical necessity and/or appropriateness of services or the site of services. RARC The remittance advice remark code (RARC) is a code that indicates the supplemental, non-financial explanation for an adjustment already described by a CARC. RARCs may include specific information about the patient’s insurance policy and may be used in coordination-of-benefits transactions. UR (Utilization Review) Generally refers to retrospective or concurrent review of the quality, medical necessity and/or appropriateness of services or the site of services.