CARC 96 / CO-96: Non-Covered Charges in Medical Billing

Claim Adjustment Reason Code (CARC) 96 identifies non-covered charges reported during healthcare claim adjudication. Medical billers may encounter this adjustment on an Electronic Remittance Advice (ERA) when a payer reports that a billed charge is not covered under the applicable circumstances.

CARC 96 may appear with the CO (Contractual Obligation) adjustment group as CO-96. However, the reason code alone does not establish which coverage requirement applies, why the charge was considered non-covered or whether the patient is financially responsible.

In this guide, we'll explain what CARC 96 means, how it differs from other coverage-related adjustments, where it appears in an X12 835 version 5010 transaction, and how medical billers and EDI professionals can investigate and respond to non-covered charge denials.

What Does Non-Covered Mean in Medical Billing?

In medical billing, a non-covered charge generally refers to an amount for which the payer does not provide coverage under the applicable circumstances.

Coverage may depend on several factors, including the patient's insurance benefits, the service furnished, applicable coverage policies and other program or plan requirements.

A payer's determination that a charge is non-covered does not necessarily mean the underlying service was inappropriate or that the provider submitted an incorrect claim.

Likewise, a service may be clinically appropriate without being covered under every insurance plan or reimbursement arrangement.

Coverage decisions can differ among Original Medicare, Medicare Advantage, Medicaid and commercial health plans. Providers should review the requirements applicable to the particular payer, coverage and date of service.

What Does CARC 96 Mean in Medical Billing?

X12 defines CARC 96 as Non-covered charge(s).

Because this is a general adjustment reason, the code alone does not identify the precise coverage restriction that resulted in the payer's decision.

For example, when a provider receives a CO-96 adjustment, the provider may need to review accompanying RARCs, payer correspondence or applicable benefit documents to determine why the charge was considered non-covered.

Possible investigation areas include:

• Whether the billed service is covered under the applicable benefit or program
• Whether a coverage restriction applies to the service
• Whether an applicable frequency or other coverage limitation was exceeded
• Whether the payer applied the correct coverage policy
• Whether the reported claim information accurately reflects the service furnished

These circumstances do not all necessarily require CARC 96. More specific adjustment reason codes may apply depending on the payer's determination.

What Is the Difference Between CARC 96, CO-96 and PR-96?

CARC 96 identifies the non-covered charge adjustment reason. The accompanying adjustment group code identifies the financial adjustment category reported by the payer.

A correctly reported CO adjustment generally represents an amount that is not the patient's financial responsibility because of an applicable contractual obligation or regulatory requirement.

The PR adjustment group identifies an amount reported as patient responsibility in the payer's adjudication. However, the presence of a PR adjustment does not independently establish whether the amount may legally or contractually be collected from the patient.

Important: A provider should not transfer a correctly reported CO-96 adjustment to the patient simply because the payer considers the service non-covered. Providers should verify the adjudication and all applicable billing requirements before determining financial responsibility.

CARC 96 Requires an Accompanying Remark Code

One important requirement in the official X12 CARC 96 definition is that at least one remark code must accompany the adjustment.

The requirement may be satisfied by an applicable NCPDP Reject Reason Code or a Remittance Advice Remark Code (RARC) that is not an Alert.

Informational RARCs that begin with Alert: do not satisfy this specific requirement on their own.

The accompanying remark provides additional information about the payer's adjustment. However, some remarks may direct providers to benefit documents or payer policies rather than identifying every detail of the coverage restriction.

For example, RARC N130 directs the reader to consult plan benefit documents or guidelines for information about restrictions affecting the service.

The presence of N130 does not independently identify which specific coverage provision applies. Additional payer information may be needed.

CARC 96 vs. Other Coverage-Related Adjustment Codes

Several X12 adjustment codes describe different reasons that a payer may reduce or deny payment. These codes should not be treated as interchangeable.

For example, CARC 50 specifically identifies a medical necessity determination, while CARC 96 reports non-covered charges more generally.

Likewise, CARC 97 identifies a benefit included in another adjudicated payment, and CARC 204 identifies an item or service that is not covered under the patient's current benefit plan.

The reported CARC should be interpreted according to its actual definition and with any available payer explanation. Providers should not assume that every non-covered service is denied for medical necessity.

Where Is CARC 96 Reported in the X12 835?

In an X12 835 version 5010 transaction, CARC 96 is reported in a CAS (Claim Adjustment) segment with an applicable adjustment group code and monetary amount.

The CAS segment may appear at the claim level in Loop 2100 or at the service level in Loop 2110.

For the first adjustment in a CAS segment, CAS01 identifies the adjustment group, CAS02 identifies the CARC and CAS03 identifies the adjustment amount.

Additional adjustments may be reported in subsequent positions within the same CAS segment when they share the same group code.

The official X12 CARC 96 definition also directs readers to the Healthcare Policy Identification REF segment in Loop 2110, if present. This segment uses REF01 = 0K (the numeral zero followed by the letter K), with REF02 containing a payer-reported policy identifier.

Important: The Healthcare Policy Identification segment is not exclusive to CARC 96 and is not reported with every adjustment. Its presence does not independently establish why a service was considered non-covered. Providers should review available policy references along with the actual CARC, RARC and payer information.

Example 1: Reading a CO-96 Non-Covered Charge

Consider a hypothetical medical service billed at $150. The payer reports that the charge is non-covered and applies a full CO-96 adjustment. RARC N130 is also reported, directing the provider to review applicable plan restrictions.

Hypothetical educational excerpt, not a complete X12 835 transaction. The procedure code and amounts are illustrative and do not establish that this service is non-covered under any particular payer policy.

Understanding the Example

The amounts reconcile as follows:

$150 submitted charge - $150 CO-96 adjustment = $0 payer payment

The payer reported no payment for the service and assigned the full submitted charge to a CO-96 adjustment.

As reported, the $150 CO adjustment is not patient responsibility. The provider should investigate the payer's coverage determination and applicable review options rather than simply transferring the amount to the patient.

RARC N130 provides additional context but does not identify the exact benefit restriction. The provider may need to consult the relevant plan documents or obtain clarification from the payer.

Example 2: A Claim With Both Paid and Non-Covered Services

A CARC 96 adjustment does not necessarily mean that every service on a claim was denied.

In this hypothetical example, a claim contains two services totaling $300. The payer pays one service after applying a contractual adjustment, while reporting the second service as non-covered under CO-96.

Hypothetical educational excerpt, not a complete X12 835 transaction. The identifiers, procedure codes and amounts are illustrative. No specific payer coverage determination is implied for either procedure.

How the Amounts Balance

The claim balances as follows:

$300 submitted charges - $30 CO-45 - $150 CO-96 = $120 payer payment

The payer paid the first service but reported the second service as non-covered. Therefore, the CO-96 adjustment applies to one service rather than automatically describing the entire claim.

Important: Medical billers should review the complete CLP, SVC, CAS and applicable remark information rather than assume that a non-covered charge adjustment affects every service.

How RARCs and Policy Information Help Explain CARC 96

Because CARC 96 is a general non-covered charge adjustment, the accompanying remark code is particularly important.

For example, RARC N130 directs providers to consult plan benefit documents or guidelines for information about service restrictions. Other RARCs may identify different coverage-related circumstances.

In an X12 835, service-level RARCs may appear in an LQ segment using qualifier HE.

The official CARC 96 definition requires an accompanying non-Alert remark code or applicable NCPDP Reject Reason Code. An Alert RARC alone does not satisfy that requirement.

When present, the Healthcare Policy Identification REF segment in Loop 2110 may also provide a reference to a payer policy associated with the adjustment.

However, a policy identifier or accompanying remark does not necessarily explain every detail of the noncoverage determination. Providers should review the applicable coverage documents and other payer information before deciding how to respond.

Non-Covered Charges vs. Medical Necessity Denials

CARC 96 and CARC 50 both involve noncoverage, but their official definitions communicate different levels of detail.

CARC 96 identifies non-covered charges generally. CARC 50 specifically identifies services the payer does not consider medically necessary.

A service reported under CARC 96 should not automatically be treated as a medical necessity denial simply because the payer issued no payment.

Likewise, medical billers should not assume that every non-covered charge can be resolved through additional clinical documentation.

Providers should identify whether the reported issue concerns plan benefits, an applicable coverage policy, medical necessity or another determination before choosing the appropriate follow-up.

Non-Covered Charges and Patient Financial Responsibility

A non-covered charge does not automatically establish that the patient is responsible for the unpaid amount.

The reported adjustment group, applicable coverage rules, provider agreements and any relevant notice or liability requirements must be reviewed together.

For a correctly reported CO-96 adjustment, the amount generally is not patient responsibility. Providers should not reassign that amount to the patient simply because the charge was reported as non-covered.

A PR-96 adjustment indicates that the payer reported patient responsibility. However, providers must still verify whether patient billing is permitted under the applicable program, contractual and legal requirements.

For Original Medicare, certain noncoverage circumstances may involve specific beneficiary notice and limitation-on-liability requirements. These requirements are not universal, and Medicare Advantage, Medicaid and commercial insurance may have different rules.

Providers should consult the applicable payer or program instructions before determining the financial treatment of a non-covered charge.

How to Investigate a CARC 96 Non-Covered Charge

A structured review can help determine what the payer reported and whether a correction, additional review or appeal may be appropriate.

Step 1: Review the Complete Remittance

Identify the affected claim or service, the adjustment group, the CARC 96 amount and the accompanying remark code.

Determine whether other services on the claim received payment or were adjusted for different reasons.

Step 2: Review the Accompanying Remark Code

Read the reported RARC or applicable NCPDP Reject Reason Code to identify any additional explanation of the non-covered charge.

If the information is not sufficient to understand the adjustment, consult available payer correspondence or contact the payer through the appropriate process.

Step 3: Identify the Applicable Coverage Requirement

Review the coverage or benefit requirements applicable to the patient's insurance, the service furnished and the relevant date of service.

For Original Medicare, determine whether an applicable coverage requirement, National Coverage Determination (NCD), Local Coverage Determination (LCD) or other Medicare policy is relevant.

For other payers, consult the applicable plan documents, medical policies or program instructions.

Step 4: Review the Submitted Claim Information

Compare the original claim information against the service documentation and the payer's explanation.

Review applicable procedure codes, diagnoses, modifiers, units, dates and other relevant information to determine whether an actual claim submission error occurred.

Do not change claim information solely to obtain payment. Any correction must accurately reflect the documented services and applicable coding requirements.

Step 5: Determine the Appropriate Resolution Process

If the claim contains an actual submission error, determine whether the payer permits an appropriate corrected claim.

If the provider disputes the coverage determination, verify whether reconsideration, a provider dispute or a formal appeal is available.

Not every non-covered charge can be corrected or appealed through the same process. The applicable payer requirements and deadlines must be confirmed.

Step 6: Review Financial Responsibility

Before assigning an unpaid balance, review the correctly reported adjustment group and applicable patient billing requirements.

Do not transfer a CO adjustment to the patient merely because the payer reported the service as non-covered.

Step 7: Track the Outcome

Retain relevant claim details, payer correspondence, coverage documentation, submitted corrections and review decisions.

Review any subsequent remittance advice to determine whether the original adjustment was upheld, revised or reversed and whether the financial amounts changed.

Corrected Claim vs. Noncoverage Appeal

The appropriate response to CARC 96 depends on whether the issue involves incorrect claim information or the payer's coverage determination.

Repeatedly submitting an unchanged claim generally does not resolve a disputed coverage determination and may create duplicate processing problems.

Submitting a corrected claim also does not necessarily preserve an appeal deadline. Providers should verify the accepted review process and applicable filing requirements before taking action.

Medicare, Medicaid and Commercial Payer Considerations

Coverage requirements differ among healthcare programs and insurance products. A standardized CARC does not establish identical benefit or billing rules across all payers.

Original Medicare

Original Medicare coverage decisions may involve applicable Medicare statutes, regulations, National Coverage Determinations (NCDs), Local Coverage Determinations (LCDs) and other coverage requirements.

Providers should review the applicable Medicare Administrative Contractor guidance and determine which coverage policy was relevant to the service and date of service.

Beneficiary financial liability for certain non-covered charges may also depend on Medicare advance-notice and limitation-on-liability requirements. Providers should verify these rules rather than assume that every non-covered charge can be billed to the beneficiary.

Medicare Advantage

Medicare Advantage plans must follow applicable Original Medicare coverage requirements for basic Medicare benefits, subject to applicable CMS rules. Plans may also administer coverage and claims through plan-specific procedures.

Providers should review the applicable plan benefits, coverage criteria and available review procedures rather than assume that Original Medicare fee-for-service claim or notice requirements apply unchanged.

Medicaid

Medicaid fee-for-service programs and Medicaid managed care organizations may have different coverage requirements, subject to applicable federal and state rules.

Providers should verify the relevant state or managed care plan guidance before determining whether a service is covered or whether any patient financial responsibility is permitted.

Commercial Payers

Commercial insurance coverage may depend on the patient's specific benefit plan, applicable exclusions, coverage policies and contractual arrangements.

Providers should review the plan's actual coverage requirements and verify any available correction or appeal procedures with the appropriate payer.

Clearinghouses and Billing Applications

Clearinghouses and billing applications may help identify non-covered charge adjustments and display the associated CARCs and RARCs.

However, successful electronic claim acceptance does not establish that the submitted services are covered under the patient's insurance.

For EDI professionals, preserving the adjustment group, CARC 96, accompanying remark codes, service information and payment amounts is especially important because the general CARC definition does not explain the complete coverage determination.

How to Help Prevent Avoidable Non-Covered Charge Denials

Not every non-covered charge can be prevented through better billing practices. However, reviewing coverage requirements and maintaining accurate claim information may help reduce avoidable errors.

Recommended practices include:

• Verify applicable benefit and coverage requirements before billing
• Review coverage restrictions relevant to frequently billed services
• Confirm the patient's insurance coverage and applicable plan
• Use procedure and diagnosis codes that accurately reflect the documented services
• Review relevant policy effective dates and changes
• Maintain appropriate supporting claim and clinical documentation
• Follow applicable beneficiary notice requirements when relevant
• Track recurring CO-96 adjustments by payer, service and accompanying RARC

When recurring adjustments involve a particular service or payer, investigating the underlying coverage policy may help billing and clinical teams distinguish correct noncoverage determinations from avoidable claim problems.

Official CARC 96 Definition

X12 maintains the official Claim Adjustment Reason Code list, including CARC 96.

For the current definition and usage requirements, refer to X12 Claim Adjustment Reason Codes.

For additional remark code definitions, refer to X12 Remittance Advice Remark Codes.

CARC 96 requires at least one qualifying remark code and should be interpreted together with the applicable adjustment group, complete payer adjudication and any available policy information.

Frequently Asked Questions About CARC 96

Key Takeaway

CARC 96 identifies non-covered charges and requires at least one qualifying accompanying remark code. When reported with the CO adjustment group, it appears as CO-96.

In an X12 835 version 5010 transaction, CARC 96 is reported through a CAS segment at the claim level in Loop 2100 or at the service level in Loop 2110. Accompanying RARCs or payer policy references may provide additional context.

A non-covered charge adjustment does not necessarily mean every service on a claim was denied, and it does not independently establish that the service was medically unnecessary or that the patient is financially responsible.

For medical billers and EDI professionals, the appropriate response is to review the actual CARC and RARC information, verify the relevant coverage requirements and determine whether correction or payer review is appropriate.

Most importantly, do not assume that a non-covered charge is an automatic patient-billable balance or that every CARC 96 adjustment has the same underlying coverage reason.

Related Eclaims Articles and Resources

• What Are Claim Adjustment Reason Codes (CARCs)?
• What Are Remittance Advice Remark Codes (RARCs)?
• How to Read an X12 835 ERA: Claim Payments, Adjustments & Denials
• What Are Claim Adjustment Group Codes (CO, PR, OA & PI)?
• CARC 50 / CO-50: Medical Necessity Denials in Medical Billing
• CARC 97 / CO-97: Bundled Services and Included Payments

Disclaimer: This article provides general educational information about CARC 96, non-covered charge adjustments and electronic healthcare remittance transactions. It does not replace official X12 implementation guides, payer coverage policies, provider agreements or applicable laws and regulations. Coverage requirements, patient liability rules, correction procedures and appeals vary by payer and may change. Always verify the requirements applicable to the specific service, patient coverage and date of service.