Insurance claims are usually denied for one of a handful of reasons: the patient or coverage details don't match the payer's records, the coverage wasn't active or the wrong plan was billed, a required prior authorization is missing, the codes don't match the documentation or the payer's edits, the payer doesn't consider the service covered or medically necessary, the claim duplicates one already sent, or it was filed too late. Most of these are set before the claim is sent, so prevention means fixing the step that produced the error, not just the claim.
Every denial names its reason. The remittance advice gives a group code (such as CO, contractual obligation, or PR, patient responsibility) and a claim adjustment reason code (CARC), often with a remark code that adds detail. The reason codes below are the standard X12 codes payers commonly use for each problem. Which code a payer picks, and what its own policy requires, varies by payer.
Is a denial the same as a rejection?
No. A rejection happens before adjudication: the clearinghouse or payer refuses the claim because data is missing or invalid, and it never enters the payer's system. Medicare, for example, returns such claims as "unprocessable". They have no appeal rights and must be corrected and resubmitted. A denial is a decision the payer made after processing the claim. It can be corrected or appealed. Both cost time, and both are mostly preventable. For what a claim needs to get through first time, see what a clean claim is.
What are the most common reasons claims get denied?
| Reason | Reason codes payers often use | Where it's prevented |
|---|---|---|
| Patient or subscriber details don't match | CARC 31, CARC 16 | Registration |
| Coverage not active on the date of service | CARC 27 | Eligibility check |
| Wrong payer or wrong order of payers | CARC 22, CARC 109 | Eligibility check, coordination of benefits |
| Prior authorization missing | CARC 197 | Scheduling and authorization tracking |
| Diagnosis doesn't support the service | CARC 11 | Coding and documentation |
| Modifier doesn't fit the code | CARC 4 | Coding |
| Service bundled into another | CARC 97 | Coding and NCCI edits |
| Not covered or not medically necessary | CARC 50, 96, 167, 204 | Coverage policy check before the visit |
| Duplicate claim | CARC 18 | Claim tracking |
| Filed after the deadline | CARC 29 | Submission workflow |
Patient and subscriber information
A misspelled name, a wrong date of birth, an old member ID or the wrong subscriber means the payer can't match the claim to a member. Scan the insurance card at every visit, re-check returning patients' coverage, and record the subscriber exactly as the plan has them.
Eligibility and coverage
Coverage can end, change plans or start after the visit date. Run an electronic eligibility check (the HIPAA-standard X12 270/271 inquiry and response) before each visit, and again for services scheduled well in advance.
Coordination of benefits
When a patient has more than one plan, coordination of benefits rules decide which pays first. For Medicare patients, the Medicare Secondary Payer rules decide when Medicare isn't primary. Billing the secondary plan first, or leaving out the primary plan's payment information, gets the claim denied or sent back. Ask about other coverage at registration and update it whenever the patient's work or family situation changes.
Prior authorization and referrals
Many plans require approval before certain services, and a service performed without it is usually denied however well it is documented. Each plan publishes its own list, and the lists change. Check the requirement when the service is scheduled, record the authorization number on the claim, and make sure the dates and units match what was approved.
Coding that doesn't match the documentation or the edits
Denials here include diagnosis codes that don't support the service, modifiers that don't fit the code, and code pairs that CMS's National Correct Coding Initiative (NCCI) edits treat as one service. NCCI's procedure-to-procedure edits catch incorrect code combinations, and its medically unlikely edits catch units above the usual limit. Bundling denials are common enough to have their own guide to CO-97.
The fix is accurate coding, not different coding. A modifier or an extra code is used when the documentation supports it, never to get past an edit. Coding higher than the record supports is an error just as much as coding lower.
Coverage and medical necessity
Medicare doesn't pay for services that aren't reasonable and necessary to diagnose or treat an illness or injury. Commercial plans have their own medical policies. For Medicare, national and local coverage determinations, and the local billing and coding articles, set out when a service is covered. You can search them by procedure or diagnosis code in the Medicare Coverage Database. Check the relevant policy before the service is done. Make sure the documentation shows why the service was needed, and that the diagnosis codes on the claim reflect it.
Duplicate claims
A claim sent twice for the same service is usually denied as a duplicate. This can happen when someone resubmits instead of checking claim status (the X12 276/277 transaction) or filing a corrected claim. Check status first. When something on a processed claim needs to change, send a corrected claim using the payer's replacement process rather than a new one.
Timely filing
Every payer sets a deadline. Medicare's is generally 1 calendar year after the date of service. Federal Medicaid rules cap the window at 12 months, and state programs publish their own limits. Commercial deadlines are set by each plan's contract. A claim held back for a missing detail is the one most likely to miss it, so track unbilled visits by age.
What should you do when a claim is denied?
- Read the codes, not just the status. The group code says who is responsible for the amount; the CARC and remark code say why.
- Decide: correct or appeal. A data or coding error is corrected and resubmitted. A coverage or medical-necessity decision you disagree with is appealed with the supporting records.
- Watch the appeal deadline. For Medicare, a redetermination must be requested within 120 days of receiving the initial determination. Other payers set their own deadlines.
- Fix the cause. Log each denial by reason and by the step that caused it. The HHS Office of Inspector General's compliance guidance for physician practices recommends reviewing the practice's denial history and correcting the most frequent sources of denials. That review is how a practice stops seeing the same denial every month.
Denials that sit unworked turn into aging accounts receivable. The guide to common medical billing mistakes covers the process gaps that let that happen.
Where can you get help with denials?
If denials are taking more of your team's time than they should, Highview's medical billing team works denials and follow-up day to day, and A/R recovery focuses on older unpaid claims. Either can start with a free call about what you're seeing.
Sources
- X12, Claim Adjustment Reason Codes and group codes.
- CMS, Medicare Claims Processing Manual, Chapter 1: §70 (timely filing), §80.3.1 (unprocessable claims have no appeal rights).
- eCFR, 42 CFR 424.44: Medicare time limits for filing claims.
- eCFR, 42 CFR 447.45: Medicaid claim submission within 12 months.
- eCFR, 42 CFR 405.942: time frame for a Medicare redetermination request.
- eCFR, 42 CFR 411.15(k): Medicare exclusion of services that aren't reasonable and necessary.
- eCFR, 45 CFR Part 162: HIPAA standard transactions (eligibility, claim status).
- CMS, Coordination of Benefits and Recovery overview.
- CMS, National Correct Coding Initiative edits.
- CMS, Medicare Coverage Database: national and local coverage determinations.
- HHS-OIG, Compliance Program for Individual and Small Group Physician Practices (65 FR 59434, October 5, 2000).