By the VerifyDoc team
When your insurer pays less than the billed amount — or nothing at all — that decision is encoded in two small alphanumeric codes on your remittance advice: a CARC (Claim Adjustment Reason Code) and often a RARC (Remittance Advice Remark Code). Reading them correctly tells you who owes what, whether the adjustment is legally billable to you, and whether you have grounds to dispute it.
This guide explains what a remittance advice actually is, how to decode the Group Code + CARC + RARC sequence in that order, which denial codes patients most often encounter, and what the 2026 regulatory changes mean for out-of-network billing under the No Surprises Act.
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Check my bill — free preview →What Is a Remittance Advice — and Why Should You Care?
A remittance advice (RA) is the document your health plan sends to a provider after processing a claim. It's not the same as the Explanation of Benefits (EOB) you receive as a patient, though they cover the same adjudication. Payers use these documents to communicate to healthcare providers why they processed a claim the way they did, and providers can find the relevant codes on both the electronic remittance advice (ERA) and the explanation of benefits sent by insurance companies.
You should care about this document for one practical reason: if a provider bills you a balance that appears on the RA as a provider write-off, you're being charged money you don't legally owe. Getting a copy of the RA — which you can request from your provider's billing office — lets you cross-check what the insurer actually paid and what adjustments are legitimately yours to pay. For context on what adjustments look like on the underlying bill itself, see What "Adjustments" on a Hospital Bill Really Mean in 2026.
Both CARC and RARC codes are sent back to the provider in the EOB (human-readable) or ERA 835 (electronic format). The ERA 835 is the standardized electronic transaction format governed by HIPAA. HHS adopted the Phase III CAQH CORE EFT and ERA Operating Rule Set under the Patient Protection sections in 45 CFR 162.1601–162.1603 and Section 1104 of the Affordable Care Act. In plain terms: these codes are federally standardized, so they mean the same thing regardless of which insurer sent them.
The Three-Part Code Stack: Group Code, CARC, and RARC
Every adjusted claim line on a remittance advice carries up to three layers of information. You must read them in sequence — the meaning of the number changes completely depending on the two-letter prefix that precedes it.
Claim Adjustment Reason Codes (CARCs) identify why a payment was adjusted. They explain the financial reason a payer reduced, denied, or otherwise modified the amount being paid on a claim. CARCs explain what happened to the payment. Remittance Advice Remark Codes (RARCs) explain why it happened or what needs to happen next.
Every adjusted claim has at least one CARC, but RARCs don't always show up. This happens because CARCs give basic explanations that work everywhere. RARCs add extra details only when needed. When a RARC does appear, unlike CARC codes, which specify the reason for an adjustment such as exceeding a fee schedule or being a non-covered service, RARC codes provide the narrative details that clarify the payer's decision.
The four Group Codes that precede every CARC number are the most immediately useful piece of information for patients:
| Group Code | Full Name | Who Is Responsible? | Can Provider Bill You? |
|---|---|---|---|
| CO | Contractual Obligation | Provider absorbs per contract | No |
| PR | Patient Responsibility | Patient owes (deductible, copay, coinsurance) | Yes |
| OA | Other Adjustment | Neither standard category; often coordination of benefits | Generally no — verify first |
| PI | Payer-Initiated Reduction | Payer's internal adjustment | No |
Understanding both the Group Code and the CARC is critical when determining whether a balance can legally be billed to the patient. A particularly important trap: the group code matters as much as the number. CO-45 and PR-45 describe the same reason with completely different consequences for who pays. The same number code can flip financial responsibility entirely based on the two-letter prefix.
The Most Common CARC Denial Codes Patients Encounter
The ten most common CARC denial codes are 16 (claim lacks information), 27 (coverage terminated), 29 (timely filing expired), 45 (charge exceeds fee schedule), 50 (not medically necessary), 96 (non-covered charge), 97 (bundled service), 109 (not covered by this payer), 197 (authorization absent), and 204 (not a covered benefit). Here's what each means for you as a patient, and what red flags to watch for.
| CARC | Meaning | Typical Group Code | Patient Action |
|---|---|---|---|
| 16 | Claim lacks required information | CO | Check paired RARC — should name the missing element. Provider fix, not your bill. |
| 27 | Coverage terminated at time of service | CO or PR | Verify your coverage dates were active. Dispute if enrollment records differ. |
| 29 | Timely filing limit expired | CO | Provider's administrative error; should not reach you as a bill. |
| 45 | Charge exceeds fee schedule/contracted rate | CO | Most frequent code on any RA — routine write-off. Never billable to you if CO. |
| 50 | Not medically necessary per payer | CO | Appealable with clinical documentation; check for RARC N115 (LCD-based denial). |
| 97 | Service bundled into another paid service | CO | Provider cannot balance-bill you. May be worth checking for upcoding. |
| 197 | Authorization required but not obtained | CO | Provider's failure to pre-authorize. Should not transfer to patient balance. |
| PR-1 | Deductible amount | PR | You owe this — verify the amount against your plan's deductible tracker. |
| PR-2 | Coinsurance amount | PR | You owe this — confirm the percentage matches your Summary of Benefits. |
| PR-3 | Copayment amount | PR | You owe this — confirm it matches your plan's copay schedule. |
CO-45 (charges exceed fee schedule) is typically the most frequent CARC on any ERA, but it is not technically a denial — it is a contractual adjustment to the contracted rate. The most common true denial codes (where payment is withheld entirely) are CO-97 (bundling), CO-50 (medical necessity), CO-29 (timely filing), and CO-16 (missing information).
Bundling denials coded as CO-97 deserve special scrutiny. If a provider unbundles services that should be billed together and you end up with separate charges on your bill, that's a billing error in the opposite direction — called unbundling. Read What Is Upcoding? How Hospitals Inflate Your Bill — and How to Spot It for a detailed walkthrough.
How to Read a CARC + RARC Pair: An Illustrative Example
(The following example uses illustrative figures only and does not represent any real claim.)
Imagine you receive a hospital bill for $4,380 after a routine outpatient procedure. Your EOB shows the insurer paid $1,624. A line item shows an adjustment of $2,100 coded CO-45 and a separate adjustment of $250 coded CO-97. The remaining $0 balance means you owe nothing beyond your own cost-sharing line (PR-2: $406 coinsurance). Here's what each code signals:
- CO-45: The $2,100 difference between what the hospital billed and the contracted rate is a contractual write-off. The provider agreed to this discount when they joined the network. You cannot be billed for it.
- CO-97: A secondary procedure was bundled into the primary surgical code. The $250 was denied as included in the main payment. Again, you owe nothing on this line — and if the hospital billed it to you separately, that's a billing error. Because CO-97 is a CO denial, the amount cannot be balance-billed to the patient — it is a provider write-off if the appeal does not succeed.
- PR-2 ($406): Your 20% coinsurance on the $2,030 allowed amount. The patient is responsible for this adjustment, such as coinsurance. This is a legitimate charge.
The decision tree below maps the steps to take when you see any code on your remittance:
CARC vs. RARC: A Side-by-Side Comparison
Patients often confuse these two code types because both appear on the same document. The table below shows the key structural differences:
| Feature | CARC (Claim Adjustment Reason Code) | RARC (Remittance Advice Remark Code) |
|---|---|---|
| Format | Numeric (e.g., 16, 45, 97) | Alphanumeric, often starts with M, MA, or N (e.g., N115, MA130) |
| Maintained by | X12 committee (published on x12.org) | CMS via Washington Publishing Company |
| Always present? | Yes — every adjusted claim line must have one | No — appears only when extra detail is needed |
| Answers | "What did the payer do?" | "Why, and what's next?" |
| Paired with | A Group Code (CO/PR/OA/PI) that assigns financial responsibility | A CARC — cannot stand alone |
| Update schedule | Three times per year (March, July, November) | Three times per year (March, July, November) |
| Legal authority | HIPAA administrative standards, 45 CFR 162.1601–162.1603 | 45 CFR § 149.100; 26 CFR § 54.9816-6A; 29 CFR § 2590.716-6A |
Medicare policy states that MACs must use CARCs and RARCs, as appropriate, which provide either supplemental explanation for a monetary adjustment or policy information that generally applies to the monetary adjustment, in the remittance advice and coordination of benefits transactions. CMS instructs MACs to conduct updates based on the code update schedule that results in publication three times per year — around March 1, July 1, and November 1.
CARC is maintained by X12 (x12.org); RARC is maintained by CMS through Washington Publishing Company. Both code sets are publicly searchable at no cost, which means you can look up any code you see on your RA without needing a paid subscription.
The 2026 Regulatory Update: No Surprises Act RARC Codes
The most significant change to remittance advice codes in recent years is the set of new RARC requirements tied directly to the No Surprises Act. These regulations ensure that remittance advice includes information relevant to adjudication of claims, including information used to determine whether a payment dispute is eligible for the Federal IDR process. These regulations are effective as of August 3, 2026.
Use of the specified RARCs will satisfy the requirements related to the use of CARCs and RARCs under the final regulations at 26 CFR § 54.9816-6A, 29 CFR § 2590.716-6A, and 45 CFR § 149.100. For out-of-network claims, these rules now require insurers to flag — right on the remittance — whether a disputed payment can enter the federal IDR process. That matters because every code in the new table comes with an explicit yes-or-no answer to one question: can a dispute over this payment go to the Federal IDR process? That's a genuinely useful thing to have spelled out in black and white, because it tells a provider or facility right on the remittance advice whether their next move is to accept the payment, request an extension, or start the clock on open negotiation.
The RARC codes will go into effect on November 1, 2026; however, RARCs will be required on claims submitted for services provided on or after January 1, 2027. Plans send these codes only on claims from providers and facilities that have no contract with the plan. They say what the payment was based on and whether the claim can go to Federal IDR; they do not explain your cost-sharing:
- N871 and N872: The initial (N871) or final (N872) payment was calculated based on a specified State law.
- N873: The final payment was calculated based on an All-Payer Model Agreement.
- N874: The final payment was determined through open negotiation.
- N875: The final payment equals the amount selected through the Federal IDR process.
- N876 and N944: The service is covered, but the plan made no payment; the two differ on whether the claim can go to Federal IDR.
- N877: The initial payment was made under the No Surprises Act, and the provider or facility may start open negotiation.
- N943: In the circumstances, the service is not subject to the No Surprises Act's surprise billing provisions.
If you see one of these codes other than N943 on an RA for a claim where the provider is trying to balance-bill you, that's a signal that the No Surprises Act's billing protections may apply. Federal IDR is a process between the provider and your plan, not you; for how it works, see What the Federal IDR Process Actually Means for Your Medical Bill in 2026. And if you're concerned the codes are being used to justify improper balance billing, our guide on Phantom Charges on Your Hospital Bill: How to Spot and Dispute Them in 2026 walks through the dispute process step by step.
What to Do When a CO Code Shows Up on Your Bill
The most actionable takeaway from this guide is simple: if a charge on your patient bill corresponds to a line on the RA showing a CO group code, you should not pay it. CO (Contractual Obligation) means the adjustment is based on a contractual agreement between the provider and payer. The patient cannot be billed for a CO adjustment. This applies whether the underlying CARC is 45 (fee schedule), 97 (bundling), or 50 (medical necessity).
Here's a practical three-step process: (1) Request your provider's RA or a detailed itemized bill that cross-references EOB line items. If you haven't already done this, our guide to understanding your itemized hospital bill shows exactly how. (2) Match each billed charge to the corresponding RA line. Any charge with a CO prefix on the RA is a write-off — flag it. (3) Submit a written dispute to the billing department citing the specific CARC and group code. If the provider continues to pursue collection, appeal to your plan and, if that fails, ask for an external review; for a surprise out-of-network bill, you can also call the No Surprises Help Desk at 1-800-985-3059 — federal IDR is between the provider and the plan, not you.
If the account goes to collections before you can resolve it, it's worth knowing your rights. The CFPB's 2025 rule that would have removed medical debt from credit reports was vacated in July 2025 and never took effect — see Medical Debt & Credit Reports in 2026: What the CFPB Rule Change Means for You for the protections that do apply.
About VerifyDoc: We help patients identify errors and overcharges on medical bills. We publish guides on hospital billing, the No Surprises Act, and disputing medical charges, updated as federal and state rules change.
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Check my bill — free preview →Frequently asked questions
What is the difference between an EOB and a remittance advice?
An Explanation of Benefits (EOB) is the patient-facing document your insurer mails or posts to your member portal after processing a claim; a remittance advice (RA) is the parallel document sent directly to the provider, usually in electronic form called an ERA 835. Both cover the same adjudication decision and carry the same CARC and RARC codes, but the RA contains more line-level detail and is the authoritative source for what the insurer actually paid. You can request a copy of the RA from your provider's billing office — there is no federal rule prohibiting them from sharing it with you. Comparing your patient bill to the RA is the most reliable way to catch overcharges and improperly transferred CO write-offs.
If I see a CO-45 adjustment on my EOB, can the hospital still charge me that amount?
No. A CO-45 code means the difference between the hospital's billed charge and the contracted rate is a contractual obligation that the in-network provider agreed to write off when they joined the network. That amount cannot legally be billed to you as a patient. If your bill includes a line for that adjustment amount, you should flag it in writing to the billing department, citing the CO group code and CARC 45. The provider's only recourse if they believe the contracted rate is wrong is a dispute with the payer — not a balance bill to you. If the account is sent to collections despite your dispute, document your written objection and consult your state insurance commissioner.
My insurer denied a service as "not medically necessary" (CO-50). Can I appeal that?
Yes — CO-50 denials are among the most commonly overturned on appeal when the right documentation is submitted. Your first step is to check the paired RARC: RARC N115, for example, means the denial was based on a Local Coverage Determination (LCD), which tells you exactly which CMS policy governs the decision. Request the insurer's clinical criteria they applied, then have your physician submit a letter of medical necessity with supporting clinical notes. Under the Affordable Care Act, you also have the right to an internal appeal and, if that fails, an independent external review — timelines vary by plan but are typically 30–60 days for standard appeals and 72 hours for urgent care situations. Keep copies of all submissions with timestamps.
How do the new No Surprises Act RARC codes (effective for services on or after January 1, 2027) affect what I owe as a patient?
These new codes — finalized under regulations at 45 CFR § 149.100 effective August 3, 2026 — require plans to disclose on the remittance advice sent to an out-of-network provider or facility whether the claim is subject to the No Surprises Act's surprise billing protections, what the payment was based on, and whether it can go to Federal IDR. They do not explain your cost-sharing. When the No Surprises Act applies, your cost-sharing must be based on the recognized amount — usually the lesser of the qualifying payment amount or the billed charge, unless a state law sets a different amount — not the full out-of-network rate. That means the No Surprises Act caps your exposure. If a provider attempts to bill you more than your in-network cost-sharing for a claim the No Surprises Act protects, you can file a complaint with CMS or your state insurance department, and the provider may be subject to penalties under the No Surprises Act.