How To Fix Denial Code 106 | Common Reasons, Next Steps & How To Avoid It

Denial Code 106 means that the patient’s payment option or election is not in effect, resulting in the denial of the claim. In this article, we will provide a detailed description of denial code 106, common reasons for its occurrence, next steps to resolve the denial, tips on how to avoid it in the future, and examples of denial code 106 cases.

2. Description

Denial Code 106 is a Claim Adjustment Reason Code (CARC) that indicates the patient’s payment option or election is not in effect. This means that the claim has been denied because the patient’s chosen method of payment, such as a specific insurance plan or payment arrangement, is not currently active or valid. The denial code serves as a notification that the claim cannot be processed until the patient’s payment option is updated or reinstated.

2. Common Reasons

The most common reasons for denial code 106 are:

1. Lapsed Insurance Coverage: Denial code 106 may occur when the patient’s insurance coverage has expired or been terminated. This could be due to non-payment of premiums, cancellation of the policy, or the policy reaching its maximum coverage limit.
2. Invalid Payment Arrangement: If the patient has chosen a specific payment arrangement, such as a payment plan or a specific insurance plan, and that arrangement is no longer valid or active, the claim may be denied under denial code 106.
3. Missing or Expired Authorization: Some healthcare services require prior authorization from the insurance company. If the authorization is missing or has expired, the claim may be denied under denial code 106 until the necessary authorization is obtained.
4. Incorrect or Outdated Patient Information: Denial code 106 can also occur if there are errors or outdated information in the patient’s records, such as incorrect insurance policy numbers, outdated contact information, or changes in the patient’s payment preferences that have not been updated.
5. Non-Compliance with Payment Terms: If the patient fails to comply with the agreed-upon payment terms, such as missing premium payments or not fulfilling their financial obligations, the claim may be denied under denial code 106.

3. Next Steps

To resolve denial code 106, the following steps can be taken:

1. Verify Patient’s Payment Option: Contact the patient or their insurance provider to confirm the current status of the patient’s chosen payment option. Determine if there are any issues or changes that need to be addressed.
2. Update Patient Information: Ensure that the patient’s information, including insurance policy numbers, contact details, and payment preferences, is accurate and up to date. Make any necessary updates or corrections to avoid future denials.
3. Reinstate or Update Payment Option: If the patient’s payment option has lapsed or is no longer valid, work with the patient to reinstate or update their payment option. This may involve renewing insurance coverage, setting up a new payment plan, or obtaining the required authorizations.
4. Resubmit the Claim: Once the patient’s payment option is in effect, resubmit the denied claim with the updated information. Ensure that all necessary documentation and authorizations are included to support the claim.
5. Follow Up with Insurance Provider: Contact the insurance provider to confirm that the updated payment option is now in effect and that the claim will be processed accordingly. Address any remaining concerns or questions to ensure a smooth resolution.

4. How To Avoid It

To avoid denial code 106 in the future, consider the following tips:

1. Regularly Verify Insurance Coverage: Stay updated on the status of the patient’s insurance coverage to ensure that it remains active and valid. Communicate with the patient and their insurance provider to address any changes or issues promptly.
2. Confirm Payment Arrangements: Before providing services, verify that the patient’s chosen payment arrangement, such as a specific insurance plan or payment plan, is still in effect. This can help prevent denials due to invalid or expired payment options.
3. Obtain Necessary Authorizations: For services that require prior authorization, ensure that the necessary authorizations are obtained before providing the service. Keep track of expiration dates and renew authorizations as needed.
4. Maintain Accurate Patient Information: Regularly update and verify the patient’s information, including insurance policy numbers, contact details, and payment preferences. This can help prevent denials caused by incorrect or outdated information.
5. Communicate Payment Terms Clearly: Clearly communicate the payment terms and expectations to the patient, including any premium payments or financial obligations. Ensure that the patient understands their responsibilities and complies with the agreed-upon terms.

5. Example Cases

Here are two examples of denial code 106:

• Example 1: A patient’s insurance coverage expired on December 31st, and they sought medical services on January 15th. The claim was denied under denial code 106 because the patient’s insurance was no longer in effect.
• Example 2: A patient had previously chosen a specific insurance plan for coverage, but they failed to renew their policy before the expiration date. As a result, the claim was denied under denial code 106.

Source: Claim Adjustment Reason Codes