Denial Code 235 (CARC) means that a claim has been denied due to sales tax. Below you can find the description, common reasons for denial code 235, next steps, how to avoid it, and examples.
2. Description
Denial Code 235 is a Claim Adjustment Reason Code (CARC) and is described as ‘Sales Tax’. This indicates that the insurance company will not make the payment for the billed service because it includes sales tax charges. Insurance plans typically do not cover sales tax expenses, leading to denials if claims are submitted with these charges.
2. Common Reasons
The most common reasons for denial code 235 are:
- Inclusion of Sales Tax Charges: Denial code 235 is triggered when the claim includes charges for sales tax. This can happen if the provider mistakenly includes sales tax in the billed amount or if the billing system automatically adds sales tax to the claim without considering insurance coverage limitations.
- Insurance Policy Exclusions: Some insurance policies explicitly exclude coverage for sales tax charges. If the policy does not cover sales tax expenses, any claims submitted with sales tax charges will be denied under code 235.
- Incorrect Billing Information: Errors in the billing process, such as incorrect service codes or inaccurate calculation of charges, can result in sales tax charges being included in the claim. These errors can lead to denials under code 235 if the insurance company identifies the inclusion of sales tax.
3. Next Steps
You can fix denial code 235 as follows:
- Review Billing Practices: Ensure that your billing practices accurately reflect insurance policy requirements. Double-check that sales tax charges are not included in the billed amount and that the claim only includes eligible expenses.
- Verify Insurance Coverage: Before submitting a claim, verify the patient’s insurance coverage and policy details. Confirm if sales tax charges are covered or excluded by the insurance policy. If sales tax charges are excluded, make sure they are not included in the claim.
- Correct Billing Errors: If the denial was due to billing errors, such as incorrect service codes or miscalculated charges, correct these errors and resubmit the claim with accurate information. Ensure that sales tax charges are not included in the corrected claim.
- Appeal the Denial: If you believe the denial was in error or if there are extenuating circumstances, you can appeal the denial. Provide supporting documentation, such as proof of insurance policy coverage or clarification on the exclusion of sales tax charges, to challenge the denial.
- Update Billing System: If the denial was a result of an automatic inclusion of sales tax charges by your billing system, update the system to exclude sales tax charges from future claims. Ensure that the system accurately reflects insurance policy requirements.
4. How To Avoid It
You can prevent denial code 235 in the future as follows:
- Educate Billing Staff: Train your billing staff on insurance policy requirements and exclusions. Make sure they understand that sales tax charges should not be included in the billed amount and that claims should only include eligible expenses.
- Implement Quality Checks: Establish quality checks in your billing process to catch any errors or inclusion of sales tax charges before claims are submitted. This can involve double-checking service codes, charges, and ensuring that sales tax charges are not included.
- Regularly Review Insurance Policies: Stay updated on insurance policy changes and exclusions. Regularly review the policies you work with to ensure that you are aware of any changes related to sales tax coverage.
- Communicate with Insurance Companies: Maintain open communication with insurance companies to clarify any doubts or questions regarding sales tax coverage. This can help you understand the specific requirements and exclusions related to sales tax charges.
5. Example Cases
Below are two examples of denial code 235:
- Example 1: A healthcare provider submits a claim for a medical procedure with a total billed amount of $500, which includes $25 in sales tax charges. The insurance company denies the claim under code 235, stating that sales tax charges are not covered.
- Example 2: In another scenario, a provider mistakenly includes sales tax charges in a claim for a prescription medication. The insurance company denies the claim under code 235, as the policy explicitly excludes coverage for sales tax expenses.
