How To Fix Denial Code 1 (CARC)

Denial Code 1 (CARC) means that a claim has been denied because the service billed is applied towards the patient’s deductible. Below you can find the description, common reasons for denial code 1, next steps, how to avoid it, and examples.

Description

Denial Code 1 is a Claim Adjustment Reason Code (CARC) and is described as “Deductible Amount”.

This indicates that the insurance company will not make the payment for the billed service because the cost is being allocated toward meeting the patient’s deductible. In simpler terms, the claim is not payable until the patient’s deductible is fully satisfied.

Common Reasons

The most common reasons for denial code 1 are:

• Unmet Deductibles: Patients often face Denial Code 1 when their annual deductible has not yet been fully paid. Insurance plans typically require the deductible to be met before covering the costs of services, leading to denials if claims are submitted for reimbursement before this threshold is reached.
• Misunderstood Deductible Accumulations: Confusion about how much of the deductible has already been paid can lead to premature claim submissions. Providers may not have updated or accurate information about a patient’s deductible status, including misunderstandings regarding which services have contributed towards the deductible and the total amount accumulated to date.
• Incorrect Application of Deductible Credits: Services that should be applied towards the deductible might be incorrectly processed, either due to billing errors or misinterpretation of insurance policy terms. This can result in services not being recognized as contributing to the deductible, leading to unexpected denials.
• Inaccurate Coding and Billing Information: Claims may be denied under Code 1 due to inaccuracies in the submitted information, such as incorrect patient identifiers, service codes, or date of service. These errors can mistakenly signal to the insurer that the deductible has not been met, even if it has, or vice versa.
• Lack of Coordination of Benefits: In scenarios where patients have multiple insurance policies, a lack of coordination can lead to Denial Code 1. This occurs when there is confusion over which policy’s deductible applies and how much has been satisfied across policies, resulting in denials due to unmet deductible requirements.

Next Steps

You can fix denial code 1 as follows:

• Confirm Deductible Status: First, verify the patient’s current deductible status with the insurance company. Determine if the services billed were indeed applied towards the deductible and if the patient’s deductible has not been fully met for the policy period.
• Accuracy Check on Claim: Review the claim for accuracy in patient information, service codes, and dates of service. Errors in these areas can mistakenly trigger Denial Code 1 even if the deductible situation is correctly applied.
• Patient Communication: Engage with the patient to discuss their deductible obligations. Clarify that the services billed were applied towards their deductible and inform them of any remaining deductible amount. This step ensures transparency and can help manage patient expectations regarding out-of-pocket costs.
• Documentation and Resubmission: If after verifying the deductible status and ensuring claim accuracy you find that the denial was in error, prepare documentation supporting the claim’s validity. This may include records showing prior deductible payments or proof of insurance policy details that might have been overlooked. Then, resubmit the claim with this additional documentation to challenge the denial.
• Liaise with Insurance: If there’s confusion or disagreement about the deductible application, directly contact the insurance company’s provider support. Discuss the specifics of the claim and the rationale behind its denial. This can lead to a resolution or clarification on how to properly apply charges towards the deductible.
• Adjust Billing Practices: Based on the outcome, it may be necessary to adjust billing practices for future claims. This could involve more detailed pre-verification of patient insurance benefits, including deductible status, before services are rendered.

How To Avoid It

You can prevent denial 1 in the future as follows.

• Determine Deductible Status: Before services are rendered, verify each patient’s insurance coverage, focusing on the deductible. Confirm how much of the deductible has already been met and the amount remaining.
• Detail Verification: When preparing claims, meticulously verify that all patient information, service codes, and billing details are accurate. Special attention should be given to the deductible status to ensure that claims are appropriately filed. Accurate billing can prevent denials resulting from discrepancies that could mistakenly indicate a deductible has not been met.
• Clarify Insurance Coverage: Educate patients about their insurance benefits, with a particular focus on how deductibles work and their role in the billing process. Clear communication can help set expectations regarding out-of-pocket expenses and reduce confusion or dissatisfaction stemming from deductible-related denials.
• Focus on Deductibles: Regularly train your billing and administrative staff on the latest insurance policies and billing procedures, with a special emphasis on understanding and handling deductibles. Equip your team with the knowledge to identify services that may be affected by the deductible and how to address Denial Code 1 effectively.

Examples

Below are two examples of denial code 1:

Example 1: In a typical scenario, a healthcare provider might submit a claim for a routine check-up costing $150. If the patient’s annual deductible is $500 and they haven’t incurred any healthcare costs for the year, the claim would be denied under Code 1, indicating the $150 will go towards the deductible.

Example 2: Another example involves a situation where a provider mistakenly submits a claim under a patient’s old insurance plan, leading to a denial since the deductible specifics do not match the current policy.

Source: https://x12.org/codes/claim-adjustment-reason-codes