CARC 27 means expenses incurred after coverage is terminated. CO-27 and PR-27 share that same reason. The difference is the group code: CO (contractual obligation) puts the loss on the provider, while PR (patient responsibility) allows the balance to move to the patient.
If a claim comes back with a 27 on the remittance, the payer is telling you the date of service fell after the patient’s coverage ended. What you do next depends on the two letters in front of the number: CO or PR.
This blog explains how to read both codes, why they happen, their impact on payments, prevention approaches and best practices in medical billing, along with the role of a medical billing company in the USA in managing denials, improving claim accuracy, and enhancing revenue cycle performance for healthcare providers.
What Are Denial Codes in Medical Billing?
Every adjustment on an 835 remittance is built from up to three parts. Mixing them up is the most common reason teams misread codes like CO-27 and PR-27.
| Component | Full name | What it tells you |
| Group code | Claim Adjustment Group Code | Who is financially responsible (CO, PR, OA, PI, CR) |
| CARC | Claim Adjustment Reason Code | Why the amount was adjusted or denied (for example 27, 45, 29) |
| RARC | Remittance Advice Remark Code | Extra detail or next-step instructions (N- and MA- series codes) |
The five group codes you will see most often:
| Group | Meaning | Typical handling |
| CO | Contractual Obligation | Provider liability. Usually written off; patient not billed |
| PR | Patient Responsibility | Balance can be billed to the patient or secondary payer |
| OA | Other Adjustment | Neither CO nor PR applies |
| PI | Payer Initiated Reduction | Payer-driven reduction, not a contractual one |
| CR | Correction and Reversal | Reversal or correction of a prior claim |
CMS states that once claims have been adjudicated, Medicare generates either an ERA or SPR that includes adjustment codes such as CARC, RARC, and Group Codes to justify its decision on payments. The codes guarantee correct posting of claims, identify accountability for payments, and facilitate efficient processing of electronic remittances.
What Is CARC 27?
CARC 27 reads Expenses incurred after coverage terminated. Payers use it when the service date falls after the effective termination date on the patient’s plan. This is an issue with eligibility, not one related to price or coding.
Since this is a denial based on eligibility, changing the codes for the claim will not make any difference. The work is in verifying coverage dates, finding another payer, and deciding who owns the balance.
What is the CO-27 Denial Code?
CO-27 indicates denial due to the end of the coverage effective on the date of service, with liability assigned by the payer to the provider under the group code CO.
As a rule, CO-27 means the payer treats the loss as the provider’s. Providers are generally expected to verify eligibility before the visit, so the patient cannot be billed unless your payer contract or program rules say otherwise.
When CO-27 is used
- The payer ended coverage retrospectively, after the patient’s visit, while your check on the date of service has shown that the patient was covered.
- The provider has done no eligibility verification and the plan had ended by then.
- A contracted payer has its own rule to assume provider’s liability regarding lapse of coverage.
What is PR-27 Denial Code?
PR-27 carries the same reason (coverage terminated before the service) but assigns the liability to the patient with the group code PR.
This means the claim can move to patient billing, or to another payer if the patient has new or secondary coverage. It does not mean the patient will necessarily pay, but it does mean your team is permitted to pursue the balance, subject to payer rules and your own collection policies.
When PR-27 typically appears
- The payer’s system assigns patient liability for all services after the termination date.
- The patient lost coverage and the payer treats the services as the patient’s own responsibility.
- The patient has moved to a new plan, and the old payer is directing you to bill the patient or the new carrier.
Key Differences Between CO 27 and PR 27 Denial Codes
It is vital in medical coding services for proper code interpretation to facilitate accurate posting of claims, minimize mistakes, and maintain compliance in billing processes.
| CARC (reason) | 27: Expenses incurred after coverage terminated | 27: Expenses incurred after coverage terminated |
| Group code | CO: Contractual Obligation | PR: Patient Responsibility |
| Who bears the loss | Provider | Patient (or another payer) |
| Can you bill the patient? | Generally no. Verify contract and program rules | Generally yes, after checking for other coverage |
| First action | Re-verify coverage dates, look for other payer, consider appeal if termination was retroactive | Re-verify coverage, look for new or secondary payer, then send patient statement |
| Revenue risk | Write-off if not recovered | Collection risk and patient-satisfaction risk |
Common Causes of CO 27 vs PR 27 Denials
Co 27 denial code descriptions happen due to eligibility, verification, coding, or authorization-related billing errors.
Retroactive termination.
The payer ends coverage retroactively to a previous month, usually after reporting of a termination was made late by the employer, or a premium payment wasn’t made.
Eligibility not checked on the date of service.
The check is done at the time of scheduling and cannot detect an event that occurs between then and the visit date.
Change in employment.
Health care coverage based on employment usually ends during the last day of employment.
Age of dependent or life event.
The dependent may have reached the plan age limit or had an event in the family like a divorce that ended the coverage.
Medicaid and Marketplace coverage changes.
Medicaid eligibility can change month to month, and Marketplace plans can be terminated for unpaid premiums after the grace period. Always re-check active status.
Wrong or old insurance on file.
The insurance the patient is currently using is different from what is recorded in the registration information.
Insurance termination after grace period expired.
Some insurers end the coverage retroactively to the end of the paid period.
Coding is not the cause
CARC 27 is an eligibility denial, so correcting CPT, ICD-10 or modifiers will not overturn it. The fix is on the coverage side.
Example: How a CO-27 Denial Plays Out
A patient receives services on February 12. The front desk performs a 270/271 eligibility check on February 5 and receives a response showing active coverage. The claim was submitted on February 14. On March 3, the ERA returned a CO-27 denial because the payer processed the patient’s coverage as terminated effective January 31, based on a late termination report from the employer.
Next steps: Make a new eligibility check for 271 for the exact date of service (Feb 12). Inquire from the patient if they had any other active coverage at the time of the date of service, and bill accordingly. If there has been any retroactive termination of coverage, inquire if there is any provision in the payer’s guidelines and/or the contract between the payor and the provider allowing them to reconsider and reprocess the claim. Keep a copy of the original eligibility reply as evidence.
Steps to Resolve CO 27 Claim Denials
CO-27 denial code descriptions can be resolved through contract review, billing improvement, and organized appeals.
1. Verify termination date. Perform a new eligibility check (270/271), or contact the payer directly. Get the exact date of effectiveness and termination.
2. Compare against date of service. If the date of service is on or prior to termination date, this denial could be a mistake on part of the payer. Resubmit a new claim or reconsideration along with your proof of eligibility.
3. Find other sources of coverage. Contact the patient and ask about new employment-based insurance, spouse’s insurance, Medicaid, or Medicare. Make sure you know whom to bill now, and don’t forget about timely filing.
4. Check for retroactive termination provisions. Check your contract with the payer, as well as relevant state laws that may mandate that payer cover services provided in good faith based on a date stamped eligibility response.
5. File an appeal if there are grounds for it. Attach the date-stamped eligibility response, copy of claim, ERA and any letters from the payer. Appeal by payer’s deadline.
6. Adjust and document. If the payment cannot be recovered, adjust the CO accordingly and note the root cause to help improve front-end processes.
Fixing PR 27 Payment Adjustments
PR-27 denial code description needs eligibility checks, patient billing precision, and practical financial communication strategies.
1. Verify the insurance coverage status first. Don’t send the patient statement before confirming that coverage was inactive at the date of service.
2. Collect new insurance details. Gather the details of new insurance from the patient and submit claims accordingly within timely filing.
3. Review the coordination of benefits. Patients might have secondary or dual insurance coverages which will apply to his/her claim.
4. Provide a billing statement to the patient. If there are no other insurance coverages, then send the patient a detailed statement.
5. Maintain records of your efforts. Maintain records of your efforts made for verification of eligibility and communication with patients and payers.
Best Practices to Prevent CO 27 and PR 27 Denials
CO-27 denial code can be prevented through correct verification, coding, and contract management practices.
Verify eligibility on or close to the date of service, not only at scheduling. For recurring or high-value visits, re-verify each time.
Use real-time eligibility tools integrated with your PM or EHR system, and save every response with a timestamp.
Update insurance at every visit. Ask patients to confirm that nothing has changed since the last appointment.
Post by group code. Train posters to separate CO from PR so write-offs and patient balances are not mixed up.
Track denials by CARC and payer. A cluster of 27 denials from one payer may point to a retro-termination pattern worth raising with the payer.
Use of Denial Management System. The denial code PR-27 can be lessened by using automated denial management systems that track, analyze, and resolve claim rejections. These systems recover efficiency, identify denial patterns, and support faster appeals which help providers enhance revenue recovery and minimize organizational workload meaningfully.
Watch timely filing. When coverage lapses, the clock for billing the next payer is already running.
Easy-to-Confuse Codes
| Code | Meaning | How it differs from 27 |
| CO-45 | Charge exceeds fee schedule / maximum allowable | This is the true contractual adjustment. Coverage was active; the price was reduced |
| PR-1 / PR-2 / PR-3 | Deductible / coinsurance / copay | Patient cost share on a covered, paid claim |
| PR-96 | Non-covered charge(s) | The service is excluded from the plan, not the coverage period |
| CO-26 | Expenses incurred prior to coverage | Coverage had not started yet, the mirror of CARC 27 |
| CO-204 | Service/equipment/drug not covered under the patient’s current benefit plan | Benefit exclusion, not a termination issue |
| CO-31 | Patient cannot be identified as our insured | Member ID or demographic mismatch |
Impact of CO-27 and PR-27 on Revenue Cycle
These two denial codes reduce cash flow differently. With an unrecovered CO-27, the entire expense becomes a write-off, making it a cost for the provider. With PR-27, the outstanding balance is transferred to the patient or another payer, meaning that payments become slower and the cost to collect will be higher. Either way, extra work will occur because of having to do additional verification on the patient’s eligibility, determining the appropriate payer and re-billing while still within the timely filing window period.
How Stream RCM Help with Denial Code
Stream RCM assists healthcare professionals in handling denial codes by determining the cause of denials, minimizing claim mistakes, and increasing claim acceptance rates during the first submission. Stream RCM simplifies work processes by automating denial management, ensuring proper coding, and effective follow-ups. Stream RCM improves the efficiency of the revenue cycle process, avoids financial losses, and speeds up reimbursements.
FAQs
What does CO-27 indicate on a medical claim form?
CO-27 indicates that charges were generated after the expiration of insurance coverage and the payer has passed the responsibility to the provider by using the CO group code.
What is the difference between CO-27 and PR-27?
Both use CARC 27 (insurance coverage expired prior to the service). CO passes the loss to the provider; PR permits the balance to be billed to the patient.
Can I bill the patient for a CO-27 denial?
Not usually, since CO indicates provider responsibility. Check your payer contract, program guidelines, and state laws before sending an invoice to the patient and see if any other coverage exists.
Can a CO-27 denial be appealed?
Yes, when you have proof of coverage at the time of service, such as a dated 271 response, or when the insurance company terminated coverage retroactively contrary to your contract or state laws. If coverage indeed expired prior to the service, then the denial is final.
Is CO-27 the same as CO-45?
No. CO-45 is the contractual adjustment when charges exceed the allowed amount. CO-27 is an eligibility denial for services after coverage ended.
Is PR-27 always the patient’s responsibility?
Not always. Make sure before billing that the payer is within the dates of coverage and has not made a mistake regarding the eligibility status.
How can practices avoid CO-27 and PR-27 denials?
Check eligibility at time of service, change insurance for each visit, document eligibility replies, and follow denials by CARC and payer.
