CO-96 Denial Code: The Complete Guide to Non-Covered Charges (2025 Update)

What is the CO-96 Denial Code?

CO-96 denial code indicates "Non-Covered Charges," meaning the insurance company has determined that the billed service or procedure is not covered under the patient's insurance plan or the provider's contract. This denial directly impacts your practice's revenue and requires immediate attention to resolve.

Unlike payment adjustments or minor billing errors, CO-96 denials represent fundamental coverage issues that can significantly disrupt your cash flow if not handled properly.

Understanding CO-96 Denial Code in Medical Billing

The CO-96 denial code falls under the "CO" (Contractual Obligation) category, which means the denial stems from contractual agreements between the provider and insurance company rather than patient responsibility issues.

What "Non-Covered Charges" Actually Means

When you receive a CO-96 denial, the insurance company is stating that:

• The service falls outside their coverage guidelines
• The procedure is excluded from the patient's specific plan
• The service doesn't meet medical necessity requirements
• The provider lacks proper authorization for the service
• The diagnosis doesn't support the billed procedure

CO-96 vs PR-96: Critical Difference

Many billing professionals confuse CO-96 with PR-96, but they have distinct implications:

CO-96 (Contractual Obligation):

• Insurance company responsibility
• Often appealable with proper documentation
• May indicate coding or authorization issues
• Requires provider action to resolve

PR-96 (Patient Responsibility):

• Patient is responsible for payment
• Service legitimately not covered by their plan
• Usually means direct patient billing
• Less likely to be overturned on appeal

Top 7 Reasons for CO-96 Denial Codes

1. Missing Prior Authorization

Many procedures require pre-authorization from insurance companies. Some procedures or medications necessitate prior authorization from the insurance company. If this step is missed, a CO 96 denial is likely.

Common scenarios:

• Surgical procedures requiring pre-approval
• High-cost imaging studies (MRI, CT scans)
• Specialty medications or treatments
• Experimental or investigational procedures

2. Lack of Medical Necessity Documentation

Insurance companies often require that services be deemed "medically necessary" for coverage. If the payer determines the treatment wasn't essential for the patient's condition, a CO 96 denial might result.

Documentation requirements:

• Detailed clinical notes supporting the procedure
• Clear diagnosis justifying the treatment
• Evidence-based treatment protocols
• Failed conservative treatment attempts (when applicable)

3. Incorrect Diagnosis and Procedure Code Matching

The diagnosis (ICD-10) and procedure (CPT) codes must align to demonstrate medical necessity and appropriate treatment.

Common mismatches:

• Behavioral health codes billed for medical services
• Preventive codes used for diagnostic procedures
• Incorrect anatomical site codes
• Gender-specific codes applied incorrectly

4. Provider Contract Limitations

The actual meaning of this denial is billing for services not covered under the contract. This could be differentiated between the Providers' and the Patients' Contract.

Contract-related issues:

• Services excluded from the provider agreement
• Non-participating provider status
• Specialty restriction violations
• Geographic coverage limitations

5. Plan-Specific Exclusions

Insurance plans often exclude certain services entirely, regardless of medical necessity.

Commonly excluded services:

• Cosmetic procedures
• Experimental treatments
• Alternative medicine services
• Non-FDA-approved devices or medications

6. Inactive or Lapsed Coverage

When a claim is denied with a CO 96 denial code, it means that the patient's insurance policy was inactive or not in effect when the medical services were provided.

Coverage issues:

• Policy terminated before service date
• Coverage is not yet effective
• Patient eligibility problems
• Incorrect insurance information

7. Bundled Service Billing Errors

Some procedures are included in broader service packages and cannot be billed separately.

Bundling scenarios:

• E&M services included in surgical packages
• Lab work included in office visits
• Multiple procedures with inclusive coding
• Post-operative care is included in the surgery fees

Step-by-Step Resolution Process for CO-96 Denials

Step 1: Analyze the Denial Details

Carefully examine the denial reason provided. The RA or EOB should specify why the service was deemed non-covered. Pay close attention to any additional notes or instructions provided by the payer.

Review checklist:

• Explanation of Benefits (EOB) details
• Specific remark codes accompanying CO-96
• Service dates and provider information
• Patient insurance verification details

Step 2: Verify Patient Insurance Coverage

Double-check the patient's insurance information, including their effective date of coverage, policy limitations, and any exclusions. Contact the insurance company directly to confirm coverage details for the specific service or procedure.

Verification steps:

• Confirm active coverage on the service date
• Review plan benefits and exclusions
• Check provider network participation status
• Verify patient eligibility and copay information

Step 3: Review Clinical Documentation

Ensure your medical records support the billed services with proper documentation.

Documentation requirements:

• Clear medical necessity justification
• Appropriate diagnosis codes (ICD-10)
• Accurate procedure codes (CPT/HCPCS)
• Supporting clinical notes and test results

Step 4: Check Authorization Requirements

If prior authorization was required but not obtained, explore the possibility of a retroactive authorization. If retroactive authorization is not possible, consider appealing the denial with supporting documentation.

Authorization review:

• Verify if prior auth was required
• Check for retroactive authorization options
• Gather original authorization documentation
• Contact insurance for authorization status

Step 5: Correct and Resubmit or Appeal

If the denial was due to a billing error, correct the mistake and resubmit the claim with the required documentation. File an Appeal: If the service is indeed covered and the denial was issued in error, submit an appeal with a detailed explanation and all necessary proof of coverage.

Resolution options:

• Corrected claim resubmission
• Formal appeal with documentation
• Peer-to-peer review request
• Patient billing (if appropriate)

Preventing CO-96 Denials: Best Practices

Pre-Service Verification

Insurance eligibility checks:

• Verify coverage before each appointment
• Confirm benefit levels and exclusions
• Check prior authorization requirements
• Validate provider network participation

Authorization Management

Prior authorization workflow:

• Identify services requiring pre-auth
• Submit authorization requests timely manner
• Track authorization approvals and denials
• Document authorization numbers properly

Accurate Coding Practices

Coding accuracy measures:

• Regular coding education and training
• Use of coding audit tools
• Peer review of complex cases
• Staying current with coding updates

Documentation Improvement

Clinical documentation enhancement:

• Clear medical necessity statements
• Detailed procedure descriptions
• Appropriate diagnosis specificity
• Supporting diagnostic test results

Appeals Process for CO-96 Denials

Internal Appeal Requirements

Send supporting documents and a letter to the insurance provider. Remember, you need to file an internal appeal within 180 days after you receive a denial.

Appeal components:

• Formal appeal letter
• Supporting medical documentation
• Prior authorization evidence
• Clinical necessity justification

Appeal Success Strategies

Effective appeal elements:

• Clear, concise explanation of services
• Strong medical necessity documentation
• Relevant policy citations
• Professional presentation format

External Review Options

If insurance companies still deny your claim, you can file for an external review. Find out who administers the external claim review process in your state.

External review process:

• State-specific procedures
• Independent medical review
• Binding decision outcomes
• Final appeal option

Technology Solutions for CO-96 Prevention

Claim Scrubbing Software

Automated verification tools:

• Real-time eligibility checking
• Authorization requirement alerts
• Coding validation systems
• Claim completeness verification

Revenue Cycle Management

Integrated RCM solutions:

• Denial tracking and management
• Appeal workflow automation
• Performance analytics and reporting
• Provider network monitoring

Action Steps for Your Practice

Immediate Actions

1. Review current CO-96 denials - Identify patterns and common causes
2. Implement eligibility verification - Check coverage before services
3. Train your team - Ensure staff understand authorization requirements
4. Establish appeal workflows - Create systematic denial resolution processes

Long-term Improvements

1. Invest in technology - Consider automated claim scrubbing tools
2. Monitor performance metrics - Track denial rates and resolution times
3. Regular contract reviews - Understand payer coverage policies
4. Continuous education - Keep coding and billing knowledge current

Conclusion

CO-96 denial codes represent significant revenue cycle challenges, but they're manageable with the right knowledge, processes, and tools. By understanding the root causes, implementing prevention strategies, and maintaining effective appeal processes, your practice can minimize the financial impact of non-covered charge denials.

Remember that every CO-96 denial offers a learning opportunity to improve your billing processes and reduce future occurrences. Focus on prevention through better verification and documentation practices, while maintaining robust resolution capabilities for unavoidable denials.

To see how SPRY can streamline your billing and minimize denials, schedule a demo today!

Frequently Asked Questions

Can CO-96 denials be prevented entirely?

While not all CO-96 denials can be prevented, implementing robust pre-service verification, authorization management, and coding accuracy programs can reduce them by 60-80%.

How long do I have to appeal a CO-96 denial?

Most insurance companies require appeals within 180 days of the denial date, though specific timeframes vary by payer and state regulations.

Should I bill the patient for CO-96 denials?

Only after confirming the service is truly non-covered and you've exhausted all appeal options. Many CO-96 denials can be overturned with proper documentation and appeals.

What's the difference between CO-96 and other non-covered codes?

CO-96 specifically indicates contractual non-coverage, while codes like CO-167 indicate specific procedure exclusions, and PR-96 indicates patient responsibility.