Why denials are your problem, not just your TPA's
Claim denials are expensive for everyone — providers lose revenue, members get surprise bills, and your plan pays for rework instead of care. If you sponsor a self-funded plan, the industry numbers should bother you:
- 5-10% average denial rate across all payers
- Significant rework cost per denied claim
- 50-65% of denied claims are recoverable on appeal
- 60% of returned claims are never resubmitted
Read those last two together: most denials can be fixed, and most never are. Every preventable denial is friction your employees feel at the worst possible moment — and money your plan quietly wastes. Your TPA's denial management practice decides which way that goes.
The codes on your denial reports, decoded
When you review an EOB or a denial report, two code sets explain what happened. You don't need to memorize them — you need to know they exist, because a TPA that can't break down denials by these codes can't manage them.
CARC — Claim Adjustment Reason Codes
CARCs explain why an adjustment was made. Each code belongs to a group:
- CO (Contractual Obligation): Adjustment per contract terms — not billable to the patient
- PR (Patient Responsibility): Member owes this amount (deductible, copay, coinsurance)
- OA (Other Adjustment): Adjustments that don't fit CO or PR
- PI (Payer Initiated): Payer-specific adjustments
Common high-impact CARCs:
- CARC-16: Claim/service lacks information or has submission errors
- CARC-18: Duplicate claim/service
- CARC-27: Expenses incurred after coverage terminated
- CARC-29: Time limit for filing has expired
- CARC-96: Non-covered charge(s)
- CARC-197: Precertification/authorization/notification absent
RARC — Remittance Advice Remark Codes
RARCs provide additional context beyond the CARC. They're supplementary — every adjustment has a CARC, but not every adjustment needs a RARC.
Common RARCs:
- N362: Missing/incomplete/invalid patient ID
- N479: Missing/incomplete/invalid referring provider
- MA130: Claim was processed based on plan limitations
The standard to hold your TPA to
Good denial management happens in three places. Here's what your administrator should be doing at each — and what it costs you when they don't.
Before submission (front-end prevention)
Real-time eligibility verification: Coverage should be checked before services are rendered, not after the claim arrives. This prevents the most common denial — services for ineligible members — and the termination-date surprises that follow every enrollment change.
Prior authorization tracking: Services that require prior auth should be flagged automatically. A claim denied for missing authorization is the most preventable denial there is, and it's the one most likely to turn into a member escalation on HR's desk.
Medical coding validation: Invalid codes, unbundled services, and implausible code combinations should be caught at intake — not discovered after the claim fails adjudication and the rework clock starts.
During adjudication
Duplicate detection: Real matching catches duplicates even when claim numbers differ — member + provider + date + service + amount. Weak duplicate logic either denies legitimate claims or pays the same claim twice. Both cost you.
Timely filing enforcement: Filing deadlines should be calculated from date of service and your plan's rules, with approaching deadlines flagged to providers — not enforced silently after the window closes.
Accumulator accuracy: Deductible and out-of-pocket tracking must be current to the claim, not to last week's batch. Stale accumulators produce incorrect denials your employees have to appeal.
After adjudication
Automated appeal workflows: When a denial is overturned, re-adjudication should happen automatically — not sit in a queue waiting for someone to re-key it.
Denial trending: Your TPA should track denial patterns by provider, procedure code, and reason — and show you the trend, not just the count.
Provider education: High-denial providers should hear about it, with data. That's how denial rates actually come down over time.
Questions to ask in your next TPA review
Ask your administrator for these five numbers. The answers — and how fast they can produce them — tell you most of what you need to know:
- What's our initial denial rate? (Well-run plans target under 8%)
- What's the overturn rate on appeal? (Above 50% means denials are being worked, not warehoused)
- What's the average time from denial to resolution? (30 days or less)
- What share of denials were preventable at intake? (Under 2% is the bar)
- What does denial management cost per denied claim? (If they can't answer, you're paying for rework invisibly)
A TPA that can't produce these on request doesn't have a denial management practice. It has a denial pile.
Where automation changes the math
Automation moves denial management from recovery to prevention:
- Prevention: Real-time validation catches 60-70% of would-be denials before submission
- Classification: Automatic CARC/RARC assignment routes each denial to the right resolution workflow instantly
- Recovery: Systematic tracking ensures no recoverable denial falls through the cracks
SmartTPA's adjudication engine assigns CARC and RARC codes automatically, tracks denial patterns across providers and procedure codes, and gives plan sponsors the denial reporting this article just told you to demand — in real time, not at the quarterly review.