What Is Adjustment
An adjustment is a change made to a claim after initial processing that modifies the amount your insurance company pays, the amount you owe, or both. Adjustments appear on your Explanation of Benefits (EOB) and Remittance Advice, usually identified by a specific adjustment code that explains the reason for the change.
Types of Adjustments
Adjustments fall into several categories that directly affect your out-of-pocket costs:
- Contractual adjustments: Your insurer writes off the difference between the provider's billed amount and the negotiated contracted rate. For example, a provider bills $500, but your plan's contracted rate is $350. The $150 contractual adjustment means you're only responsible for your portion of the $350 allowed amount.
- Denial adjustments: The insurer denies coverage entirely due to lack of prior authorization, medical necessity determination, or policy exclusions. You may owe the full billed amount if you didn't receive an Advanced Beneficiary Notice (ABN).
- Correction adjustments: The insurer reverses a previous payment due to billing errors, duplicate processing, or incorrect coding submitted by the provider.
- Regulatory or compliance adjustments: State insurance laws sometimes require adjustments based on balance billing protections or mental health parity rules, for example under parity laws requiring equal coverage for behavioral health.
Where You'll See Adjustments
Adjustments show up on your EOB with adjustment codes (usually two or three digits). The Remittance Advice sent to your provider contains the same information. These documents are critical: they explain why your final bill differs from what was initially billed. Keep copies because you'll reference them during internal appeals or when disputing charges with your provider.
Adjustments and the Appeal Process
Adjustment codes matter when you file an internal appeal (within your insurance company) or external appeal (to your state insurance commissioner or independent review organization). If an adjustment denied your claim due to medical necessity, you can argue that the treatment was medically necessary based on clinical guidelines or your provider's documentation. Your appeal must address the specific reason code listed on the EOB.
State regulations vary significantly. Some states require insurers to complete internal appeals within 30 days for standard claims. If your adjustment was due to prior authorization denial, you have 180 days from the date of service to request an expedited external review in most states.
Common Questions
- Do I have to pay a contractual adjustment? No. Contractual adjustments are written off by the provider and are not your responsibility. You only owe your deductible, copay, or coinsurance based on the allowed amount, not the original billed amount.
- What if an adjustment code says "not medically necessary"? File an internal appeal with your insurer within 180 days of the EOB date. Submit clinical evidence, peer-reviewed studies, or your provider's clinical notes supporting medical necessity. If denied internally, request an external review with your state insurance regulator.
- Can a provider bill me for a denied adjustment? It depends on whether you were properly notified. If you didn't receive an ABN before a service potentially not covered, many states prohibit the provider from balance billing you. Review your state's patient balance billing protections.