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Health Care Payment and Remittance Advice and Electronic Funds Transfer

The health care payment and remittance advice transaction is the transmission of either:

  • Payment, with information about the transfer of funds and payment processing from a health plan to a health care provider's financial institution
  • Explanation of benefits or remittance advice from a health plan to a health care provider

What Is an EFT?

An electronic funds transfer, or EFT, is the electronic message used by health plans to order a financial institution to electronically transfer funds to a provider’s account to pay for health care services. An EFT includes information such as:

  • Amount being paid
  • Name and identification of the payer and payee
  • Bank accounts of the payer and payee
  • Routing numbers
  • Date of payment

What Is an ERA?

An electronic remittance advice, or ERA, is an explanation from a health plan to a provider about a claim payment. An ERA explains how a health plan has adjusted claim charges based on factors like:

  • Contract agreements
  • Secondary payers
  • Benefit coverage
  • Expected copays and co-insurance

Claims Adjustment Reason Codes (CARCs) and Remittance Advice Remark Codes (RARCs)

Under HIPAA, all payers, including Medicare, are required to use claims adjustment reason codes (CARCs) and remittance advice remark codes (RARCs) approved by X12 recognized code set maintainers, instead of proprietary codes to explain any adjustment in the claim payment.

You can request new codes and revisions to existing codes. Select the “Change Request Form” option on the Washington Publishing Company web pages for CARCs or RARCs.

Requests for codes must include suggested wording for the new or revised message, and an explanation of how the message will be used and why it is needed. Additional Medicare-specific information is available in the Medicare Claims Processing Manual, Chapter 22 - Remittance Advice.

The CARC Committee reviews requests 3 times a year.

The RARC Committee reviews requests 12 times a year.

HIPAA Adopted Standards

HHS has adopted two standards for EFT transactions:

  • CCD+Addenda, the NACHA Corporate Credit or Deposit Entry (CCD) with Addenda
  • Trace Number Segment (TRN) implementation specifications in the X12 835 TR3 for data content of the Addenda Record of the CCD+Addenda 

The adopted standard for ERA transactions is ASC X12 835 TR3.

Health plans are required to input the X12 835 TRN Segment into Field 3 of the Addenda Record of the CCD+Addenda. The TRN Segment in the Addenda Record of the CCD+Addenda should be the same as the TRN Segment in the associated ERA that describes the payment. Using the same TRN Segment helps to match the payment to the correct remittance advice, a process called reassociation.  

Note: The EFT standards apply only to transmissions of data over the Automated Clearing House (ACH) Network—a processing and delivery system for EFT that uses nationwide telecommunications networks.

Operating Rules 

Operating rules for electronic funds transfer (EFT) and electronic remittance advice (ERA) went into effect on January 1, 2014.

View the Phase III EFT and ERA Operating Rules on the CAQH CORE website.

To learn more, see the EFT and ERA Operating Rules.