How to work on Remittance code CO 2 claim processed towards Coinsurance.

Introduction

Coinsurance is a common patient liability you’ll encounter on Explanation of Benefits (EOBs). Unlike deductibles, which must be met before insurance pays, coinsurance is the percentage of allowed charges the patient owes after the deductible is satisfied. Accurately processing coinsurance ensures you collect the correct patient share, maintain cash flow, and minimize billing disputes. In this guide, you’ll learn:

• The definition and mechanics of coinsurance
  
• How coinsurance appears on EOBs (EOB code CO‑2 and PR‑2)
  
• A step‑by‑step workflow for posting coinsurance liabilities
  
• Key differences between coinsurance, copays, and deductibles
  
• Real‑world examples featuring Sarah the biller, Dr. Patel’s practice, and patient John Lee
  
• Best practices, common pitfalls, and FAQs
  

This article belongs to our “Denial Management & Appeals” silo see also Understanding EOB Codes and Insurance Verification for related topics.

What Is Coinsurance?

Coinsurance is the percentage of an allowed charge that the patient is responsible for paying after meeting their deductible. Common plan designs include:

• 80/20 Coinsurance: The insurer pays 80% of the allowed amount; the patient pays 20%.
  
• 70/30, 90/10, or other splits depending on the policy.
  

Coinsurance applies per service or per claim, and resets each benefit year alongside the deductible.

Why it matters: If your practice overlooks coinsurance tracking, you may underbill the patient or misstate patient balances both of which harm cash flow.

Understanding EOB Code CO‑2 (Coinsurance Amount)

On the HIPAA 835 remittance advice, coinsurance is flagged under the CO (Contractual Obligations) group with Reason Code 2:

• Group Code CO indicates a contractual adjustment based on the provider‑payer agreement.
  
• Reason Code 2 denotes the Coinsurance Amount applied to the patient’s liability.
  

An alternative grouping uses PR (Patient Responsibility) with Reason Code 2 (PR‑2), especially if the payer treats all patient liabilities under the PR group. Your posting workflow should map both CO‑2 and PR‑2 to “Coinsurance Applied” in your billing system.

Why Claims Show Coinsurance

Claims may show coinsurance for several reasons:

• Benefit design: The plan specifies a percentage split after deductible.
  
• Network status: In‑network services often have standard coinsurance; out‑of‑network may be higher.
  
• Service category: Certain services (e.g., imaging, specialist visits) may carry different coinsurance rates.
  
• Benefit maximums and accumulators: Some services accumulate separately under specialty benefits.
  

Eligibility Verification and Benefit Checks

Before rendering services, verify benefits to anticipate coinsurance:

1. Eligibility portal or clearinghouse: Pull coinsurance percentage and remaining deductible.
   
2. Document percentages in the patient’s chart and billing notes.
   

This proactive step helps you estimate patient responsibility at check‑in.

Step‑by‑Step Guide to Processing Coinsurance Amounts

1. Verify Benefits and Plan Design

• Confirm the coinsurance percentage (e.g., 20%) and any service‑specific rules.
  
• Note remaining deductible coinsurance applies only after deductible is met.
  

2. Submit the Claim Accurately

• Use precise CPT/HCPCS codes and correct modifiers.
  
• Ensure patient network status is up to date.
  

3. Review the Remittance Advice

• Locate CO‑2 or PR‑2 on the 835, confirming the coinsurance amount.
  
• Check the payer’s accompanying remark codes for clarification (e.g., “Patient owes 20% of allowed charge”).
  

Example: Dr. Patel’s office bills a $1,000 injection. Allowed charge is $800; patient coinsurance is 20%. The payer pays $640, posts CO‑2 for $160.

4. Post the Coinsurance Adjustment

• In your practice management system, post the adjustment as “Coinsurance Applied.”
  
• Update the patient’s account balance for that coinsurance amount.
  

5. Issue the Patient Statement

• Clearly label the line item: “Coinsurance (20% of allowed charge)” or “Applied coinsurance: $160.”
  
• Provide a brief explanation: “Your plan requires 20% coinsurance on this service.”
  

6. Follow Up on Patient Liability

• Send statements promptly, with online payment options or payment‑plan offers.
  
• Track patient aging to reduce outstanding AR days.
  

Differences Between Coinsurance, Copayment, and Deductible

Feature	Deductible	Coinsurance	Copayment
Definition	Fixed amount patient pays per year	Percentage of allowed charge per service	Fixed fee per visit/service
When it applies	Before insurance pays	After deductible is met	At time of service
EOB Code Example	CO‑1 (Deductible)	CO‑2 or PR‑2 (Coinsurance)	CO‑3 or PR‑3 (Copayment)
Patient Planning	Estimate total liability up front	Calculate per service based on allowed amount	Easy to collect at check‑in
Impact on AR	Large lump‑sum billing early	Ongoing billing per service	Minimal billing follow‑up

Understanding these distinctions helps you set patient expectations and reduce billing confusion.

Real‑World Examples

Scenario 1 Imaging Service with Coinsurance

• Patient: Lisa Nguyen
  
• Service: CT scan ($2,000 charge)
  
• Allowed Amount: $1,500
  
• Deductible Remaining: Met earlier in the year
  
• Coinsurance: 30%
  
• Workflow:
  
  1. Submit claim; receive EOB with CO‑2 = 30% of $1,500 ($450); payer paid $1,050.
     
  2. Post CO‑2; statement shows “Coinsurance (30% of allowed $1,500): $450.”
     

Scenario 2 Office Visit with Combined Deductible and Coinsurance

• Patient: John Lee
  
• Service: Specialist consultation ($300 charge)
  
• Allowed Amount: $200
  
• Deductible Remaining: $100
  
• Coinsurance: 20%
  
• Workflow:
  
  1. EOB shows CO‑1 = $100 (deductible), then CO‑2 = 20% of remaining $100 ($20); the insurer paid $80.
     
  2. Post CO‑1 and CO‑2; statement reads:
     
     • Applied to deductible: $100
       
     • Coinsurance (20% of $100): $20
       

Scenario 3 Out‑of‑Network Service

• Patient: Maria Torres
  
• Service: Out‑of‑network physical therapy ($120 charge)
  
• Allowed Amount: $80
  
• Deductible Remaining: $0
  
• Coinsurance: 40% out‑of‑network
  
• Workflow:
  
  1. Claim processed; EOB shows CO‑2 = 40% of $80 ($32); insurer paid $48.
     
  2. Post CO‑2; patient balance $32.
     

Best Practices and Tips

• Automate benefit checks to pull coinsurance percentages in real time.
  
• Educate patients on coinsurance at check‑in with printed benefit summaries.
  
• Bundle communications: Include deductible and coinsurance details on the same statement to avoid multiple bills.
  
• Maintain payer guides listing coinsurance rates by service category for each payer.
  
• Audit postings monthly to catch miscoded coinsurance adjustments.
  

Frequently Asked Questions

Q1: What does CO‑2 mean on an EOB?
A1: CO‑2 indicates the coinsurance amount applied to the patient’s liability per the provider‑payer contract.

Q2: How do I know if coinsurance was calculated correctly?
A2: Compare the EOB’s CO‑2 amount to the allowed charge multiplied by the patient’s coinsurance percentage (e.g., 20%). Any discrepancy should be queried with the payer.

Q3: Can coinsurance apply before the deductible?
A3: No—coinsurance applies only after the deductible is met. If the deductible isn’t met, you’ll see CO‑1 (deductible) first.

Q4: Should coinsurance be billed differently than deductible?
A4: Yes—deductible (CO‑1) and coinsurance (CO‑2) are separate line items. On patient statements, label them clearly and post them individually in your AR system.

Q5: How do I handle combined CO‑1 and CO‑2 on one claim?
A5: Post CO‑1 first, update the remaining allowed charges, then post CO‑2 on the balance. Your system may auto‑split when both codes are present.

Q6: What if my payer uses PR‑2 instead of CO‑2?
A6: Map PR‑2 to the same “Coinsurance Applied” workflow in your billing system. The financial impact is identical; only the adjustment group differs.

Conclusion

Handling coinsurance requires clear understanding of plan designs, precise claim submission, and accurate posting of CO‑2 (or PR‑2) amounts. By verifying benefits, educating patients, and following a consistent posting workflow, you’ll minimize billing errors and improve collections. Remember to audit regularly and maintain payer‑specific guides for coinsurance rates.

For more on managing patient liabilities, explore our guides on Deductible Processing and Copayment Management.