Insurance and Billing Codes Quick Reference
Pharmacy insurance billing is a daily responsibility for technicians in community pharmacy. This cheat sheet covers key billing concepts, common rejection codes, and troubleshooting strategies tested on the CPHT exam.
Key Components of a Pharmacy Insurance Card
| Field | Description |
|---|---|
| BIN (Bank Identification Number) | 6-digit number that routes the claim to the correct PBM or processor |
| PCN (Processor Control Number) | Identifies the specific plan or sub-group within the PBM |
| Group Number (GRP) | Identifies the employer or group plan |
| Member ID / Cardholder ID | Unique identifier for the patient or subscriber |
| Person Code | Identifies the individual within the family (01 = cardholder, 02 = spouse, 03+ = dependents) |
| Rx Bin / Rx PCN | Sometimes separate from medical insurance BIN/PCN |
Common Claim Rejection Codes
Rejection codes vary by PBM, but these are among the most frequently encountered:
| Code/Type | Description | Typical Resolution |
|---|---|---|
| Refill Too Soon | Claim submitted before the allowed refill date based on days supply | Wait until the appropriate fill date or contact insurance for override if clinically needed |
| Prior Authorization Required | Drug requires PA before coverage | Notify pharmacist; prescriber must submit PA to the PBM |
| Drug Not Covered / Not on Formulary | Medication is not on the plan's formulary | Contact prescriber for a formulary alternative or request a formulary exception |
| Invalid Member ID | Member ID does not match PBM records | Verify card information; ask patient for updated card |
| Invalid Date of Birth | DOB in the system does not match PBM records | Verify and correct DOB in pharmacy system |
| Invalid Group Number | Group number is incorrect or expired | Verify with patient; may need new insurance card |
| Quantity Exceeds Maximum | Quantity dispensed exceeds plan limits | Reduce quantity or request override |
| NDC Not Covered | Specific NDC is not covered (brand vs. generic issue) | Try a different manufacturer NDC or switch to generic |
| Plan Limitations Exceeded | Patient has exceeded maximum allowed under the plan | Contact PBM for details; may need PA |
| Inactive Coverage / Patient Not Found | Patient's coverage has ended or cannot be located | Verify with patient; patient may need to contact their insurer |
| DAW Penalty | Dispense As Written code causes higher cost | Verify DAW code is correct; contact prescriber if substitution is appropriate |
| Duplicate Therapy | Patient is receiving another drug in the same class | Alert pharmacist to review; prescriber may need to confirm |
DAW (Dispense As Written) Codes
| DAW Code | Meaning |
|---|---|
| 0 | No product selection indicated (substitution permitted) |
| 1 | Substitution not allowed by prescriber |
| 2 | Substitution allowed - patient requested brand |
| 3 | Substitution allowed - pharmacist selected brand |
| 4 | Substitution allowed - generic not in stock |
| 5 | Substitution allowed - brand dispensed as generic |
| 6 | Override |
| 7 | Substitution not allowed - brand mandated by law |
| 8 | Substitution allowed - generic not available in marketplace |
| 9 | Other |
Coordination of Benefits (COB)
When a patient has more than one insurance plan, COB determines which plan pays first (primary) and which pays second (secondary).
- Primary insurance is billed first and pays its portion.
- Secondary insurance is billed for the remaining balance after the primary has paid.
- The birthday rule applies to children covered under two parents' plans: the plan of the parent whose birthday falls first in the calendar year (month/day) is typically primary.
- If a patient has both employer coverage and Medicare, specific rules determine which is primary depending on the patient's age and employer size.
Prior Authorization (PA) Process
- Pharmacy submits a claim and receives a PA-required rejection.
- Technician notifies the pharmacist and contacts the prescriber's office.
- Prescriber (or their staff) submits a PA request to the PBM, providing clinical justification.
- PBM reviews and approves or denies the request.
- If approved, the pharmacy can resubmit the claim.
- If denied, the prescriber can appeal or change the medication.
Medicare Part D Key Points
- Medicare Part D covers outpatient prescription drugs.
- Plans are offered by private insurance companies approved by Medicare.
- Each plan has its own formulary organized into tiers (higher tier = higher cost to patient).
- Coverage phases: deductible, initial coverage, coverage gap, and catastrophic coverage.
- The "coverage gap" (sometimes called the "donut hole") is a temporary limit on what the plan will cover.
Medicaid Key Points
- Medicaid is a joint federal-state program for low-income individuals.
- Coverage and formularies vary by state.
- Copays may be minimal or zero depending on the state and the patient's income level.
- Pharmacy must be enrolled as a Medicaid provider to bill.
Exam Tips
- Know the BIN, PCN, Group, and Member ID fields on an insurance card.
- Understand the DAW codes - DAW 0, 1, and 2 are the most commonly tested.
- Be able to describe the PA process step by step.
- The birthday rule for COB is a frequently tested concept.
- Know the difference between Medicare Part A (hospital), Part B (medical), and Part D (drugs).
- Reject resolution is a critical technician skill - understand common rejections and how to fix them.