CO-308: Contracted Funding Agreement Adjustment
The employee funding agreement adjustment is a contractual write-off. Post the adjustment per the agreement terms and do not bill the employee-patient.
What Does CO-308 Mean?
CO-308 is the only group code pairing for this adjustment code. The contractual obligation designation confirms that the payment adjustment is mandated by the contracted funding agreement between the payer and the provider. The provider agreed to these payment terms as part of the funding arrangement for employee healthcare. The adjusted amount is a write-off — the provider cannot bill the employee-patient for the difference between the billed charges and the funded amount.
When CARC 308 appears on a remittance, the payer is applying a payment adjustment dictated by a contracted funding agreement that exists specifically for situations where the patient is an employee of the healthcare provider. This is a niche scenario common in large hospital systems and healthcare networks that self-fund employee benefits or have special contractual arrangements for employee healthcare.
The funding agreement between the payer and the provider defines how claims are paid when the patient is also an employee of the provider organization. These agreements often specify different payment rates, internal fund transfers, or alternative payment methodologies that do not follow the standard claim reimbursement process. The adjustment reflects the difference between the standard billed amount and the amount payable under the employee funding agreement.
CARC 308 is used exclusively with Group Code CO, confirming this is a contractual obligation. The provider cannot bill the employee-patient for the adjusted amount. This code is relatively uncommon and applies only to organizations that have these specific contracted funding arrangements — most providers will never encounter it unless they treat their own employees under a self-funded plan with special payment terms.
Common Causes
| Cause | Frequency |
|---|---|
| Employee treated at own employer's facility The subscriber (patient) is employed by the healthcare provider that rendered the services, and the payer has a contracted funding agreement that adjusts payment differently for employee-patients at their employer's facility | Most Common |
| Self-funded employer plan adjustment The employer self-funds healthcare benefits for its employees who work at the provider facility, and the contracted funding agreement specifies a different payment methodology when employees receive care at their own workplace | Most Common |
| Hospital system employee benefit arrangement Large hospital systems or health networks have contracted agreements where employee services are paid at adjusted rates or through internal fund transfers rather than standard claim reimbursement | Common |
How to Resolve
Verify the patient's employee status and the funding agreement terms, then post the adjustment as a contractual write-off.
- Validate employee status Cross-reference the patient against your HR records to confirm current employment status with the provider organization.
- Verify adjustment calculation Compare the adjustment amount against the funding agreement's payment schedule for this service type to ensure accuracy.
- Post the write-off or dispute If the calculation is correct, post as a contractual write-off. If incorrect — either the patient is not an employee or the amount is wrong — contact the payer for correction.
This is a standard contractual adjustment. The amount is a provider write-off per your payer contract.
Common RARC Pairings
The RARC code tells you exactly what triggered the CO-308:
| RARC | Description |
|---|---|
| N381 | Alert: Consult your contractual agreement for billing and payment information related to these charges. |
How to Prevent CO-308
- Maintain accurate records of which patients are also provider employees and flag their accounts in the billing system for special payment processing
- Ensure the contracted funding agreement terms are accessible to the billing team for reference during payment posting
- Coordinate with HR to keep employee eligibility information current and promptly update the billing system when employees are hired or terminated
- Review the funding agreement periodically to ensure adjustment calculations remain aligned with current terms
General Prevention
- Maintain accurate records of which patients are also employees of the provider organization to anticipate funding agreement adjustments
- Ensure the contracted funding agreement terms are clearly documented and accessible to the billing department for reference during payment posting
- Flag employee-patient accounts in the billing system so staff can apply the correct payment expectations and avoid unnecessary follow-up on expected adjustments
- Review the contracted funding agreement periodically to ensure payment calculations align with current terms
- Coordinate with human resources to keep employee eligibility information current in the billing system
Related Denial Codes
Sources
- https://x12.org/codes/claim-adjustment-reason-codes
- https://portal.ct.gov/-/media/ohs/health-it-advisory-council/apcd-advisory-group/data-submission-guide-workgroup/meeting-materials/6-30-22/carc-codes_final.pdf
- Codes maintained by X12. Visit x12.org for official definitions.