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CO-225 Code: Payer Penalty or Interest in Encounters

CO-225 reports a penalty or interest payment made by a payer. X12 limits it to plan-to-plan encounter reporting within the 837, so providers rarely see it on a remittance; it mostly appears in data exchanged between health plans and agencies.

Quick facts

Code
CO-225 (CARC 225)
Status
Active In use since June 1, 2008.
Code set
Claim Adjustment Reason Codes (CARC)
Group codes
  • CO (Contractual Obligation): Reported with CO in encounter data to show the penalty or interest amount in the plan-to-plan record. It is not a patient balance.
  • OA (Other Adjustment): Some plans report the amount under OA in encounter data because it is neither a contractual reduction nor patient liability.
Official description
Penalty or Interest Payment by Payer (Only used for plan to plan encounter reporting within the 837)
X12 Claim Adjustment Reason Codes, retrieved September 25, 2026
Last verified
against the official X12 list.

What CO-225 means

CARC 225 is penalty or interest payment by payer, with an explicit restriction: it is only used for plan-to-plan encounter reporting within the 837. It is not intended for provider remittances.

Encounter reporting is common in managed care. A health plan that pays a provider’s claim often has to send a record of that claim to a state Medicaid agency, a sponsoring plan, or another entity. That record is formatted as an 837, and its adjustment segments explain how the plan adjudicated the claim. If the plan paid a late-payment penalty or prompt-pay interest, CARC 225 lets it report that amount in the encounter.

For most provider billing teams, this code is mostly background knowledge. It matters to plan encounter teams, delegated entities, and organizations that both provide care and submit encounter data.

When providers encounter it

  • Delegated or risk-bearing groups that submit encounters to a health plan may need to report interest they paid to downstream providers.
  • Provider-sponsored plans that manage their own encounter submissions.
  • Payer mapping errors, when an encounter-only code leaks onto a provider 835.

How to handle it

  1. On an 835 to a provider: ask the payer why it appears, because it falls outside its intended use. Interest on a provider remittance is normally reported elsewhere in the 835.
  2. In your own encounter submissions: use CARC 225 only for penalty or interest amounts you actually paid, and follow the receiving agency’s companion guide.
  3. Reconcile interest separately from service-line adjustments so encounter totals balance.
  4. Check state rules. Some state Medicaid programs specify how interest and penalties must appear in encounter data.

How to prevent problems

  • Keep encounter-reporting code sets separate from provider remittance posting rules.
  • Review companion guides for encounter submissions each year.
  • If you receive 835s, flag any CARC 225 lines for review instead of auto-posting them.
  • For more on how CARC codes are meant to be read, see how to read CARC and RARC codes.

Remark codes that may appear with CO-225

  • N381 (Alert: Consult our contractual agreement for restrictions/billing/payment information related to these charges.): Points to the contract or agreement under which the penalty or interest was paid.
  • OA-23 (The impact of prior payer(s) adjudication including payments and/or adjustments. (Use only with Group Code OA)): Reports prior payer impact in COB; also often seen in 837 adjustment loops.
  • CO-94 (Processed in Excess of charges.): Used when a payer processed more than the billed charges.
  • CO-223 (Adjustment code for mandated federal, state or local law/regulation that is not already covered by another code and is mandated before a new code…): A regulatory adjustment code for mandates not yet covered by a specific code.

CO-225 FAQ

Will I see CO-225 on my ERA?

Normally no. X12 restricts CARC 225 to plan-to-plan encounter reporting in the 837. Providers see prompt-pay interest on the 835 through other fields, such as the PLB segment or claim-level interest amounts.

What is plan-to-plan encounter reporting?

It is when a health plan, such as a Medicaid managed care organization, sends encounter data about claims it paid to a state agency or another plan. CARC 225 lets it show penalty or interest amounts in that data.

What should I do if CO-225 appears on a provider remittance?

Ask the payer to explain it. Since the code is meant for encounter reporting, its appearance on a provider 835 may be a mapping error on the payer side.

Does CO-225 affect what the patient owes?

No. It reports a penalty or interest amount between plans or in encounter data. It does not change the patient's cost sharing, and nothing reported under CARC 225 should be billed to a patient.