CO-258: Claim Not Covered - Patient in Custody or Incarcerated

What Does CO-258 Mean?

CO-258 indicates the claim is denied because the patient was in custody or incarcerated, and insurance coverage is excluded during incarceration. The provider cannot post as a contractual adjustment for the denied amount under the insurance claim. If the custody status is confirmed, the responsible government authority should be billed. If the custody status is incorrect, appeal the denial with documentation proving the patient was not in custody on the date of service.

CARC 258 appears when a payer denies a claim because the patient was identified as being in custody or incarcerated at the time the service was rendered. Under most insurance policies, Medicaid rules, and commercial plan terms, coverage is suspended or excluded during periods of incarceration because the custodial authority — the federal Bureau of Prisons, state Department of Corrections, or local jail system — assumes responsibility for the inmate's healthcare.

The most common trigger is the federal Medicaid inmate exclusion, which prohibits Medicaid payment for services provided to incarcerated individuals. Some states allow an exception for inpatient hospital stays of 24 hours or more, but outpatient services are generally excluded. Commercial insurers may also have policy provisions that suspend coverage during custody periods.

CARC 258 appears with Group Code CO, indicating the denial is a contractual adjustment. However, the resolution path depends on whether the patient was actually in custody. If the patient was not incarcerated on the date of service — perhaps they had been released before the encounter or the payer's data is outdated — the provider should appeal with documentation proving the patient's non-custody status. If the patient was genuinely incarcerated, the provider should submit the claim to the responsible government custodial authority.

Common Causes

How to Resolve

1. Confirm the patient's actual status Verify custody status on the specific date of service. Payer databases may have outdated information — the patient may have been released before the encounter. Contact the correctional facility or the patient's legal representative for confirmation.
2. Gather proof of non-custody if applicable Obtain a release letter from the correctional facility, court documentation showing release date, or other official documentation that proves the patient was not in custody on the date of service.
3. Submit appeal for incorrect status If the patient was not in custody, file a reconsideration with the payer including the release documentation. Request the claim be reprocessed under the patient's active insurance coverage.
4. Route to government authority if incarcerated If confirmed incarcerated, identify the responsible custodial authority and submit the claim to their healthcare payment office. Federal inmates are covered by the Bureau of Prisons; state prisoners by the Department of Corrections; local inmates by county/city jail systems.
5. Check for Medicaid exceptions For Medicaid-eligible patients, verify whether the state permits Medicaid payment for inpatient hospitalizations of 24+ hours during incarceration. Many states have reinstated this exception, potentially allowing partial claim recovery.

Common RARC Pairings

The RARC code tells you exactly what triggered the CO-258:

How to Prevent CO-258

• Verify patient custody status at registration before providing non-emergency services to identify coverage exclusions early
• Establish billing relationships with local and state correctional healthcare coordinators to streamline claims for incarcerated patients
• Train registration and billing staff to identify patients who may be in custody and route claims appropriately
• For emergency departments, implement a workflow for flagging custody patients and directing claims to the correct government authority
• Maintain current contact information and billing procedures for federal, state, and local correctional healthcare payment offices

General Prevention

• Verify patient custody status before providing services by checking with legal representatives or the facility
• Identify the responsible government authority for healthcare costs before rendering non-emergency services
• Maintain a process for routing claims to the correct payer when patients are in custody
• Educate billing and coding staff on CARC 258 implications and the proper billing pathway for incarcerated patients
• Document the patient's custody status in the medical record at the time of service

Also Filed As

The same CARC 258 may appear with different Group Codes:

Related Denial Codes