What is a payer in healthcare?

In healthcare, a payer—also referred to as a payor—is the person, organization, or entity that pays for the care services administered by a healthcare provider. This term most often refers to private insurance companies, who provide their customers with health plans that offer cost coverage and reimbursements for medical treatment and care services.

There are three different types of healthcare payers:

  • Commercial
  • Private
  • Government / Public

“Commercial payer” refers to publicly traded insurance companies like UnitedHealth, Aetna, or Humana while “private payer” refers to private insurance companies like Blue Cross Blue Shield. “Public payer” refers to government-funded health insurance plans like Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP).

Why are payers important in healthcare?

Payers play an important role in furnishing patients with the health insurance coverage that they need in order to receive necessary health care services. In most cases, beneficiaries pay into a monthly or yearly insurance plan in exchange for coverage within a range of certain procedures or services.

Each time a healthcare provider submits a medical claim to a payer in order to receive reimbursement for a specific procedure or service, they generate information about that care episode. Providers, suppliers, and other stakeholders within the healthcare industry can use this all-payer medical claims data to access helpful insights about provider referral patterns, network affiliations, diagnoses, comorbidities, prescription volumes, and more.