What is a payor?

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

There are three different types of healthcare payors:

  • Commercial
  • Private
  • Government/public

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

What’s the difference between “payor,” “payer” and “payee”?

The terms “payor” and “payer” have the same meaning and are often used interchangeably. The American Medical Association (AMA) recognizes “payor” as preferable. A payee is the party who receives payment in the exchange of services.

Why are payers important in healthcare?

Payors play an important role in providing patients with the health insurance coverage needed to receive necessary healthcare 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 payor 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-payor medical claims data to access helpful insights about provider referral patterns, network affiliations, diagnoses, prescription volumes, co-morbidities, and more.

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