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 health insurance companies, which provide customers with health plans that offer cost coverage and reimbursements for medical treatment and care services.

The three main different types of healthcare payors are government/public payors, commercial payors, and private payors.

Government/public payors

Government payors include U.S. government-funded health insurance plans like Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP). These programs help support certain populations and economic statuses.

Commercial payors

Commercial payors most often refer to publicly traded insurance companies like UnitedHealth, Aetna, or Humana that provide individual and group health insurance plans. People are often covered by these types of plans through their employers but can also purchase them directly, or through an insurance marketplace.

Private payors

Private payors sometimes refers to private insurance companies like Blue Cross Blue Shield. These plans are similar to commercial plans that are available through an employer, from the insurance company, or through a marketplace. Private pay for insurance can also include non-insurance payment for healthcare services such as paying cash directly for a service rather than going through insurance.

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. Definitive Healthcare has adopted the same standard spelling.

A payee is the party who receives payment in the exchange of services.

Why are payors 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.

In addition, understanding a hospital’s source of revenue, or payor mix, can help segment and target accounts based on their payment sources.