Third-party payer

What is a third-party payer?

A third-party payer is an entity that pays medical claims on behalf of the insured. Examples of third-party payers include government agencies, insurance companies, health maintenance organizations (HMOs), and employers.

Deeper definition

Third-party payers pay for covered insurance expenses for an insurance recipient or a designated beneficiary. This includes payment for medical expenses owed to a health care provider or to the insured for reimbursement when the insured incurs covered out-of-pocket expenses.

Third-party payer organizations can be either private or public entities, such as a health insurance company or Medicare or Medicaid agency.

Third-party payer example

Third-party payers are not just entities that are mandated to pay insurance claims. These types of payers are active in various business arenas outside of the health care market.

Typically, a person with insurance pays a defined premium amount each month for private insurance coverage and in some cases for public insurance programs as well.

Once the insured receives health care and the health care provider has submitted a claim to the third-party payer, the third-party payer then sends payment to the provider for covered outstanding procedure expenses on behalf of the insured.

When visiting a health care provider, the insured might make a copay to the health care provider for the office visit. Often, the copay amount does not cover all the expenses due to the health care provider. The provider’s office sends a bill for the outstanding balance for services and care for the insurance recipient to the insuring entity, or third-party payer, to receive payment for covered services.

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