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Third-party payer

A third-party payer pays a person’s medical expenses. Bankrate explains.

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.

Typically, a person with insurance pays a premium 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.

With a savings account, you can store money away for a medical emergency and earn interest on it in the meantime.

Third-party payer example

In most cases, when someone receives a service, she pays the service provider directly. With health care, however, the cost of paying directly is often too high for one person to pay alone. She may rely on a third-party payer to cover her costs. In most cases, this means an insurance company. Candice goes to get a colonoscopy. The procedure is expensive, but Candice has been paying a monthly premium to her insurance provider and they act as a third-party payer to cover the cost of the colonoscopy.

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