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.

More From Bankrate

  • The Benefits of Bundling Your Home and Auto Insurance

    If you’re a homeowner with one or more vehicles, you may be able to save money on home and auto insurance bundles. As mandated in most states in the US, you need a minimum amount of car insurance to [...]

    4 MIN READ Jan. 6, 2021
  • USAA Insurance Review 2021: Auto, Home and Life

    USAA Insurance is known for its service to the military community and their families. Whether you’re active or former military, an eligible family member, a cadet or midshipman, USAA is available to [...]

    8 MIN READ Dec. 17, 2020
  • 21st Century Insurance Review 2021: Car & Home

    21st Century Insurance, a small operation serving the residents of California and Hawaii, is best known for its fast claim turnaround time and customer service. Most business is done online or over the [...]

    4 MIN READ Dec. 17, 2020
  • NJM Auto Insurance Review 2021: Overview & Rates

    New Jersey Manufacturers Insurance Company has been selling insurance since 1913. The property and casualty mutual company operates under the name NJM Auto Insurance, providing coverage mainly in New Jersey [...]

    6 MIN READ Dec. 11, 2020
  • Ameriprise Insurance review: Car, home and life

    A well-established financial institution, Ameriprise also offers auto, home and life insurance policies. It sells standard policies at middle-of-the-road rates. Ameriprise recently sold its home and auto [...]

    4 MIN READ Sep. 22, 2020
  • AAA Insurance Review 2021: Auto, Home, and Life

    The American Automobile Association formed in 1902, when fewer than 25,000 cars occupied American roads. Throughout its history, AAA has worked tirelessly to improve safety, producing driver textbooks [...]

    7 MIN READ Sep. 10, 2020
  • Kemper Insurance Review: Auto, Home & Life

    Kemper is a multifaceted insurance holding company that sells auto, home, life and small business insurance products. It offers auto insurance through agents and independent brokers in the state of California, [...]

    6 MIN READ Sep. 3, 2020