In the healthcare industry, the terms “payer” and “health plan” are often used interchangeably. However, there are some key differences between the two that are important to understand. This article will examine what payers and health plans are, how they differ, and why the distinction matters.
What is a Healthcare Payer?
A healthcare payer is an organization that pays for the cost of healthcare services provided to patients by doctors, hospitals, and other healthcare providers. Payers process claims, determine eligibility, manage enrollment, and handle payments to providers on behalf of the insured individuals.
Some examples of payers include:
Commercial health insurance companies like Aetna, Cigna, UnitedHealthcare, etc.
Government health programs like Medicare, Medicaid, TRICARE, etc.
Employer-sponsored self-funded health plans.
State high-risk pools and state Children’s Health Insurance Programs (CHIP).
In essence, a payer is any entity that is financially responsible for paying claims for healthcare services rendered. They administer payments within the healthcare system.
What is a Health Plan?
A health plan refers specifically to a health insurance policy or product that provides medical coverage to its enrolled members. Health plans can be offered by commercial insurers, government agencies, employers, unions, etc.
Some key features of health plans:
They provide defined health benefits and coverages.
Have a network of contracted providers.
Specify out-of-pocket costs like premiums, deductibles, copays.
Manage eligibility, enrollment, and claims.
Pay for covered medical services received by enrollees.
Key Differences Between Payers and Health Plans
While payers and health plans are related concepts, there are some notable differences between the two:
|Basis of Comparison
|An entity that pays for healthcare services
|An insurance product that covers medical costs
|Broad entity that pays claims
|Specific health insurance policy
|Aetna, Medicare, Self-funded employer plan
|Aetna HMO, Medicare Advantage, Employer PPO
|Process claims, determine eligibility, make payments
|Provide defined benefits, pay for members’ care
|Payers offer multiple health plans
|A payer administers a health plan
|Can be commercial insurer, government program, employer, etc.
|Offered by commercial insurer, government program, employer plan
|Members enroll in a specific health plan
|Health plan has enrolled members
|Payers process claims for multiple health plans
|Claims are for members of that specific plan
A payer is a broad entity that pays claims, while a health plan refers to a specific insurance policy.
Payers can offer multiple different health plans and administer payments for all of them.
Members enroll in and receive benefits from a specific health plan offered by the payer.
Claims processing is done by the payer but applied to members of a particular health plan.
So payers and plans are closely interrelated, but not exactly the same thing.
Why Does the Distinction Matter?
While subtle, understanding the difference between payers and health plans is important for several reasons:
Avoid Confusion – Since the terms are often used interchangeably, distinguishing between them leads to clearer communications.
Administrative Accuracy – Payers must accurately associate claims and enrollment data with the right health plan.
Analytics – Data analysis requires separating measures like utilization, costs, risk pools by specific health plan.
Member Experience – Members interact with their health plan benefits and network, not the payer directly.
Regulations – Rules like HIPAA apply narrowly to health plans, not all payers.
Vendor Contracts – Payer vs. health plan dictates required solutions and services.
Examples of Major Healthcare Payers and Health Plans
To illustrate the payer vs plan distinction, here are some examples of large payers and the specific health plans they offer:
Aetna – Payer
- Aetna HMO, PPO, POS, etc. – Health Plans
UnitedHealthcare – Payer
- UHC Choice, Choice Plus, Select Plus, etc. – Health Plans
Cigna – Payer
- Cigna Open Access, LocalPlus, etc. – Health Plans
Humana – Payer
- Humana Employer Medicare Advantage, Humana Gold Plus – Health Plans
Medicare – Payer
- Medicare Advantage, Medicare Prescription Drug Plans – Health Plans
Florida Blue – Payer
- BlueOptions, BlueCare, BlueMedicare, etc. – Health Plans
So in each case, the payer is the overall company or agency that administers medical claims payment. The health plans refer to specific insurance products they offer to cover healthcare services.
Health Plans vs Insurance
Health plans also have some overlap with the term “health insurance,” but there are differences:
Health insurance refers broadly to coverage that pays for medical care.
A health plan is a specific health insurance product offered by a payer.
There can be many different health plans under the umbrella of health insurance.
So “health insurance” is a category, while a “health plan” is a particular product within that category.
Though subtle, recognizing the key differences between payers and plans enables clearer communication, administrative accuracy, data analysis, and compliance in the healthcare industry.
Health Insurance 101: The Basics and Types of Plans
What does payer mean in health care?
Why are health plans often referred to as payers?
What are the two types of payer?
What is the difference between health insurance and health plan?