Who is a Payer in US Healthcare? A Comprehensive Overview

Payers play a critical role in the US healthcare system by facilitating payments between patients and providers. But who exactly are the major payers in healthcare? This in-depth guide examines the key payers in the system, the services they provide, and how they influence care delivery and costs.

What is a Healthcare Payer?

A healthcare payer is an organization that pays for medical services on behalf of patients. Payers process claims, determine eligibility, authorize services, and issue payments to providers.

The two main categories of payers are:

  • Public Payers – Government-funded programs like Medicare, Medicaid, TRICARE, and the VA
  • Private Payers – Commercial health insurance companies like UnitedHealthcare, Cigna, and Humana

Payers also set reimbursement rates, manage provider networks, and develop value-based payment models. Their policies and incentives significantly impact how healthcare is accessed and delivered.

Key Services Provided by Payers

Payers perform a variety of critical functions in healthcare:

  • Claims processing – Receiving, evaluating and paying provider claims for services
  • Provider contracting – Negotiating reimbursement rates and building provider networks
  • Member services – Handling enrollment, answering questions, and managing complaints
  • Utilization management – Reviewing appropriateness of care and authorizing services
  • Medical management – Developing care management programs and quality initiatives
  • Customer service – Assisting members with finding providers, understanding benefits, and resolving claims issues
  • Billing and premium collection – Generating premium invoices and collecting payments

Juggling these diverse services allows payers to facilitate interactions between patients, providers, employers, and government entities.

Major Payers in the US Healthcare System

The US has a mix of public and private sector payers across different coverage segments:


  • Federal health insurance for those 65+ and people with disabilities
  • Covers over 63 million members
  • Pays over $830 billion annually to providers


  • Joint federal-state program providing coverage for low-income individuals
  • Covers over 82 million members
  • Accounts for 16% of national health spending

Commercial Health Plans

  • Offered by private insurers to employers and individuals
  • Enroll over 195 million members
  • Major plans include UnitedHealthcare, Anthem, Cigna, Aetna, and Humana


  • Provides coverage for active duty and retired military members and families
  • Over 9 million beneficiaries
  • Run by private contractors overseen by the Department of Defense

Department of Veterans Affairs (VA)

  • Covers medical care for eligible veterans at VA facilities
  • Over 9 million enrollees
  • Largest integrated health system in the US

This mix of public and private payers provides coverage to a majority of Americans.

Payer Business Models

Payers utilize different business models and plan designs:

  • Managed care plans – HMOs, PPOs, and EPOs that leverage provider networks, utilization controls, and care coordination
  • Indemnity plans – More open-access plans like PPOs with fewer utilization controls
  • Consumer-directed plans – High-deductible plans paired with HSAs or HRAs
  • Government programs – Taxpayer-funded coverage like Medicare and Medicaid
  • Employer-sponsored plans – Group plans offered by employers to employees and dependents

Larger payers often have a diverse portfolio spanning commercial, Medicare, Medicaid, and specialty plans. Smaller payers may focus on a niche.

Payer Influence on Healthcare

As major sources of coverage and financing, payers significantly influence healthcare delivery in many ways:

  • Directing patient volume through narrow networks and utilization controls
  • Shaping treatment patterns via coverage and payment policies
  • Driving adoption of value-based payment models
  • Promoting preventive care and wellness through benefit design
  • Investing in healthcare IT, data exchange, and virtual care capabilities
  • Pushing healthcare industry consolidation via vertical integration
  • Lobbying around healthcare legislation and regulations

Payers leverage their enrollments and reimbursement dollars to enact system-wide changes.

Key Differences Between Payers and Providers

While often confused, payers and providers play very different roles:

Payers Providers
Pay for services Deliver patient care
Process claims and payments Submit claims and receive payments
Do not directly deliver care Do not directly pay for care
Set reimbursement rates Accept set reimbursement rates
Manage populations Treat individual patients

In short, payers pay while providers provide care. However, payers are increasingly expanding into care delivery via provider acquisitions.

Payer Challenges and Initiatives

Payers face a shifting landscape presenting challenges like:

  • Rising costs of care
  • Competitive marketplace
  • Government regulation
  • Value-based payment adoption
  • Consumerism and transparency
  • Inefficiencies and waste
  • Social determinants of health
  • Healthcare disparities

To address these issues, payers are pursuing strategies such as:

  • Developing advanced data analytics capabilities
  • Emphasizing preventive care and chronic disease management
  • Investing in virtual and digital health solutions
  • Partnering more deeply with providers
  • Focusing on social determinants of health
  • Advancing health equity and access

Payers must continually evolve to improve care affordability, outcomes and equity.


In the end, payers serve the vital economic function of financing care delivery in the US system. Through enrollment, reimbursement, quality initiatives and benefit design, they aim to offer affordable coverage that meets consumer needs. Payers face intensifying pressure to constrain costs while improving health outcomes and experiences. Understanding their role and incentives provides key insights into the forces shaping American healthcare.

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Who is considered a payer?

A payer is an individual or organization that makes payments. In finance, a payer is an entity making payments on investment products, such as bonds or dividends on stocks. In the healthcare industry, payers are the organizations providing payment for medical services.

What are the 4 types of payers?

Payers are typically categorized in four ways: Health plans, payers, insurers, and payviders. A common misconception is that these are all synonymous with each other, but they’re not exactly interchangeable terms. Health plans pay the cost of medical care, while the payer processes and pays provider claims.

What is a payor in healthcare?

At base, a “payor” is the entity that pays for services rendered by a healthcare provider. The payor may be a commercial insurance company, government program, employer, or patient.

What is the biggest payer of healthcare services in the US?

Medicare is the single largest payer for health care services in the United States.

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