Get to Know Payer Basics
Learning Objectives
After completing this unit, you’ll be able to:
- Define healthcare payers and key terms and regulations used by healthcare payers.
- Identify the main business objectives of healthcare payers.
The healthcare industry information we share in this module applies mainly to the United States. Keep in mind that healthcare experiences around the world may differ vastly.
Understanding Verticals
If you have health insurance, then you have experience with payers—also known as insurance carriers. This is the sector that finances healthcare. The National Library of Medicine defines an integrated healthcare system as “an arrangement whereby a healthcare organization offers, either directly or through others, a broad range of patient care and support services.” Payers do the following tasks.
- Design medical insurance plans.
- Build networks of healthcare providers.
- Manage insurance benefits.
- Enroll groups and members in insurance plans.
- Process insurance claims.
- Process insurance premium payments.
- Engage members in wellness and care management programs.
Payers are one of the five healthcare sectors.
- Providers
- Payers
- Pharmaceuticals
- MedTech
- Public Sector health
For an overview of the primary aims, trends, and sectors in healthcare, review the Quick Look: Healthcare and Life Sciences module in Trailhead.
Patient centricity is a common theme in all five healthcare industry sectors. For an overview of the primary aims, trends, and market sectors in healthcare and life sciences, check out the Healthcare and Life Sciences Industry: Quick Look on Trailhead.
Let’s see where Payers can help our friend, Alvin, a dog walker who walks several dogs at a time. One day, he gets tangled in the leashes as they chase a squirrel across the street. He breaks his leg. He gets treated at a hospital and is thankful for the support of his doctors and nurses. When it’s time to pay for the services, he enters the world of payers.
Oh, and both spellings—payer and payor—are correct, but in this module, we use payer. It’s also good to know that payers call their customers “members”.
Who Are the Payers?
A large amount of the United States population is covered under some sort of health insurance. Here are the types of payers that provide insurance.
| Type of Payer | Description |
|---|---|
|
Major National Plans |
Insurers that provide coverage in multiple states across the country |
|
Regional and Local Plans |
Insurers that provide coverage in specific regions of the country |
|
Provider-Led Plans |
Hospital systems that provide their own health insurance coverage |
|
Government Plans |
Government-funded health insurance programs and insurers focused on these programs |
Some payers cross multiple categories. One, for example, is a US-based federation of health insurance companies and organizations that consists of several independently operated member companies that fall into regional and local plans and a government-wide benefit plan for federal employees.
What Do Payers Care About?
The three things payers care about most are:
- Affordability of care
- Accessibility of care
- Quality of care
The payers’ mission is to pay for care used by their members, and they do this by growing their membership numbers. More members equals more premiums collected, creating a larger pool of money to cover the cost of care. Payers also carefully manage medical costs and risks for their members.
| What Payers Do | Example of How They Do It |
|---|---|
|
Design cost-effective products and services |
Alvin’s insurance carrier includes eight physical therapy sessions to prevent reinjury. |
|
Negotiate agreements with hospitals and doctors on the cost of care |
Alvin’s insurance carrier and the provider agree on the rate the insurance plan pays the hospital, doctor, physical therapist, and any other provider to care for Alvin’s broken leg. |
|
Sell benefit plans to individuals and employer groups |
Alvin’s insurance carrier offers him health insurance through his employer at a lower rate than if he purchased it as an individual. |
|
Control care usage through incentives |
Alvin’s insurance carrier provides an incentive for Alvin’s doctor to order an x-ray instead of an MRI, as an x-ray is one-tenth the cost. |
Terms for Healthcare Payers
Watch these narrated slides to learn some common terms used in the payer sector.
Now that we’ve shared who payers are, what they care about, and the language they use to communicate, let’s move on to discuss payer products, payer customers, and the trends they face.