Introduction to Payers

Payers(Payor) are the health insurance companies responsible for paying for the patient’s medical services. Payers are responsible for setting service rates, collecting payments, processing claims and paying providers claims. Generally, they cover regular check ups, laboratory tests, vaccines and medicine prescriptions etc. 

A payee is the provider (usually doctors, nurses, pharmacies),  who receives payment in exchange of services. 

The Centers for Medicare and Medicaid Services (CMS) is one of the largest healthcare payers in the United States that administers Medicaid and Medicare. There are more than 900 health insurance companies operating throughout the United States. In 2020, private health insurance coverage was 66.5% whereas public health insurance coverage was at 34.8 %.

What is Health Insurance ?

Health insurance helps cover the cost of an insured person’s medical and surgical expenses.

Essentially, health insurance subscribers enter into an arrangement with a health insurance company in order to reduce the impact of the cost of medical expenses. Most insurance plans require subscribers to pay premiums, which are essentially subscription fees that are paid monthly or annually. 

It is quite essential to have health insurance coverage for anyone in the US as without it, the medical bills will be very high and everything will have to be paid out of pocket. Also, some doctors/providers may be reluctant for the check-up without insurance.  There are a lots of people who do not have health insurance and they are reluctant to go for health checkups to avoid the hefty medical charges. 

Types of Health Insurance

There are two main types of insurance. 

Public or government Insurance

Public or government Insurance refers to the federal or state subsidized healthcare in exchange for a premium. The Centers for Medicare & Medicaid Services (CMS) is a federal agency that administers this program. Medicare, Medicaid, the Veterans Health Administration, and the Indian Health Service are examples of public health insurance in the U.S. 

Private or Commercial insurance

Private health insurance refers to any health insurance coverage that is offered by a private entity instead of a state or federal government. According to the Centers for Disease Control and Prevention (CDC), the U.S. healthcare system relies heavily on private health insurance. In 2020, private health insurance coverage was 66.5% whereas public health insurance coverage was at 34.8 %. Atena, Cigna, Blue Cross Blue shield, United Healthcare etc are some of the private insurance companies.

Public/Government Insurance


Medicare is a federal healthcare program. In order to qualify for Medicare benefits, a person must be: 65 years of age; a United States citizen; and be enrolled in Social Security. Medicare makes exceptions for persons under 65 with end-stage renal failure (which requires regular dialysis treatment), and persons under 65 who have other certain disabilities or illnesses (like Lou Gehrig’s Disease).


Medicaid is a joint state and federal healthcare program that provides care to persons who might not otherwise be able to afford it. Medicaid provides coverage to low-income families and individuals, disabled individuals, and certain elderly persons.

Unlike Medicare, which is a federal program with universal standards, Medicaid regulations and restrictions vary by state. Each state has to maintain its own Medicaid program (like California’s Medi-Cal or Wisconsin’s BadgerCare). Each of these state-based Medicaid programs still has to meet certain standards established by the federal government, but you should expect to see a wider range of variation in Medicaid policies than Medicare policies.

Private/Commercial/Insurance Plans

  • Indemnity plan - A type of medical plan that reimburses the patient and/or providers as expenses are incurred.
  • Conventional indemnity plan - An indemnity that allows the participant the choice of any provider without effect on reimbursement. These plans reimburse the patient and/or provider as expenses are incurred.
  • Preferred Provider Organization (PPO): -  A type of health plan where you pay less if you use providers in the plan’s network. You can use doctors, hospitals, and providers outside of the network without a referral for an additional cost.
  • Exclusive Provider Organization (EPO):  - A managed care plan where services are covered only if you use doctors, specialists, or hospitals in the plan’s network (except in an emergency).
  • Health Maintenance Organization (HMO):  - A type of health insurance plan that usually limits coverage to care from doctors who work for or contract with the HMO. It generally won't cover out-of-network care except in an emergency. An HMO may require you to live or work in its service area to be eligible for coverage. HMOs often provide integrated care and focus on prevention and wellness.

Self-Insured Employers

  • Self-insured health insurance means that the employers is using their own money to cover their employees medical claims 
  • Employers are basically the companies who hire employees to work for them 
  • For big companies like Microsoft, Boeing it is cost effective for them to act as an insurers to cover expenses themselves 
  • These companies have an  insurance fund (pool of money) to pay for healthcare for their employees. 
  • Self-insured employers sign a contract with an insurance company or third party administrator (TPA) for the operational parts (enrolling employees, processing claims, paying doctors, etc.) but the actual money is paid by the company itself. 
  • Self-insurance is beneficial to businesses because it makes employers more aware of their risks. Businesses must analyze their risks and how much money to save based on past and future analyses of risk.

Health Insurance as Employment Benefit

  • In US, companies that people work for often pay for part (or sometimes all) of their health insurance premiums as an employment benefit. That is why healthcare gets linked to employment in the US. When you leave a job, you typically lose your health insurance too - which is a huge problem if you don’t have a new job (and new health insurance) lined up. If it worked this way in Nepal, Leapfrog would offer a health insurance plan that you could join. 
  • Plans are usually shared between family members. So if you worked for Leapfrog, and your wife/husband worked for another company, the two of you would typically pick the best of the two plans and join that one.

Ways to get Insurance

  • A group coverage plan at your job or your spouse or partner's job
  • Your parents' insurance plan, if you are under 26
  • A plan you purchase on your own directly from a health insurance company or through the Health Insurance Marketplace
  • Government programs such as
    1. Medicare
    2. Medicaid
    3. Children's Health Insurance Program (CHIP)
  • The Veterans Health Administration or TRICARE for military personnel
  • US states, if it provides a health insurance plan
  • Continuing employer coverage from your former employer, on a temporary basis under the Consolidated Omnibus Budget Reconciliation Act (COBRA)

    Introduction to Managed Care

    Managed Care is a health care delivery system organized to manage cost, utilization, and quality. The most common health plans available today often include features of managed care. These include provider networks, provider oversight, prescription drug tiers, and more. These are designed to manage costs for everyone without sacrificing quality care.

    Managed Care reduces how much money Payers (health insurance companies) have to pay, mostly by doing two things:

    • Agreeing on costs (e.g. how much a visit to a doctor should cost) by negotiating rates and signing contracts with groups of doctors (those who agree to these rates are called “In-Network” because they are the network of providers to whom a patient can go). 
    • In the case of HMOs, preventing a patient from visiting a specialist doctor (who is expensive) without first getting approval (a “referral”) from their personal general-purpose doctor also referred to as “primary doctor/care provider”.

    Features of Managed Care

    • Provider networks: Health insurance companies contract with groups of providers to offer plan members reduced rates on care and services. These networks can include doctors, specialists, hospitals, labs, and other health care facilities.
    • Preventive care incentives: Managed care plans typically focus on making preventive care a priority. Most preventive services, such as annual check-ups, routine screenings, and certain vaccines, are covered at 100% by your health plan. 
    • Primary Care Providers (PCP): Your health plan may require you to choose a PCP if you don’t already have one. You may be required to see your PCP first before going to any other doctor or specialist. If you need more specialized care or treatment, your PCP can refer you to the right specialists and facilities, often in the same network.
    • Prior authorization: Most managed care plans require you to get approval before you have certain types of procedures or treatments done, or are prescribed certain types of specialty medications. This is called prior authorization, precertification, or preapproval, depending on your insurer.
    • Prescription drug tiers: If you have prescription coverage, your health plan may provide more coverage for generic medications than brand names. This furthers the goals of managed care, which is to help keep costs lower, while still ensuring you receive quality care and equally effective medications.

    Types of Managed Care

    • HMO (Health Maintenance Organizations): lower monthly premiums, comprehensive benefits - With an HMO plan, a primary care physician (PCP) typically must be selected. The PCP is responsible for coordinating all the members’ healthcare — a referral is often required before seeing a specialist or another physician. HMOs also have provider networks, and require healthcare services within their network.
    • PPO (Preferred Provider Organization): offers provider flexibility, higher monthly premiums - Like an HMO, PPO plans also have a network. The big difference is that members can  go out of network for their healthcare—often without a referral—but they will pay more. Most of the time, monthly premiums are higher than an HMO
    • POS: benefit levels vary for in-network vs. out-of-network - POS plans are much like HMOs in that members must select a primary care physician. They’re also similar to PPOs—members can seek healthcare outside the network. But they will pay more. Monthly premiums are also typically higher than an HMO.

    Difference in Managed Care Structures