Third party reimbursement is when a third party pays for services provided to a customer, such as health insurance companies or government benefit programs. The customer provides information to assist with billing, and the third party will pay the bill or deny it if the services are not covered. Prior approval may be required, and some providers may refuse third-party reimbursement from certain companies or organizations.
Third party reimbursement is compensation for services provided by a third party, rather than the person receiving the services. This is most commonly seen in a healthcare context, where a patient receives treatment and an insurance company pays the service provider. Third party reimbursement may also be used as a method of payment in other situations, generally at the discretion of the person offering the services. Individuals may refuse to accept this method of compensation, or may refuse to provide services in some settings.
In third party reimbursement, one person receives the service and the third party is billed by the service provider. The customer is responsible for providing information to assist with billing, including the name of the third party and other relevant information, such as an insurance identification number. The third party will pay the bill or deny it if the services are not covered. If the bill is rejected, the service provider will bill the customer. Invoices can also be sent when payments are only partially covered.
Health insurance companies use this system, as do government benefit programs. Some employers allow their employees to bill them for particular products and services for third party reimbursement. An employer may, for example, allow people to rent cars based on company policy. The car is checked out in the employee’s name, but the employer pays the rental fee, rental insurance, and any other costs associated with renting the car.
In some cases, a care provider must have a pre-existing relationship with the party providing the reimbursement. Health insurance companies often use a network of doctors and other health care providers, for example. Your clients are expected to try these providers first when seeking care. If they see a doctor outside of the network, reimbursement may not be provided or may be much lower than it would otherwise be. Conversely, service providers may refuse to accept third-party reimbursement from certain companies or organizations. People usually do this when they are concerned about getting paid on time.
Third party reimbursement may require prior approval. The party responsible for payment reviews proposed items and services to determine if they should be covered. Policies commonly specifically prohibit reimbursement for certain things, such as elective or experimental medical procedures in the case of health insurance. People can usually get a list of approved and denied services so they can plan accordingly in advance and avoid the surprise of an unpaid bill.
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