The Difference Between a Payor and a Payer

The Difference Between a Payor and a Payer

"Payor" and "payer" are interchangeable spellings of the word for a person or organization that pays for some kind of goods or services. "Payer" is used most often, while "payor" is a less common variation.

Defining "Payer"
The noun "payer" is defined as the "one that pays; especially: the person by whom a bill or note has been or should be paid," according to Merriam-Webster‰Ûªs Online Dictionary. The business definition of "payer" is the "person or organization submitting payment," as listed in the Treasury Data Registry, Department of the Treasury. The term "payor" is listed as a less common variant of the term "payer," and the definition or meaning of the two words is the same. The term "payor" is sometimes used in medical and insurance documents when defining or describing third-party payors and responsibilities. In legal documents "payor" is used to describe a person required by law to make specific payments, such as child support.

Defining Financial Terms Related to "Payer"
The noun "payee" is defined as the "one to whom money is or is to be paid," according to Merriam-Webster‰Ûªs Online Dictionary. In short, the payer gives, and the payee receives.

The noun "payment" is defined as the "the act of paying" and "something that is paid," according to Merriam-Webster‰Ûªs Dictionary. The payment is the thing (most often money) the payer gives to the payee.

The verbs "pay," "paid" and "paying" have a variety of definitions listed in Merriam-Webster‰Ûªs Dictionary and are used in different contexts. The simplest definition provided is "to give in return for goods or service." If focusing on the payer relationship ‰ÛÓ the root words specifically ‰ÛÓ the payer pays the payee a payment.

The Use of "Payer" in Financial Transactions
When it comes to finances, the term "payer" can get more complex. In an investment context, the term "payer" can refer to the entity that makes an interest or dividend payment, as stated by Investopedia. A dividend is a cash payment to stockholders from a publicly traded corporation's earnings. In this case, the corporation is the "payer" and the stockholder is the "payee." In a property context, when someone is purchasing a home with a mortgage, that person is the "payer." The bank or other financial entity that holds the mortgage and receives monthly mortgage payments is the "payee."

The Use of "Payer" in Health Insurance
Health care can be structured in a variety of ways, and countries around the world have different forms of health care systems for their citizens. One structure is the single-payer national health insurance, where the government covers the cost of health care while the care itself is handled by private providers. The third-party payer system comprises an organization, either public or private, that pays insurance and medical expenses on behalf of the individuals within its organization, as discussed by the American Health Lawyers Association. In this structure the individual pays health insurance premiums, and the third-party payer pays bills on the individual's behalf. There is also a direct-pay structure where the individual pays for his or her health care costs directly.