Final answer:
Health insurance companies process claims for providers and healthcare plans, distinguishing between fee-for-service systems and HMOs while dealing with adverse selection and negotiating lower rates due to their large client base.
Step-by-step explanation:
The entity that processes or facilitates the processing of claims for providers and healthcare plans are commonly known as health insurance companies. In a fee-for-service system, providers are reimbursed for each service they provide. In contrast, health maintenance organizations (HMOs) reimburse providers based on the number of patients they care for, regardless of individual service costs. One issue with insurance markets is adverse selection, where there is an imbalance of information between the insurance buyers and the insurance company regarding the risks involved. Insurance companies leverage their large client base to negotiate lower rates with healthcare service providers, thereby increasing consumer benefits and reducing payout costs for the company itself when claims are processed.