Every health insurance plan comes with prescription drug coverage. Whether you need to treat heartburn, back pain, or an infection, there’s a prescription waiting for you. But not every health insurance plan covers every prescription, and if you’re not careful, you may end up paying a lot out of pocket for drugs.
That’s why it’s crucial that you learn about your plan’s formulary, also known as a drug list. A health insurance plan’s formulary is important to understanding which prescription drugs are available to you, how much they might cost, and whether there are any other restrictions around them.
In this article, we’re going to cover your top questions about prescription drug coverage, formularies, drug tiers, and appealing to your health insurance company about a prescription drug decision.
What is a formulary (a.k.a. drug list)?
Every health insurance plan comes with a formulary. This formulary is the official list of medicines that your health insurance plan will pay for. You may hear the term formulary used elsewhere – hospitals and networks have their own formularies for what drugs they approve of, which may not match up with your health insurance plan’s formulary.
As we’ll get into more detail below, the basic idea of a formulary is to provide specific guidelines for both the insurer and the insured around how they split the cost of prescription medication.
What are drug tiers?
In the U.S., formularies have "tiers" – basically, groups of drugs that are classified according to cost. As we mentioned above, formularies are designed to provide guidelines around how a health insurer is going to share the cost of prescription medication with enrolled customers.
Drug tiers are the main way in which health insurance companies communicate how much a specific prescription drug will cost a member. Based on the tier a drug is in, it will have a specific copayment set by the health insurance company. (Specialty drugs usually have a coinsurance payment instead.)
Drug tiers are not standardized, and not all plans have the same number of tiers. Additionally, not all plans will put the same drugs in the same tiers. The guidelines below will help give you a general overview of drug tiers typically work:
The cheapest prescription drugs available to you, typically limited to generic drugs. Generic drugs are just as safe as brand-name drugs – the only difference is the name and how much money you’re saving. In some plans, some cheaper brand-name drugs fall under Tier 1.
More expensive generic drugs and preferred brand-name drugs occupy this tier. If you must take a brand-name, you should work with your doctor to choose an appropriate one from Tier 2, as they’re the most affordable.
Non-preferred and expensive brand-name drugs are usually in this tier. These drugs will cost you a significant amount out-of-pocket.
The most expensive tier, usually occupied only by speciality drugs, such as newly approved drugs. These drugs typically do not have a specific copay; instead, you’ll pay a percentage of the total cost.
How do I find my formulary?
Many formularies are freely available on the internet – you just have to know which plan you’re looking for. Your health insurer may also have multiple formularies available: an abridged version that focuses on the drugs most people care about and a comprehensive version with more detail. Additionally, your health insurer may have a separate formulary for specialty drugs.
To find your plan’s specific formulary:
Check your insurer’s website. Have your insurance card ready so you know which plan to search for. You can Google "name of health insurance company" plus "formulary" and likely find a result quickly.
If you can’t find it online, you probably have a hard copy of your formulary in the initial welcome packet your insurer sent you. If you still have it and remember where it is, take a peek.
If you can’t find it online and you don’t have a physical copy, call your insurer and ask for them to send you a copy. If you have a specific question about your formulary, such as what tier a drug is in, they may be able to help you over the phone.
Your doctor should also have an up-to-date formulary for your health insurer; when discussing prescription medications with your doctor, ask her whether the drug is in your plan’s formulary, and at what tier.
Does my formulary list any other restrictions on my prescription drug coverage?
Yup. In order to fit certain drugs into specific tiers, your insurer may place certain restrictions around them. This helps them offer drugs at a lower price than they otherwise would be able to, though it can get you into trouble if you didn’t know about these restrictions beforehand. Some drugs may also have restrictions due to safety concerns.
Your health insurer’s formulary will list restrictions on specific drugs. Some examples of restrictions you may see are:
Prior authorization: This drug is only available if your doctor receives authorization from your insurer before prescribing it. If you do not get prior authorization, you’ll pay full price for the drug.
Quantity limits: This drug is only available in certain quantities because having too much is a safety concern. You can go over this limit if you’re willing to pay full price or your doctor gets prior authorization.
Step therapy: There are sometimes multiple drugs to treat one condition. You may be asked to use at least one cheaper drug before being prescribed the more expensive option.
How do I get coverage for a drug that isn’t on my formulary?
If you recently switched health insurance plans and your new plan doesn’t cover a prescription you have, or your health insurance plan changed their formulary, you may find yourself in a situation where you’re paying full price for a prescription that used to be covered. You may also want coverage for a drug that was never covered, but is the best (or only) option for treating a specific condition.
First, always talk to your doctor about finding an alternative. Bring your formulary and work with them to find an alternative drug that is covered, if possible.
If it isn’t possible to choose a drug that is already covered by your formulary, or the alternative drug on your formulary isn’t appropriate, you can ask your health insurance company for an exception. Contact your health insurance company directly for more information on how to request an exception. If your exception is granted, the health insurer will cover the drug as if it is their highest drug tier.
If your exception is not approved, you may appeal the decision.
You may also find that a prescription discount card makes a needed drug affordable, if your health insurance doesn't cover it.
Understanding your health insurance plan’s drug formulary is key to planning out your out-of-pocket healthcare expenses. It can also help you work with your doctor to find the right drug for you and negotiate with your health insurer if necessary.