Prescription Drug Coverage Explained

Medicine is expensive. And if you’re filling prescriptions each and every month, you already know how quickly those costs can add up.

Health insurance can help. By law, any comprehensive plan you buy for yourself or your family must include prescription drug coverage. But it’s tricky — not every plan will cover every drug. Before choosing a plan, you need to know exactly how much you’ll shell out for the medicines you rely on.

Here are some things to keep in mind:

1. Even if your insurance covers the medication, you’ll likely still have to pay some of the cost. Let’s say you just got a prescription from the doctor. You drive to the pharmacy to pick it up, and the pharmacist asks for your credit card. You thought insurance would cover your medicine — so what gives? You need to know that your medicine could still be subject to a deductible, copays, or coinsurance. In other words, “covered” doesn’t necessarily mean “free.”

2. Not all drug coverage is created equal. Some drugs are really expensive. Some are relatively cheap. Any health insurance plan you choose is going to provide different levels of coverage for different drugs. What they cover depends on the drug and how expensive it is. When choosing a plan, be sure you check to see just how much coverage you’ll get for the medicines you take most often.

Here are the typical ways that plans are organized:

• Tiers. Some plans divide all prescription medications into four groups, also called tiers. Tier 1 drugs will cost you the least. Tier 4 drugs — sometimes called specialty drugs — are going to cost you the most.
• Generic, Preferred Brand, Preferred Specialty, Non-Preferred. Some health insurance plans categorize drugs based on brand name. Generics cost less, preferred brands are middle-cost, and some non-preferred brands can be very pricey. (By law, a generic drug must work the same as its brand name equivalent. With this kind of plan, it pays to ask your doctor for generics when they’re available — you could save as much as 80 percent by making the switch.)
• Formulary vs. Non-Formulary. Formulary is just a fancy way of saying “drugs we cover.” Non-formulary can mean “drugs we don’t cover” or “drugs we cover but they’ll cost you more.”

3. It pays to ask specific questions about your medications. Many drugs get prescribed by doctors for different conditions. For example, the same medicine might lower cholesterol for one patient and prevent mini-strokes for another patient. Just because a drug is on a “covered” list, that doesn’t mean it’s covered at the same level for all uses. So be sure to ask the health insurance carrier and your doctor about coverage for your particular prescription.

4. Your plan might have a separate drug deductible. Some health insurance plans ask you to meet a drug deductible before they start helping to pay for your medications. In other words, you’ll have to pay the first few dollars for prescriptions out of your own wallet. Once you meet your drug deductible, the insurance company will start to share your costs. (And this drug deductible might be separate from the overall plan deductible.)

But here’s the thing: Even if your plan has a drug deductible, the deductible might not apply to every drug. For example, let’s say your plan breaks drugs into tiers. You might have to meet a drug deductible before your plan helps pay for tier 4 drugs, but your plan might help pay for tier 1 drugs from the get-go.

5. Some plans limit how much you’ll have to pay for medicine in a year. You may be able to buy a plan with an out-of-pocket max specifically for medications. With these plans, there’s a cap on the total amount you’ll have to pay for prescriptions in a given year — which is great if you take a lot of medicines.

Be sure to read your plan’s details about prescriptions carefully.