A Guide to Medication Formularies
Understanding your prescription medication coverage
Key takeaways:
A drug formulary is a list of generic and brand-name prescription medications covered by your health insurance plan.
Your health plan’s formulary is divided into tiers based on the type of drug. If your prescription medication is included in a lower tier, it will cost less.
Drug formularies vary from plan to plan. If the prescription medications you take are not included in your insurance plan’s formulary, you may be responsible for paying for them out of pocket.
Table of contents
The basics
Navigating your health insurance coverage can feel like a drive through dense fog or heavy rain. It’s hard to see due to lack of clarity and visibility — especially when it comes to medication coverage. That’s why understanding your plan’s prescription drug formulary is critical on your journey to better health and saving money.
The more you know about your prescription drug coverage, the better equipped you will be to take charge of your health. Here are the basics of medication formularies, how to make the most of the plan you’re on, and how to use this knowledge when choosing a new plan.
What is a drug formulary?
A formulary is a list of generic and brand name prescription drugs covered by your health plan. Non-formulary drugs typically only include brand-name medications and come with high out-of-pocket expenses. Your health plan may only help you pay for the drugs listed on its formulary. It’s their way of providing a wide range of effective medications at the lowest possible cost.
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You may be asked to pay a copay of $5, $10, $20, or more, depending on the drug. Some drugs are covered at 100%, making your copay $0. You may also be asked to pay a percentage of a brand-name drug listed on the formulary, making your out-of-pocket cost much higher.
What is a tier?
Your health plan’s formulary is divided into three or four categories. These categories are called tiers. Drugs are placed in tiers based on the type of drug: generic, preferred brand, non-preferred brand, and specialty. Here’s what typical formulary tiers look like:
Tier 1: Tier 1 drugs are usually generics and have the lowest copays.
Tier 2: Tier 2 drugs will cost you more than tier 1 medications. They include non-preferred generics and brand-name medications.
Tier 3: Tier 3 includes generics, preferred brands, and non-preferred brands. Your out-of-pocket price for these drugs will be higher than tiers 1 and 2. Your health plan may place a drug in tier 3 if it’s new or if there's a similar drug on a lower tier.
Tier 4: Tier 4 includes generics, preferred brands, non-preferred brands, and specialty drugs. Specialty medications treat rare or serious medical conditions. Your out-of-pocket cost will be highest in tier 4.
Some health plans have more than four tiers and others have only two or three, but they all work the same. Drugs in lower tiers will cost less and those in higher tiers will cost more.
Take a close look at your insurance company’s formularies for each of their plans. A company may list a drug in tier 1 in one plan, but in tier 2 in another plan. What’s more, don’t assume a tier 1 drug for a certain insurance company will be listed as a tier 1 drug for all insurance companies. You may find the same drug on different tiers from one insurance provider to another.
How are formularies created and why do they change?
Typically, a team of medical professionals approves the drugs on a health plan’s formulary based on safety, quality, and cost-effectiveness. The team is made up of pharmacists and physicians who review new and existing medications.
What to do if insurance won’t cover your medication: Insurance companies don’t always cover all medications, leaving consumers responsible for the entire cost. Read our tips and tricks to save on uncovered medications.
Making prescription medications more affordable: Whether you have insurance or not, prescription medications can be costly. Here’s how you can save on medications.
The power of prescription medication coupons: Find out how you can use coupons and manufacturer savings cards to save money on the medications you need.
Sometimes health plans choose not to cover a prescription drug. They do this if:
The drug has a generic version.
The drug is considered less effective than other, similar drugs.
The drug is as effective as other, similar drugs but costs much more.
Health plans update their formularies every year, but they also make changes throughout the year. These changes occur when a new drug becomes available or when the FDA decides a drug is harmful.
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Where can I find my plan’s drug formulary?
If you’re shopping for a new health insurance plan, you can typically find a link to the formulary on the summary of benefits and coverage.
If you’re already enrolled in a plan, you can find your formulary on your health insurer’s website. You must know the name of your plan to check the formulary that applies to you. Look for your plan’s name on your insurance card. If you can’t find the formulary online, call and ask the insurer to send you a copy either by postal mail or email.
What if my medication is not on my plan’s formulary?
Taking steps to get your plan to cover a non-formulary drug is easier than you think. Every insurer has an “exceptions process.” You will need to fill out and mail paperwork or submit a form online.
While the exceptions process may vary from one company to another, they all have the following in common:
Your healthcare provider must confirm you need the drug they prescribed.
Your doctor must state that your plan’s covered drugs won’t treat you as effectively as the prescribed medication.
Your physician believes that your plan’s covered drugs may harm you.
Your plan only covers the drug at a lower dosage that’s not effective for you. If you are overweight or obese, for instance, you may need a higher dose that’s not covered by your plan.
Ask your health plan about temporary coverage during the exceptions process. Your insurer may agree to cover the drug until they make a decision.
If your plan decides to cover the medication long term, it will most likely place it on the highest tier. Be prepared to pay an amount comparable to the most expensive drugs on your plan.
If your plan says no to your request, don’t fret. You still have options. First, your plan must explain their decision. Next, you have the right to appeal the decision. In fact, your insurer is required to tell you about the appeals process. The appeal can take place internally or externally.
Internal appeal: You may ask your insurer to perform a complete and fair review of the decision. For patients in life or death situations, your plan must conduct its review immediately.
External appeal: You can take your request to an independent third party. That means your insurance company will not have the final say over your request.
Can my healthcare provider access my formulary?
Yes and no. Many health plans share their formularies with healthcare providers. Others don’t, leaving it up to you to take your prescription needs into your own hands. Here’s what you can do:
Discuss with your doctor. Share your formulary with your physician. Ask for a prescription from your list that best meets your treatment needs.
Ask about generics. Explore the generics or tier 1 and tier 2 drugs on your formulary with your doctor. Save money by working together to find an effective drug that costs less.
Partner with your provider. You may be the number one advocate for your health, but your provider is right behind you. If your physician really wants you on a drug that’s not covered, ask them to take up your cause with you. Your doctor’s support may help other patients get their drugs covered, too.
What should I consider when choosing a health plan?
When shopping for a health plan, there’s a wide range of variables to consider. You may ask questions like, “Can I afford the monthly premium?” and “Can I continue to see my favorite healthcare provider?”
You should also consider the medications you take. A formulary can help you with that. By reviewing different formularies, you can pick a health plan that covers your medications. Additionally, you can choose a plan that has your drugs listed on their lower tiers. Remember, the tier level for drugs varies from plan to plan and from insurance provider to insurance provider.
The bottom line
When navigating your health insurance coverage, it’s important to understand how medication formularies work. Your insurance may only cover drugs listed on its formulary. However, if you take a non-formulary drug, you may be able to get your insurance plan to cover it through their exceptions process.
If you’re searching for a new health plan, you should consider if the plan will cover the medications you take and review the tier level for your drugs. This will help you shop for the best health plan for your needs.
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References
U. S. Food & Drug Administration. (n.d.). Drugs.
