Every health insurance plan comes with prescription drug coverage, but not every plan covers every medication. And, within a plan, how much you will have to pay for medications will vary, depending on the drug itself. This is why it’s important to know how prescription drugs are covered and what to look for to make sure you have the coverage you need when you’re choosing a plan.

How Can I Know Which Drugs Will Be Covered?

When you're considering insurance plans, ask to see each plan's formulary, which is the list of drugs covered by the plan. The formulary provides guidelines on how the cost of the drug is split between you and the insurer.

Formularies usually have “tiers,” which are groups of drugs classified according to cost. Your co-payment for a drug is based on which tier a drug is in.

What drugs are in what tier differs according to each plan. Not all plans have the same number of tiers or include the same drugs in each tier, but here is how they typically work:

• Tier 1 — These are the least expensive prescription drugs available with the plan, typically limited to generic drugs. Generic drugs generally work just as well as brand-name medications. The only difference is the name and how much money you can save.
• Tier 2 — More expensive generic drugs and brand-name drugs your plan has designated as “preferred” are in this tier. If you take a brand-name drug, you should talk to your doctor about whether a drug in this tier is appropriate for you, as this is where to find the most affordable brand-name options.
• Tier 3 — Non-preferred and expensive brand-name drugs are usually in this tier. These drugs will cost you a significant amount out-of-pocket.
• Tier 4 — This is the most expensive tier, usually reserved for the highest-priced drugs and for drugs that treat rare conditions.

How Do I Find a Plan’s Formulary?

To find a plan’s formulary, check the insurer’s website. Have the name of the plan ready (or, if already insured, your insurance card) so you know which plan to search for. If you can’t find the information online, call the insurer and ask them to send you a copy. If you have a specific question about your formulary, such as what tier a drug is in, the plan may also be able to help you over the phone.

How Can I Avoid Unexpected Costs?

The best way to avoid unexpected drug costs is to know what you’re buying when shopping for coverage, and to make sure any prescription drugs you take are covered by any new health insurance plans you’re considering.

Pay special attention to whether your prescriptions will be covered with a simple copay, or whether you’ll need to fulfill your annual deductible first. If you need to meet your deductible, you will have to pay out-of-pocket for the full cost of your drug until you reach the threshold when your insurance will kick in. Find out if any new plan you’re considering uses tiers, and how much you’d pay for drugs in each tier to get a better understanding of how much you will pay.

And remember: if you get a prescription filled and find out it will cost you more at the pharmacy than you were expecting, you aren’t obligated to buy it. Contact your doctor, explain the situation, and see if there’s a less expensive option.