Prescription drug insurance

Prescription drug insurance is an important part of a comprehensive health insurance plan. But as drug prices rise, many insurance companies are placing additional restrictions on what they will and will not cover. This means that even Americans enrolled in a plan with prescription drug coverage can incur significant out-of-pocket costs.

According to the CDC, 48.4% of adults have used at least one prescription drug in the past 30 days, 24% have used three or more, and 12.6% have used five or more .

On a per capita basis, inflation-adjusted retail prescription drug spending in the United States has exploded over the past six decades, from $ 90 in 1960 to $ 1,025 in 2017 .

Health reform

Before the Affordable Care Act (ACA), approximately 20% of individual / family health plans did not cover prescription drugs, according to HealthPocket analysis . The ACA has established a basic health benefits standard that includes prescription drug coverage for all new individual health plans and small group health plans since 2014, when the law took effect.

Large group plans with at least 51 (in most states) or 101 employees (in some states) are not required to cover basic ACA health benefits other than preventive care . However, the vast majority of these plans provide prescription drug coverage.

How Insurance Covers Prescriptions

There are big differences in the way health plans cover prescription drugs, and the rules can vary from state to state. There are several benefit schedules that health plans can use to cover prescription drugs:

  • Copays Prescription drug copays are a fixed amount that you pay for prescription drugs up front. Copays are generally based on tiers according to the plan's formulary. For example, a plan may charge $ 10/25/50 for Tier 1 / Tier 2 / Tier 3 drugs, respectively, with no deductible or other cost sharing .
  • Coinsurance: With coinsurance, you pay a percentage of the cost of the prescription and the rest is covered. Usually this is an 80/20 or 70/30 split, which means you pay 20% or 30% and the rest is covered by your insurance. Many co-insured plans require you to pay full price until you meet your deductible and then pay only a percentage of the total cost. However, some coinsurance plans only require an interest rate until the deductible is met and then cover the prescriptions at 100%.
  • Prescription Deductible – A prescription deductible is different from a medical deductible and must be met before coverage takes effect. Once the deductible is met, a copayment applies, usually based on the drug's tier. For example, a plan may have a $ 500 deductible on prescription drugs in addition to a $ 3,500 medical deductible.
  • Integrated Deductible – An integrated deductible includes prescription and medical costs. Prescription drug copays or coinsurance apply after full deductible has been met.
  • The maximum cash available includes prescriptions: as long as the plan is not a grandparent or grandparent , you will have to limit the total net cash spending to no more than the level set annually by the federal government (2021 – $ 8,550 per person and 17 $ 100 for a family); both medical and prescription expenses should count toward this limit. However, the rules for Medicare Advantage plans are different because the plans' built-in drug coverage does not count toward the plan's cash limit.


A pharmaceutical formula is a list of drugs covered by your health plan. Health insurers can develop their own forms and adjust them as needed, although they must comply with various state and federal regulations.

In the formulary, drugs are divided into tiers: the least expensive drugs are usually in Tier 1, and the most expensive drugs are generally in the top tier .

Tier 1 drugs are usually specialty drugs, including injectables and biologics . For these drugs, the consumer will generally have to pay coinsurance. Some states have limits on the size of the plan that members must pay for specialty drugs to keep them available .


According to the ACA, the plan's formulary must cover :

The Pharmacy and General Practitioner (P&T) committee should also be responsible for ensuring that the form is complete and up-to-date .

Although all general drug tiers must be covered, specific drugs do not have to be covered by all plans.

An example is insulin. Every plan should include rapid-acting insulin. However, the plan may cover a preferred brand such as Novo Nordisk's NovoLog (insulin aspart) but not Humalog Lilly (insulin lispro).

The same goes for contraception. Although the ACA requires health plans to fully cover (that is, no copays, coinsurance, or deductibles) all types of contraceptives approved by the FDA for women , each health plan can decide which specific contraceptive it will cover for each type. expensive. – share for others (or not cover them at all).

If your drug is not covered and you and your PCP believe the drug is necessary for your health, you can appeal.


Most of the forms have procedures to restrict or restrict the use of certain drugs. General restrictions include:

  • Prior Authorization – You may need prior authorization before you fill certain prescriptions, which means that your provider must send a prescription to your insurance company before coverage is approved.
  • Quality Care Dosing – Your health plan may review your prescriptions to make sure the quantity and dosage are in line with FDA guidelines before approving coverage.
  • Staged Therapy – Some plans may require you to try a less expensive drug first before claiming coverage for a more expensive drug.

State health insurance

Unlike private health plans, Original Medicare (Medicare Parts A and B) does not cover prescription drugs. Medicare Part D was created in 2003 to provide prescription drug coverage to Medicare members and requires the purchase of a private prescription drug plan .

There are several ways to get prescription drug coverage if you are eligible for Medicare, usually at age 65 (or younger if you meet disability criteria). Possible options:

  • A stand-alone Medicare Part D prescription drug plan that can be used in conjunction with Original Medicare
  • Medicare Advantage plan that includes Part D prescription drug coverage (these Medicare Advantage plans are known as MAPD )
  • Additional coverage from Medicaid (coverage will be through Part D) or from your employer or your spouse's employer (including retirement insurance, which is considered comparable to Part D coverage).

Health insurance

Medicaid is a joint federal-state program that pays for health care for individuals and families with low incomes and relatively small assets. Prescription drugs are covered by Medicaid in all states, and beneficiaries pay a small or no copayment .

However, people who are dual eligible for Medicaid and Medicare get prescription drug coverage through Medicare Part D. Medicare offers an Extra Help program that pays the premiums and most of the cost of a prescription drug plan for Medicaid members.

Other options

If you have a grandparent insurance plan that does not cover prescription drugs, or if you are uninsured, there are prescription drug insurance plans and discount plans available separately .

These plans may be offered by insurance companies, pharmacies, drug manufacturers, or advocates / affiliates like AARP.

Offline drug coverage

Prescription drug coverage is available as a separate plan. This works in a similar way to health insurance: You pay an annual premium and then get a copayment or coinsurance at the pharmacy.

These plans are often offered through major employers, or you can purchase the policy yourself. The most famous type of stand-alone plan is Medicare Part D, although there are private plans. If you are contemplating such a plan, read the fine print carefully to find out what it is about.

Drug discount plan

In this context, discount drug plans are worth knowing, although they are not insurance, as they can help you close the gap when it comes to out-of-pocket costs.

The plans are often offered by network pharmacies and drug manufacturers. In the discount plan, you are given a percentage of the total cost, as if using a coupon. Generally, you pay a monthly or yearly fee and receive a card that you must show to your pharmacist. Some plans, like Refill Wise, are free, but only work at certain pharmacies .

If you need an expensive prescription, visit the manufacturer's website for a drug discount plan. Some coupons can only be used without insurance, while others may cover copayment or coinsurance costs.

Even at a discount, you can still pay a significant amount for expensive drugs.

Get the word of drug information

Prescriptions are expensive, and having adequate coverage can mean the difference between being able to afford drugs and having to do without them. If you are having trouble paying for your prescriptions, prescription assistance programs can help.

Always make sure you are clear about why you need a particular recipe and whether a more affordable option might be a suitable substitute. Talk to your doctor about your options.

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