Guide to Understanding Your Prescription Insurance Coverage

Prescription drugs can be expensive, some costing hundreds or more dollars per pill. Without insurance, most people would find it difficult to pay for long-term medication use. ^{(Learn More)}

The exact nature of your insurance plan will vary, but most of the information you need should be available on your insurer’s website. If you need specific information that isn’t there, try calling one of their representatives. ^{(Learn More)}

To determine what your prescriptions will cost, you need to understand your copays. This is the amount you will have to pay for a drug that your insurance covers.^{(Learn More)}

You also have to consider your deductible, which is how much you have to pay in health care costs before your insurance provider begins to cover costs. Many insurance plans have separate deductibles for prescription medications. ^{(Learn More)}

While the specifics vary, most insurance plans have tiers that medications are placed in. There are generic medications, preferred medications, and non-preferred medications, with generics tending to be the cheapest and non-preferred the most expensive. Meanwhile, there are usually one or two more tiers for specialized medications, which can get extremely costly in some cases. ^{(Learn More)}

If a drug isn’t covered at all by your insurance, first talk to your doctor to see if there are any alternatives available that are covered. ^{(Learn More)}

For some patients, alternatives won’t be available. In those cases, you should go through what is called the exceptions process. This is a process to try and convince your insurer to make an exception in their policy and cover the drug for you. Generally, this is done through your doctor, who must present evidence that no safe alternative is available and that the drug is medically necessary. ^{(Learn More)}

Drugs and Insurance

The financial reality of health care, at least in the United States, is that many people cannot afford long-term prescriptions without their insurance covering most of the cost. Despite often relatively low production cost, some drugs sell for a 1,000 percent markup or more.

While some steps are occasionally taken by lawmakers to stop this practice, it has largely continued. There is profit to be made, and it is generally legal.

Insurance will often cover the bulk of most people’s prescription costs, but the specifics depend on the person’s individual plan.

It is important to understand what your insurance will and will not cover, as well as potential workarounds if they are not covering a medication you need. Being caught unaware could cause financial hardship or even be dangerous depending on the situation.

Where to Find Your Information

Your insurance provider’s website should have all the information you need to understand what is and is not covered (although the information is not necessarily all in one place). If you are confused or having any issues, the website should also list information on how to contact one of their representatives.

You may also want to consult someone knowledgeable on the subject, such as your doctor, if you are concerned about a particular medicine. It is important to remember that, regardless of their service quality, an insurance provider is biased toward profit for itself. Your doctor may be aware of some information that can help you save the most money while also getting the medications you need.

Copays

A copay (short for copayment) is the amount a health care beneficiary (you) pays for a health care service. Generally, you will have to pay a certain percentage of the medication’s cost, dependent on a drug’s tier (discussed below). In some cases, the cost may be fixed, similar to how doctors’ visits tend to be priced.

There are some insurance plans that may require you pay no copays for your medications. These plans are relatively rare, however, and they may cost you substantially more overall. This does not mean they are never the best option for you. Individual needs vary, and some people might be able to save money with such a plan. These plans are also arguably more convenient for those who don’t usually worry about the cost of insurance premiums.

Understanding Deductibles

A deductible is the set number you will have to pay out of pocket before your insurance begins to cover your costs. You may have to pay anywhere from a few hundred dollars to over a thousand, depending on your plan, to reach your deductible. It is important to factor this in when determining your overall health care costs.

Deductibles can be complicated. Some plans will have a separate deductible for your prescription drug costs. Many plans will cover some costs even when you have not yet reached your deductible, such as routine checkups. You will have to look over your specific plan to determine exactly how your own deductible works.

Medication Tiers

There are three basic categories of covered drugs: generic, preferred, and non-preferred. The exact mechanics will vary based on your plan, but broadly speaking, you can expect the following:

Generic medications tend to be much cheaper (costing as much as cost 30 to 70 percent less) than their brand-name counterparts. Despite this substantially lower cost, they also are tested by the FDA and should be as safe and effective as brand-name versions. In fact, they are often chemically identical. These drugs come with the cheapest copays.
Preferred medications are drugs for which generic versions are not available. While generally more expensive than generic medications, they are usually less expensive than non-preferred medications.
Non-preferred medications are medications for which there is a cheaper, or sometimes more clinically valuable, alternative available. They can have substantially higher copays than either preferred or generic medications.

Most insurance brands have some kind of tier system, where medications receive different types of copays depending on their tier. Most use the above three types of drugs as the first three tiers, although some plans might break them up further, such as having two tiers of generic coverage.

There are also usually one or two higher tiers for medications that are specialized or otherwise don’t fit into the other categories. As a general rule, the higher your medication’s tier, the more expensive it will be for you.

What if a Drug Is Not Covered?

Insurance providers generally maintain a list of the drugs they cover, called a formulary, on their website. You may notice upon reviewing that list, or sometimes only when trying to get your medication from the pharmacy, that a medication you have been prescribed is not on there.

The easiest option in this case is to talk to your doctor and find a medication that is covered. However, sometimes this is not an option. Even if there is an alternative, it may be less effective or different in some way that is pertinent to your situation.

Transgender individuals are an example of patients who sometimes struggle with this. Oftentimes, they will be marked as one gender on paperwork but may require medications associated with a different gender. Problems can sometimes arise from this type of discrepancy, with an insurer’s computerized system automatically rejecting the claim.

The Exceptions Process

If you need a medication and your claim has been denied, talk to your doctor about going through the exceptions process. While this process can be complicated, it is basically a system in which you and your doctor prove there is no good alternative to the medication you were prescribed, so your insurer makes an exception and covers it. Some insurance plans will cover the drug while a decision is being made.

If your exception was denied, you can try and appeal it. However, that may also signal it is now time to consider your options. You may need to talk to your doctor about any alternatives, even those that are less ideal.

Otherwise, you may need to pay for the medication out of pocket or consider switching to an insurance plan that will suit your needs. There are also many discounts available online for certain prescription medications.