Every health plan maintains a formulary, which is the list of prescription drugs it covers and the cost tier each drug is assigned to. Your medications and their tier placement can significantly affect what you pay out of pocket, so checking a plan's formulary before you enroll is one of the most practical steps you can take. The same drug can cost very different amounts on different plans.
At a glance
- A formulary is a plan's list of covered drugs, organized into cost tiers.
- The tier your medication is on determines your copay or coinsurance for that drug.
- Formularies change every year, so check coverage during each enrollment period, even if you are keeping the same plan.
What a formulary is
A formulary is the health plan's approved list of prescription medications. Insurance companies, working with pharmacy committees, decide which drugs to include, which tier to place them on, and what restrictions may apply.
Not every available medication is on every formulary. Plans cover a range of drugs in each therapeutic category, but the specific brands, generics, and specialty medications included vary from plan to plan.
ACA-compliant Marketplace plans are required to cover prescription drugs as an essential health benefit, but they have flexibility in choosing which specific drugs to include and how to structure costs.
How tiers work
Most formularies organize drugs into tiers, with lower tiers costing you less:
- Tier 1: Generic drugs. These are typically the lowest-cost option. Generics contain the same active ingredient as their brand-name counterpart and are approved by the FDA. Your copay or coinsurance is usually the lowest at this tier.
- Tier 2: Preferred brand-name drugs. These are brand-name medications the plan has negotiated favorable pricing on. They cost more than generics but less than non-preferred brands.
- Tier 3: Non-preferred brand-name drugs. These are brand-name drugs that are not on the plan's preferred list. They typically have higher copays or coinsurance.
- Tier 4: Specialty drugs. These are high-cost medications, often used for complex conditions like cancer, rheumatoid arthritis, or multiple sclerosis. Specialty drugs usually have the highest cost-sharing, often calculated as coinsurance (a percentage of the drug's cost) rather than a flat copay.
Some plans use three tiers, others use five or more. The tier names and structure may vary, but the principle is the same: lower tiers cost you less.
How to check if your medication is covered
1. Use the plan's formulary search tool. Most insurance companies provide a searchable formulary on their website. You can find it through the Marketplace when comparing plans, or directly on the insurer's site. Search by the drug name (generic or brand) to see whether it is covered and which tier it is on.
2. Check for restrictions. When you look up a drug, note whether it has any special requirements:
- Prior authorization: Your doctor must get approval from the plan before the prescription is covered.
- Step therapy: You may need to try a lower-cost drug first and show it did not work before the plan covers the one you need.
- Quantity limits: The plan may cap how much of the medication you can get in a given time period (for example, 30 tablets per month).
3. Confirm the pharmacy. Some plans have preferred pharmacies where you pay less. Check whether your usual pharmacy is in the plan's pharmacy network.
Why the same drug costs different amounts on different plans
Two plans from the same insurance company can place the same medication on different tiers. A drug that is Tier 2 (preferred brand) on one plan might be Tier 3 (non-preferred) on another, or it might not be on the formulary at all.
This means the monthly cost for the same prescription can vary by dozens or even hundreds of dollars depending on which plan you choose. For people who take regular medications, comparing formularies is as important as comparing premiums.
Hypothetical: Aisha takes a brand-name medication for high blood pressure. On Plan A, the drug is Tier 2 with a $35 copay. On Plan B, the same drug is Tier 3 with a $75 copay. Over a year, that is a $480 difference for one medication, even if the two plans have similar premiums.
What to do if your medication is not covered
If a plan does not include your medication on its formulary, you have several options:
- Ask your doctor about alternatives. There may be a similar medication that is on the plan's formulary and works for your condition. Your doctor is the best person to evaluate whether a substitute is appropriate.
- Request a formulary exception. You or your doctor can ask the plan to cover a non-formulary drug if there is a medical reason why the alternatives are not suitable. Plans have a process for reviewing these requests, though approval is not guaranteed.
- Compare other plans. If a specific medication is essential and expensive, a different plan that covers it at a lower tier may save you more overall, even if its premium is slightly higher.
- Check the plan's appeals process. If an exception request is denied, you have the right to appeal.
Mail-order vs. retail pharmacy
Many plans offer a mail-order pharmacy option that can lower your per-prescription cost, particularly for medications you take on an ongoing basis:
- Mail-order pharmacies typically dispense a 90-day supply at a lower cost than three separate 30-day fills at a retail pharmacy.
- Retail pharmacies are convenient for short-term prescriptions or when you need a medication immediately.
- Preferred pharmacies. Some plans designate certain retail pharmacies as "preferred," where you pay a lower copay than at non-preferred locations.
If you take regular medications, check whether the plan's mail-order option would reduce your costs.
Formularies change annually
Plans can update their formulary each plan year. A drug that was covered this year may be moved to a higher tier, have new restrictions added, or be removed entirely next year. This is one reason to review your plan's formulary during each open enrollment period, even if you plan to keep the same coverage.
When formularies change mid-year (which is less common), plans are generally required to give you notice and may provide a temporary supply of the affected medication while you and your doctor find an alternative.
What to do next
Primary action: Search your medications to see which plans in your area cover your prescriptions and what you would pay at each tier.
Alternative: If you take multiple medications and want help comparing formularies across plans, call or chat with a licensed agent at Healthcare.com who can walk through the options with you.
This article provides general educational information, not legal, tax, or financial advice. Plan availability, pricing, subsidies, and benefits depend on individual circumstances, location, and the current plan year, and may change.
