One might argue that access to affordable prescription drugs is just as important as the ability to choose your own doctor. That’s why many health insurance policies include a prescription drug benefit. If you plan on taking prescription medications – whether for long term or short-term treatment, here’s a deeper look at how to use your Rx or prescription benefits.
If you or someone in your family takes regular prescription medication, it’s important to understand how that’s covered in your health insurance policy. In some health plans, you’ll have to reach your annual deductible before the insurance company starts helping pay for the cost of those prescriptions. You must pay out of pocket until you reach your deductible. Then, once your deductible is satisfied, prescriptions are covered and paid for by the health insurance company. Sometimes there is a separate deductible required for prescription medications. In that case, you’ll have to reach the prescription deductible before you start receiving help from your insurance carrier.
So, what does that mean for you? While pharmacy benefits will depend on a specific health plan, drug coverage is usually provided in one of three ways:
- Prescription coverage with a copay. With this plan, the member does not have to meet a deductible before receiving drug coverage, but each prescription is typically associated with a copayment. For example, a low-cost generic drug may cost you a $10 copay, while a brand-name drug may cost 40% of the full price (depending on your plan).
- Prescription coverage after meeting a deductible. With this type of plan, the member must meet the plan’s annual deductible before insurance covers any of the cost for prescription drugs. If you’re contemplating a plan with this pharmacy arrangement, you should consider that the average deductible for single coverage in 2017 was $1,505, and at small businesses it was higher: $2,120.1
- Prescription coverage with a special prescription drug deductible. Some plans have separate deductibles for prescription drugs, meaning they’re separate from the plan’s overall medical deductible. Typically, with this type of plan, once the medical deductible is satisfied, you will still have a copayment or coinsurance for prescriptions.
It’s important to note that not all health plans cover all prescriptions. Each health insurance plan has a unique list of prescription drugs that it covers, called a formulary. Some of these may be 100% covered with a doctor’s prescription, while others may only be covered for treatment or specific conditions.
At a glance, looking at insurance plans in tiers is a great way to see a holistic view. Not all drug tiers work the same way and many plans will vary, but generally the higher tiers will cost you more out of pocket than lower tiers.
Here is how the prescription tiers work:
- Tier 1 is generally only generic prescription drugs. These typically cost you a minimal co-payment.
- Tier 2 includes preferred brand-name drugs that will generally have a higher co-payment than tier 1.
- Tier 3 consists of non-preferred brand-name drugs with an even higher co-payment.
- Tier 4 will include “specialty drugs” that are costly and associated with treatment of serious medical conditions.
With nearly 60% of Americans over the age of 20 relying on prescription meds, pharmacy benefits are an important component of any company’s medical plan. Because drug costs can vary significantly depending on a member’s health plan, it’s essential to take the time to explore how each plan you’re considering treats prescription drugs.2
If you have a specific prescription you take, we suggest determining which category it falls under to estimate your out of pocket costs and what percentage your plan will cover.
Have more questions on your prescription benefits? Give us a call at (619) 222-0119 or visit our website to learn more.
Sources:
1 https://www.kff.org/report-section/2018-employer-health-benefits-survey-summary-of-findings/