How prescription coverage works

• ✺Prescription costs can add up significantly, especially for chronic conditions requiring ongoing medication.
• ✺Understanding your formulary helps you and your doctor choose effective, affordable medications.
• ✺Knowing about prior authorization or step therapy requirements in advance can prevent delays in getting needed medication.

Formulary

A list of medications a health plan covers, organized into cost tiers.

Prior authorization

Insurer approval required before certain medications or treatments are covered.

Step therapy

A requirement to try a lower-cost medication first before a more expensive one is approved.

Pharmacy benefit manager (PBM)

A company that manages prescription drug benefits on behalf of an insurer or employer.

Generic drug

A medication with the same active ingredients as a brand-name drug, usually sold at a lower cost.

• ✗Not asking your doctor if a cheaper, covered alternative exists before filling an expensive prescription.
• ✗Assuming all pharmacies charge the same price for a given drug under your plan.
• ✗Not checking whether a new medication requires prior authorization before trying to fill it.
• ✗Ignoring manufacturer coupons or discount programs that could lower out-of-pocket costs.

• !Formulary tiers and specific drug coverage can change yearly, even within the same plan.
• !Prior authorization and step therapy requirements can cause delays, so ask your doctor about timing if you need a medication urgently.
• !Some pharmacies offer home delivery or mail-order options that can be cheaper for long-term medications.
• !Discount cards or cash prices can sometimes be lower than your insurance copay for certain drugs — it's worth comparing.

• Prescription coverage uses a formulary with cost tiers, usually cheaper for generics.
• Some drugs require prior authorization or step therapy before being covered.
• Using in-network pharmacies generally lowers your cost.
• Comparing cash prices and discount programs can sometimes save money even with insurance.

Totally optional. Nobody's grading you.

1. 1.Look up your plan's formulary to see how your current medications are tiered.
2. 2.Ask your doctor or pharmacist about generic alternatives if you're prescribed a new medication.

Related lessons:

• How health insurance works
• How to choose an insurance plan
• Understanding medical bills

• Prescription drug coverage
  HealthCare.gov(opens in a new tab)
• Generic drugs: Questions and answers
  U.S. Food and Drug Administration (FDA)(opens in a new tab)