Understand how prescription drug coverage works to avoid paying for unexpected high drug costs.
It’s time for a reality check.
In 2015, eHealth surveyed more than 6,500 customers and more than one-third (35%) said they’d had to pay more than expected for prescription drugs in the last year. On average, these people spent over $800 out of pocket for their covered drugs..
So, how can you avoid nasty surprises like this when shopping for coverage?
In this article we’ll help you understand how prescription coverage works and how to avoid unexpected costs by tackling the following questions:
- How can you know which drugs are covered by your health plan?
- How much will you pay for prescription drugs under your plan?
- What are drug coverage tiers and how do they work?
- How can you avoid unexpected costs when it comes to drug coverage?
- Why should you shop for health insurance at eHealth.com?
How can you know which drugs are covered by your plan?
Not all health plans cover all drugs, and if you need a drug that’s not covered, it can cost you a lot of money.
To avoid those costs, you need to look at the list of prescription drugs covered by your health insurance plan. This list is called a formulary.
Some drugs on your plan’s formulary may be covered automatically with a doctor’s prescription. Others may be covered only for treatment of specific conditions or after you’ve tried a different, preferred drug first.
You can usually get the most recent copy of your insurance plan’s formulary by calling your insurer or visiting their website.
NOTE: eHealth has a tool for people on Obamacare and Medicare that let’s you search for health plans based on the specific drugs you take.
Before you buy a plan, you should look at the formulary to see if your drugs are covered, and talk to a licensed agent to make sure you understand what’s covered.
How much will you pay for prescription drugs under your plan?
The answer to this question will vary based on the kind of coverage you have. But when it comes to drug coverage, health plans typically break down into three main groups.
- GROUP 1 – Drug coverage before your deductible: If your plan covers your drugs before you meet your deductible, each drug will typically be subject to cost-sharing in the form of copayments or coinsurance. Your out-of-pocket costs may vary depending on the drugs you take. A low-cost generic drug might cost you only a $20 copayment while you may have to pay 40% of the full price for a unique, brand-name drug.
- GROUP 2 – Drug coverage after your deductible: Some plans do not cover the cost of prescription drugs until you meet your plan’s annual deductible. The average deductible for a family plan in 2016 was $7,983, according to eHealth’s Price Index report. So, pay careful attention to plans that require you to fulfill a deductible before drug coverage kicks in.
- GROUP 3 – Drug coverage after a special prescription drug deductible: Some plans may have special deductibles solely for prescription drugs. These deductibles are separate (and generally a lot lower) than your overall deductible for other medical care. Once you’ve paid out your prescription deductible your drugs may be covered with a copayment.
Remember, no matter which category your plan falls into, some drugs may not be covered at all, or only in certain circumstances.
If your health insurance plan utilizes “drug coverage tiers,” that can also affect how much you pay for prescriptions.
What are drug coverage tiers and how do they work?
Drug coverage tiers are a means of categorizing different kinds of drugs and incentivizing patients to use more cost-effective options when possible. Drugs from higher tiers may cost you more out of pocket than drugs from lower tiers.
For example, a health insurance company may categorize drugs into four different tiers:
- Tier 1 may include only generic drugs – Drugs from tier 1 may only cost you a minimal copayment.
- Tier 2 may include preferred brand-name drugs – Your copay for these drugs may be higher than your copay for tier 1 drugs.
- Tier 3 may be comprised of non-preferred brand-name drugs – Expect to pay a still-higher copayment for these.
- Tier 4 may include what are called “specialty drugs” – These are drugs that are costly and associated with treatment for rare or serious medical conditions. Tier 4 drugs may cost you more out of pocket than even tier 3 drugs.
Not all insurance plans utilize drug tiers, and not all drug tiers work the same way. Make sure you understand how your plan – or any new health plan you’re considering – covers prescription drugs.
How can you avoid unexpected costs when it comes to drug coverage?
The best way to avoid unexpected drug costs is to know what you’re buying when shopping for coverage.
Pay special attention to whether your prescriptions will be covered with a simple copay, or whether you’ll need to fulfill your annual deductible first. Find out if any new plan you’re considering utilizes drug tiers, and how much you’d pay for drugs in each category.
You’ll also want to be sure that any prescription drugs you take on a regular basis are covered by the new health insurance plan you’re considering.
For real insight and personal help finding the right drug coverage, work with a licensed health insurance agent like eHealth when shopping for coverage. It doesn’t cost anything extra and it can save you money by matching you with a plan that truly meets your needs.