How does prescription drug insurance differ from prescription discount cards?

HealthMarkets helps you differentiate between these 2 types of prescription payment options.

Next time you visit the pharmacy counter, you may spot a sign advertising prescription discount cards. Those cards, which are usually free, promise big savings on drug costs.

But before you get your prescription discount card and start using it, learn how it compares to prescription drug insurance. Using both wisely may help you reduce your prescription costs. Here’s what to know.

Why you may need help with prescription drug costs

Almost a quarter of Americans take 3 or more prescription drugs, and more than 70% of doctor visits involve getting some kind of medication. While many prescription drugs are affordable, there are some that are very, very expensive, according to insurance broker Matthew Claassen. He’s CEO of Medigap Seminars Insurance Agency in Palm City, Florida.

Where to get prescription drug insurance

Even though prescription drugs are an important part of modern medicine, health insurance doesn’t necessarily cover them. Here are some of the different situations that might come up involving your prescription drug coverage:

• If you get your insurance through a large employer, you will most likely have drug coverage. Check with your benefits administrator for details.
• If you have a private, Affordable Care Act (ACA)-compliant plan, you’ll be covered. Prescription drugs are one of the essential health benefits required under the ACA.
• If you have Medicaid, you’re probably covered. All states currently provide coverage for outpatient prescription drugs to “all categorically eligible individuals and most other enrollees.”
• If you have Medicare Part C (Medicare Advantage), you probably have drug coverage, although you’ll want to check your plan documents to be sure.
• If you have Medicare Parts A and B (also known as Original Medicare), you won’t have drug coverage. (There are a few exceptions, such as drugs you are given as part of inpatient treatment during a covered hospital stay.)
  • Medicare members who don’t have prescription drug insurance can purchase a stand-alone Medicare Part D prescription drug plan. This is the same coverage that’s incorporated into most Medicare Advantage plans.

A licensed insurance agent can help you find plans that have prescription drug coverage. Call 1-800-827-9990 to discuss available plans, or browse your options online today.

How prescription drug coverage works

Each drug plan has a list of drugs (aka a formulary) that shows all the medications it covers. Those medications are typically grouped into 3 or more tiers based on how much you’ll pay at the pharmacy counter. For example, a tier 1 generic drug might have a $5 copay, a tier 3 preferred brand-name drug might have a $25 copay, and a tier 5 specialty drug might have 20% coinsurance. (That means you’ll pay 20% of the total cost of the drug.)

Since everyone is taking different medications, the plan that is best for you might not be as good for your spouse or best friend.

“The right plan will depend on the specific medications that you take. It will depend on whether the drug is covered under the formulary. It will depend on the dosage that you take. And it will depend on the pharmacy where you’d like to get the medication,” says Ari Parker. He’s the author of It’s Not That Complicated: The Three Medicare Decisions to Protect Your Health & Money and cofounder of Chapter, which offers free Medicare resources to older adults.

How prescription discount cards work

It’s worth knowing that prescription discount cards, such as Optum Perks, aren’t a form of insurance. Instead, they offer discounts on certain drugs at pharmacies that accept the cards. You can search for a drug by name on the discount card’s app or website to find the out-of-pocket cost at participating pharmacies near you. (Keep in mind that, depending on the drug, there may be a wide variety of prices.)

“Like any discount plan, they can offer good coverage because they have large buying power,” Claassen says. Also, pharmacies are often willing to receive less money for each prescription just to get you in the store, much like grocery stores offering great prices on weekly specials.

When you pay for a prescription using a discount card, what you spend doesn’t apply to your insurance’s deductible or your maximum out-of-pocket amount. (The maximum out-of-pocket is the most you’d have to pay for covered services in a plan year.) While this is probably only a concern with expensive medications, you’ll still want to keep it in mind when you’re deciding the most cost-effective way to pay.

Call a licensed insurance agent at 1-800-827-9990 to talk about an Optum Perks discount card today.

When to choose which drug discount card

So, how should you pay for your next prescription? “It depends on the medication and where you intend to fill it,” Parker says. Claassen recommends that you first compare prices, as well as read the fine print, when you sign up for a prescription discount card.

Can you get by with just a prescription discount card?

Even if every prescription you take is cheaper with a prescription discount card, Parker says you’ll still want to have prescription drug coverage. There’s always a chance that you’ll unexpectedly need a drug that is much more expensive when using a discount card — if it’s included at all.

What’s more, if you’re a Medicare member and don’t sign up for drug coverage when you become eligible, you’ll have to pay a late enrollment penalty. This penalty equals 1% of the “national base beneficiary premium,” or $34.70 in 2024, for each month you skip coverage. And it never goes away.

“Even for people who are not taking any medications, I recommend a Part D plan. Many plans only cost 2 to 3 cups of coffee per month,” he says. “Why take the chance that you won’t have a medication added during the year?”