Ever wondered why generics, certain brands, and even some medications cost much less than others? It may have to do with your prescription drug plan’s tier pricing. Learn what tier pricing is, why and how insurance companies use it, and how to use tier pricing to your advantage below.
Prescription Drug Plans Define Coverage With Formularies and Tiers
Every prescription drug plan includes two methods of categorizing coverage: formularies and tiers. A drug formulary is a list of all of the prescription medications your plan will cover. If your formulary does not cover a medically necessary medication, you can ask to add it to your policy’s formulary by having your doctor submit a prior authorization request. However, it is not guaranteed that your insurance company can or will add the medication. Every plan’s drug formulary will differ, but you can easily review your formulary on your insurance company’s website or within the documents you received when enrolling in the plan.
Building onto the drug formulary, each plan also uses drug tiers. A drug tier will determine the level of coverage a prescription drug plan will offer for specific types of medications. A prescription drug plan will use up to a 4-tier system, though some plans use only the first three.
|Tier 1||Tier 2||Tier 3||Tier 4|
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A prescription drug plan will usually cover more of the costs of a tier 1 generic prescription. This means tier 1 prescriptions will usually have lower copays and coinsurance amounts. On the other hand, tier 4 specialty drugs will have the highest copays or coinsurance amounts. Again, each drug plan is unique and may not include each of these tiers. Check your individual policy for exact tiers and pricing.
Why Do Prescription Drug Plans Use Tiers?
Just like health insurance plans use networks, prescription drug plans use formularies and tiers to manage costs. Prescriptions listed on a plan’s formulary will usually be the most cost-effective medication to treat a certain condition. For example, let’s say Cholesterol Medication A costs $50. Cholesterol Medication B, which may have a different but equally effective formula as A, costs $35. A drug formulary may only list Cholesterol Medication B because it treats the same condition at a lower cost.
Drug tiers are another form of cost management. Certain medications cost both you and the insurance company less money. For example, a generic will usually cost much less than the original brand name equivalent. Because of the potential savings, most insurance companies want consumers to use generic and preferred medications. In order to promote the use of these less expensive medications, a prescription drug plan may cover a larger portion of the costs for lower tier medications (meaning lower copays and coinsurance for you).
Can You Use Drug Tiers to Your Advantage?
Absolutely. You can use your drug plan’s formulary and tier pricing as a savings tool. First, you will need to meet with your primary physician. Discuss any of your current medications, conditions, and prescription drug plan options with your doctor. Together, you can find the least expensive prescriptions to effectively treat your conditions.
HealthMarkets Can Help With Prescription Drug Coverage
Are you trying to find a new health insurance plan with prescription coverage for your current medications? Or, are you looking for a prescription drug plan to pair with your Medicare coverage? Either way, HealthMarkets can help. Just give us a call today at (800) 304-3414. Or, if you prefer in-person meetings, find a licensed insurance agent near you.