Prescription Drug coverage is an important health plan benefit for many people. From drug deductibles to drug tier levels to co-pays and co-insurances, you need to know how your drugs will be covered. Let’s take a look at drug tiers specifically.
What are Drug Tiers?
Every insurance company who offers prescription drug coverage creates a Formulary, which is a list of drugs covered by the health insurance plan. It is important to know whether your prescriptions are on the plan Formulary before signing up for a plan. Drugs listed on the plan Formulary are all assigned a tier level. Typically, there are 5 or 6 tier levels on a Formulary.
The first tier, Tier 1, is usually common, low-cost, preferred generic prescriptions such as an antibiotic. Tier 1 prescriptions have the lowest cost to the enrollee of the plan. Drugs labeled Tier 2 are usually non-preferred generic drugs, and may have a higher cost. Tier 3 drugs are usually more expensive, preferred brand-name drugs such as Eliquis. Finally, Tiers 4 drugs are usually higher cost brand name drugs and Tier 5 drugs are typically specialty medications. Tier 6 drugs are often no-cost maintenance prescriptions that have the best coverage.
How does the drug Tier of my prescription affect the cost?
The health plan assigns each drug tier category a specific cost. Plan members may pay fees when they pick up the prescription at the pharmacy. Costs may be assigned as co-pays or co-insurances, and each tier has its own assigned cost. For example, tier 1 drugs might cost a $25 co-pay, while tier 3 drugs might require 25% co-insurance. For more info about Co-pays and Co-insurance, read our article on that topic. Other factors affecting the cost of your prescription include drug deductibles and the pharmacy’s retail cost of your medication. For more info about drug deductibles, read our article.
In summary, drug tiers are an integral part of how your prescriptions will be covered by your health plan. Knowing the assigned tiers of your drugs, charges for each individual tier, and whether they are in the plan formulary are essential pieces of the puzzle in choosing the right health plan, whether it is an Individual or Medicare plan.