Terminology can be a little hard to get your head around at times. This is why we are going to take the time to explain everything to help you properly understand. A drug formulary is a list of prescription drugs that go by both generic drugs and brand drugs name.
These are generally a list compiled into the health plan of your choosing from your insurance provider. Usually, your health plan will only pay for drugs that are in your health plan drug formulary.
It is completely normal for a health plan to ask doctors to prescribe medications on the drug formulary so that they can cover them. This actually really keeps things easier and more affordable for everyone.
Who Chooses The Drugs On The Formulary?
Usually, there is a team that goes through the currently used and accepted drug treatments and combs through them to pick what goes on the drug formulary.
Thanks to the Affordable Care Act (ACA) new reforms were added. This means that small group plans have to have at least one version of every drug category and class. Either they have to follow this or match up to the state’s basic plan that they have set.
What Is A Co-Payment?
A co-payment is when you have to share the cost of your prescription with your insurance. You pay a certain amount, and your insurance covers the rest of it. Tiers usually set the cost for each drug. Tier 1 would have a $20 co-payment, and Tier 2 drugs would have a $40 co-payment.
What Is Co-insurance?
It is quite common for a health plan to use co-insurance. This is when you pay only a percentage of a cost for each prescription instead of a set cost. Say a drug cost $1000 and you’re set to pay 30% then you would pay the initial $300 and your insurance would cover the remainder of the cost.
This can still be costly for many people who have conditions where the drugs they need are Tier 4 which tend to be the most expensive drugs.
There are out-of-pocket limits set by the ACA through. This means after a person pays a certain amount of money out-of-pocket for their prescriptions then the health plan has to cover the rest of the costs for the year. This is known as a cost-share.