Pharmacy insurance, also known as prescription drug coverage, is a type of health insurance that helps cover the cost of prescription medicines. It makes it cheaper for you to get the medicines you need to stay healthy.
Types of pharmacy insurance
Pharmacy insurance can be part of a regular health insurance plan or a separate plan just for medicines. Types of pharmacy insurance include:
Employer-sponsored plans: Many people get health insurance through their jobs. This often includes coverage for prescription medicines. These plans usually cost less because they cover many people.
Individual drug plans: You can buy health insurance with prescription drug coverage. You can get these plans through the Health Insurance Marketplace or directly from insurance companies.
Medicare Part D: This government program helps people on Medicare pay for their prescription medicines. It's optional and available to anyone with Medicare Part A or Part B.
Medicaid: This program for low-income individuals and families provides health coverage, including prescription medicines.
Veterans Affairs (VA): The VA offers prescription drug coverage for eligible veterans as part of their health care benefits.
Health Insurance Marketplace
Under the Affordable Care Act, commonly known as Obamacare, plans available through the Health Insurance Marketplace must cover essential health benefits, including prescription drugs. Any plan you buy through the Marketplace will include some level of coverage for medications.
The ACA also allows young adults under age 26 to stay on their parents’ health insurance plan. This applies to married and unmarried children.
What you need to know about pharmacy insurance plans
Pharmacy insurance plans can be confusing. Here is some information to help you understand how the plans work.
Formulary: A drug formulary is a list of medicines covered by your insurance plan. Medicines are often categorized into tiers. Each tier has different prices. The higher the tier, the more you usually have to pay. Your out-of-pocket cost depends on which tier your medicine is in. Lower-tier drugs cost less, while higher-tier ones cost more.
Prior authorization (PA): Some medicines may require approval from your insurance company before a pharmacy can fill a medication. This means your doctor must provide more information to show the need for the medicine.
Health care provider’s role: Your health care provider must complete the prior authorization process requested by the pharmacy.
Patient's role: Follow up with your health care provider if approval is delayed. Remember, you are your best advocate.
Step therapy: Your insurance plan may require you to try a less expensive medicine before they approve a more expensive one. If the first medicine does not work, your health care provider can ask the insurance provider to cover a different one. This is sometimes called “fail-first therapy.”
Formulation: Some medicines come in different forms, such as oral (by mouth), topical (on the skin), or injectable. The cost of the medicine may depend on the formulation. Make sure you know which formulation is covered by your plan, which is most cost-effective, and which is right for you.
Out-of-pocket costs for medicines
It is important to understand your pharmacy insurance plan and know what costs you need to cover. These amounts depend on your plan and the type of medicines you need.
Copayments and coinsurance: Many pharmacy insurance plans require you to pay part of the cost of medicines. This might be a copayment (a fixed amount) or coinsurance (a percentage of the medicine's cost).
Deductibles: Some plans have a deductible that you must pay before the insurance starts to cover the costs of your medicines. Once the deductible is met, you will only have to pay the copayment or coinsurance. If your plan has a deductible, your out-of-pocket costs may be higher at the beginning of the year than toward the end. You must pay toward your deductible before a lower copay or coinsurance takes effect.
Ways to help lower costs of medicines
Use an approved or in-network pharmacy.
Insurance plans often have a list of preferred or in-network pharmacies where you can get your medicines at a lower cost. Using a non-approved or out-of-network pharmacy may result in higher out-of-pocket costs. Check your insurance card or contact member services to learn more about preferred pharmacies for your plan.
Fill prescriptions through a mail-order pharmacy.
Many insurance plans offer mail-order pharmacy services at a lower cost. This can be a convenient way to get your medicines, especially for long-term prescriptions or refills.
Find out if a generic medication or preferred brand drug is available.
Brand-name medications: Brand-name drugs are divided into 2 main categories: preferred brands and non-preferred brands. Preferred brand medicines are brand-name drugs that your insurance covers at a lower cost, so they are cheaper for you. Non-preferred brand medicines are also covered but cost more. Picking preferred brands can help you save money on your prescriptions.
Generic drugs: A generic medicine is the same as the brand version in ingredients, safety, strength, quality, and intended use. But they cost less than brand-name drugs.
Your health care provider may specify whether a generic is acceptable. Or they may state that a brand-name medication must be given. “Dispense as Written” (DAW) means that a generic drug cannot take the place of the brand-name drug prescribed by your health care provider.
Check for manufacturer discounts or discount programs.
Many drug manufacturers offer copay assistance cards or coupons for their medications. These are often available on the drug website or through your health care provider. Take the coupon to your pharmacy when you fill your prescription.
Several companies offer free discount cards that can be used at participating pharmacies. These cards can provide discounts and savings on brand-name and generic medications. Show your card to your pharmacy when you fill your prescription.
Check with your pharmacy to see if they have a membership program that offers medication discounts. There may be a small enrollment fee for some programs.
Understand traditional and specialty medicines.
Traditional drugs are standard medicines that are available at most pharmacies.
Specialty medicines are used to treat complex or rare health conditions. They need special handling and prior authorization and are filled through specialty pharmacies. Because of this, they cost more and may not always be covered by your pharmacy plan.
Find out if you are eligible for a Patient Assistance Program (PAP).
Patient assistance programs may be available if you cannot afford your medicines. These programs provide medications or financial aid to help cover prescription costs for people who qualify.
These programs are sponsored by pharmaceutical companies, government agencies, and nonprofit organizations.
This may result in medicines provided at little or no cost to the patient.
Medications are often sent directly to the patient’s home or to their health care provider.
Eligibility for a PAP varies but often requires low income, lack of insurance or inadequate coverage, proof of residency, and medical need.
Learn more about Medicare Part D
What is Medicare Part D?
Medicare Part D is a program run by the U.S. federal government to help people with Medicare pay for their prescription medications.
Here’s what you need to know about Medicare Part D:
It is an optional program: You can choose to join Medicare Part D if you want help paying for your prescriptions.
The plan can be used at various pharmacies: Part D covers medications you get from local pharmacies, mail-order services, and specialty pharmacies.
You may have to use designated pharmacies in some cases: Just like other insurance plans, Part D might require you to use certain pharmacies for specialty medications.
4 stages of Medicare Part D
Understanding these stages can help you better plan your prescription drug costs under Medicare Part D.
Deductible Stage: At first, you must pay out-of-pocket for your medicines before your insurance starts to help.
Initial Coverage Phase: After you meet your deductible, your Part D plan will start paying some of your drug costs. This amount depends on the specific plan you signed up for.
Coverage Gap (Donut Hole): Once you spend enough in the initial phase, you enter the coverage gap, also known as the donut hole. During this time, you will pay 25% of the total cost of your medications.
Catastrophic Coverage Phase: When your out-of-pocket costs for covered medications reach about $8,000, you enter the catastrophic phase. In this stage, you will have very low or no out-of-pocket costs for your medications.
Low-Income Subsidy (LIS) for Medicare Part D
The Low-Income Subsidy (LIS), or Extra Help, is a program for people with limited income that helps pay for Medicare Part D prescription drug costs.
If you qualify, you will not have to pay the deductible or monthly plan premium for Medicare Part D. You will have low-cost copayments for brand-name and generic medications. Once you reach the catastrophic phase, you will not have to pay anything for your medicines.
To qualify for this help, you must meet certain requirements. You must be enrolled in Medicare Part A or B, live in the U.S., and meet certain income requirements.
You may qualify if you receive Medicare or Supplemental Security Income (SSI) or are enrolled in a Medicare Savings Program like Qualified Medicare Beneficiary (QMB), Specified Low-Income Medicare Beneficiary (SLMB), or Qualifying Individual (QI).
Most people with Medicare, Medicaid, and Social Security are automatically enrolled in an LIS plan.
You can apply for extra help through the Social Security Administration if you are not automatically enrolled.
Tips to help you use your pharmacy insurance
Know how to find your pharmacy plan information and how to read your insurance card.
When you go to the pharmacy, introduce yourself to the pharmacist and address questions or concerns.
Let your pharmacy know what insurance plan you have or if there are any changes to your plan.
Ask your pharmacist about coupons or discount programs through your pharmacy or the drug company.
Talk to your pharmacist or health care provider to see if a generic medicine is available.
Be sure you know if a medicine needs prior authorization or must be filled through a specialty pharmacy.
Before you pay for medicines, check with the pharmacy team to understand pricing and confirm if insurance or discounts have been applied.
Stay informed about your insurance plan and pharmacy processes.
Key points about pharmacy insurance
Pharmacy insurance or prescription drug coverage helps cover the cost of medicines, making them more affordable.
There are different types of pharmacy insurance, including employer-sponsored plans, individual plans, Medicare Part D, Medicaid, VA plans, and Health Insurance Marketplace plans.
Out-of-pocket costs can include copayments, coinsurance, and deductibles.
To lower costs, use in-network pharmacies, consider mail-order services, check for generic options, look for discount programs and coupons, or see if you are eligible for patient assistance programs.
It is important that your child continue their medicines as prescribed when they leave the hospital. Learn how to get medicines at your local pharmacy.
