Does Health Insurance Cover Prescription Drugs? Understanding Formularies and Tiers

Prescription drug coverage is one of the most important—but most misunderstood—parts of a health insurance plan. Whether you’re picking up antibiotics or managing a chronic condition, knowing how your plan covers medications can save you a ton of stress and money.

Here’s what you need to know about formularies, drug tiers, and how to navigate denials.

What Is a Formulary?

A formulary is the list of prescription drugs your health insurance plan covers. It includes both generic and brand-name medications, organized by category and cost level.

Insurance companies work with pharmacy benefit managers (PBMs) to decide which drugs to include and how much they’ll cost you. The goal is to balance effective treatment with affordability—for both you and the insurer.

Plans usually update their formularies once or twice a year, so the list can change.

Types of Formularies

• Open formulary: Covers a broad range of medications, with some exclusions.

• Closed formulary: Only covers drugs on the list—others are not paid for unless an exception is granted.

Always check the most recent formulary from your insurer before filling a new prescription.

What Are Drug Tiers?

Formularies are divided into tiers, which determine how much you’ll pay out of pocket. The higher the tier, the more expensive the medication typically is.

Here’s a breakdown of common formulary tiers in 2025:

Prescription Drug Tier Comparison

The actual costs can vary based on your plan’s structure (copay vs coinsurance) and whether you’ve met your deductible.

How to Find Out if Your Medication Is Covered

Before heading to the pharmacy, here’s how to check if your prescription is on the formulary:

1. Log in to your insurer’s portal.

2. Search the formulary tool for the exact name of your medication.

3. Check what tier it’s in, whether it requires prior authorization, or if there are preferred alternatives.

If your medication isn’t listed, or is in a high-cost tier, you may have options to reduce costs.

Prior Authorization and Step Therapy

Some drugs require prior authorization, meaning your doctor must get approval from your insurance before the plan will cover the medication. This process ensures the drug is medically necessary.

Others may require step therapy, where you have to try a lower-cost medication first before the insurer covers a more expensive one.

These requirements can slow things down, but they’re often negotiable with proper documentation from your doctor.

Generic vs Brand Name Drugs

Choosing a generic drug when possible can dramatically lower your costs. Generics are FDA-approved, contain the same active ingredients, and are usually in Tier 1.

Brand-name drugs may be placed in higher tiers unless no generic equivalent exists. If you’re prescribed a brand drug, always ask if a generic alternative is available.

Appealing a Drug Denial

If your insurance denies coverage for a medication, you’re not out of options. Here’s how to fight back:

Steps to Appeal a Drug Denial

1. Request a written denial letter. This explains why the drug wasn’t approved.

2. Talk to your doctor. They can help submit a letter of medical necessity.

3. File an internal appeal. Follow the instructions in your plan’s denial letter.

4. Request an external review. If the internal appeal is denied, you can ask an independent reviewer to evaluate the case.

Some states also have consumer assistance programs that can help you through the process.

Using a Mail-Order Pharmacy

Many insurance plans offer savings through mail-order pharmacies, especially for long-term medications. These services typically deliver a 90-day supply and can lower your per-pill cost.

Just make sure your medication is eligible, and always check shipping times to avoid running out.

Extra Help for High-Cost Medications

If you’re prescribed a drug that costs hundreds or even thousands per month, don’t panic. Here are some support options:

• Manufacturer copay cards – Often available for brand-name drugs

• Patient assistance programs (PAPs) – Run by nonprofits or drug companies

• State pharmaceutical assistance – Especially helpful for seniors or low-income households

• Health Savings Accounts (HSAs) – Can be used tax-free to cover prescription costs

Your doctor or pharmacist may also be able to recommend lower-cost alternatives.

Tips for Managing Drug Costs

• Always ask if a generic version is available

• Compare prices using pharmacy tools like GoodRx

• Stick with in-network pharmacies

• Use your plan’s preferred drug list

• Refill early to avoid emergency costs

• Consider a 90-day supply for chronic meds

Being proactive can make a big difference in how much you spend at the pharmacy.

Understanding Prescription Drug Coverage Makes a Difference

Health insurance does cover prescription drugs—but not all drugs are treated equally. Between formularies, tiers, prior authorizations, and appeal processes, there’s a lot to juggle. But understanding the system helps you get the medications you need without breaking the bank.

Take time to review your plan’s drug list and ask questions when something isn’t clear. A little research now can save you a lot of money—and frustration—later on.