Understanding Pharmacy Tiers in Health Insurance

If your health insurance policy covers prescription drugs, you probably need to understand how the Tier system works. Insurance companies established this system to stagger co-payment amounts for prescriptions and to urge more patients to opt for the generic version of medications whenever possible. Under the Tier system, you will pay more in co-payments for drugs listed in the higher tiers and may not receive any coverage for drugs not included in the system. Before getting a prescription, you should know how to understand these tiers.

Things You'll Need

• Health insurance policy or access to the company's web site
• List of your prescriptions

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Instructions

Understanding the Drug Coverage Tiers

• 1

  Look for details about your health insurance's formulary. The formulary is the list of medications covered by your health insurance policy. You can find this information in the paperwork you've been provided with your policy or by going to the web site of your health insurance provider. Usually, you will find the most detailed and up-to-date information about which drugs are covered on the web site.

• 2

  Understand the differences between the tiers. Most formularies include three tiers of prescription drugs. Tier 1 drugs cost the least in terms of co-payments. They usually include the generic versions of medications, as well as other inexpensive drugs. Tier 2 drugs have higher co-payments and consist mostly of brand name drugs. Tier 3 drugs are not usually shown because any medication not specifically listed in the formulary falls into this category. These medications are not automatically covered by your prescription benefits so you need to get prior authorization from the insurance company before they will pay for the medicine.

• 3

  Compare your list of prescriptions to the formulary tiers. Check the formulary to see where all of your medications fall into the different tiers. Your policy should spell out how much your co-payments will be for each tier. Remember you may also have a prescription deductible you have to meet before the insurance will kick in to cover any of the costs of the medications.