Understanding what a Formulary is on your Health Insurance Plan

Understanding what a formulary is on your health insurance plan is an important part of understanding the important nuances of your health insurance. If you do not understand the workings and reason of the formulary list it could end up costing you a lot of additional money.

♦  What is a Co-pay?

The first bit of information that needs to be understood to fully grasp the importance of the formulary list if what a co-pay is. A “co-pay” stands for co-payment. Just like it sounds, it is the amount of money that the insured pays along with the insurance company for things all things to do with healthcare.  The amount of the co-pay for prescription drugs is a direct result of where or if the drug is on the formulary list.

♦  What is a formulary list? 

A formulary list is the medications that have been approved for use by the insurance company. The prices of the of all the drugs on this list vary. These lists are pretty standard. If you have a major medical condition, or even most minor ones, some form your medication will almost surely be on the formulary lists of almost every insurance company. If you have very specific needs and know exactly what medication you need to take, it is easy to look up the company’s formulary list to see whether the drug you desire is on the list or not.

♦  How does the presence or lack of presence affect the price of co-pay?

Remember the Co-pay is the share that a person will need to pay for his drugs along with the insurance company. If you have a drug with a 7$ co-pay, the patient will always pay 7$ at a minimum for the drug. The next concept someone must understand is that there are pricing, “levels”. Coverage is usually offered in graduated systems of levels; starting with levels that will be least expense to the insured up to the most expensive. 

♦  How do the Formulary levels  work? 

The least expensive level is generic drugs. They have the lowest co-pay and the highest percent of coverage.  Generics are in no way a “lesser” option than name brand. The “active” ingredient must be the same to be approved. For Generic level coverage all the insured usually pays for these drugs is the co-pay. 

Next comes name brands that ARE on the formulary list. These will of course be more expensive and the customer will definitely pay more than for generic drugs. For most insurance companies there will be a percentage of the cost that the insured pays. So if the formulary drug is 20% co-pay and the bottle costs 200$.  The customer pays 40$. Finally you get drugs that are not on the formulary list, these drugs will be the most expensive to the user by having the highest co-pay and often being the most expensive to begin with. The percentage depends on your insurance company, but for example, they may have a 50% coverage for non-formulary drugs. So if the non-formulary drug goes for 250$ a bottle, the insured will pay 125$.

♦  Understanding The Formulary On Your Health Insurance Plan

I don’t know about you but the difference between 7$ and 125$ is quite significant. Many of the non formulary prescriptions may be significantly more than 205$ too. Taking the time to understand the Formulary list on your health insurance plan is important step for getting good Health Insurance.