Prescription Insurance: Plan Options & Ways to Save on Drugs

Most people get prescription insurance through a health insurance plan.

There are other ways to save on prescriptions, such as drug discount cards and supplemental plans. Also called pharmacy insurance, choosing the right prescription coverage can help you lower your drug costs and make it easier to get the medications you need.


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Prescription insurance through a health plan

The most popular way to get prescription insurance is through a health insurance plan.

It costs an average of $88 per month for an ACA insurance plan that covers both prescriptions and medical care. That's after income-based subsidies through the Affordable Care Act (ACA).

Regular health insurance plans nearly always cover prescriptions. That's because prescriptions are one of the 10 essential health benefits under the Affordable Care Act (ACA).

When choosing a prescription plan, compare your options based on the specific drugs you take and how much coverage you expect to need.

  • Which drugs do you take? Insurance plans specify which drugs will be covered in what's called the drug formulary. For example, the exact diabetes drugs that are covered will vary by plan, even though all plans will cover diabetes medicine. By getting a plan that covers the drugs you're currently taking, you won't have to change your medications to get your insurance to pay.
  • How much coverage do you need? The rule of thumb when choosing your coverage is that if you expect to need expensive prescriptions or medical care, it's usually worth it to pay more each month for a plan with better coverage. A plan's level of coverage determines how prescription costs are split between you and your insurance plan. A higher-tier plan costs more each month but will pay for more of your prescription costs.

Prescription insurance through Medicare

The Medicare prescription drug plan is called Medicare Part D.

You can only get a Medicare prescription plan if you're eligible for Medicare benefits. That means you're at least 65 or have a disability.

There are two ways to get Medicare prescription coverage.

Standalone Medicare Part D plan: A Medicare Part D drug plan is standalone prescription drug coverage that doesn't cover medical care. You'll usually have a Part D plan alongside Part A to cover hospital care and Part B to cover doctor appointments. The average cost of a Medicare Part D drug plan is $59 per month.

Bundled Medicare Advantage plan: Part D prescription benefits can be bundled into a Medicare Advantage plan, which is also called Medicare Part C. These plans usually cover both medical care and prescriptions. Medicare Advantage is often cheap, with an average cost of $27 per month. And there are many options with no monthly cost other than what you pay for Original Medicare . However, if you get very sick, your costs for medical care and prescriptions can be very high with these plans.

Stand-alone prescription drug coverage that's not Medicare

If you don't qualify for Medicare, you can get standalone prescription coverage with a prescription discount card, an indemnity plan, or short-term health plan.

1. Prescription discount cards

Other than Medicare, most of what's being sold as stand-alone prescription drug plans are actually prescription discount cards.

Most prescription discount cards are free. The average savings is $18 per prescription or about 48% off your drug cost.

Prescription discount cards are not insurance. They're like a coupon. You'll show the card at the pharmacy, and you'll pay less for your prescription. How much you save will vary.

You usually can't use a prescription discount on top of any insurance benefits. So if you also have insurance, you'll have to decide if it's a better deal to use the discount card or your insurance plan.

  • When to use discount cards: Discount cards such as GoodRx can be helpful when you don't need many prescriptions or don't expect to meet an insurance plan's deductible .
  • When insurance is better than a prescription discount card: Using prescription coverage through a health insurance plan is better if you take routine prescriptions, have a chronic health condition, or need brand name or specialty drugs. That's because a health insurance plan protects you from very paying high costs because you won't pay more than your plan's out of pocket maximum.

2. Supplemental prescription insurance

A "fixed indemnity plan" can give you extra coverage for prescriptions on top of what you have through a health insurance plan.

You can use an indemnity plan as your only prescription coverage. But most people use indemnity plans to double up on insurance benefits, which can be helpful if you need expensive medications or health care.

Fixed indemnity plans pay you a set amount for each type of medical expense. For example, it could pay $40 each time you fill a prescription, up to 12 prescriptions per year. The payouts are usually a flat rate and don't consider how much the drug costs. This makes them similar to a hospital indemnity plan.

Not all indemnity plans will cover prescriptions. UnitedHealthcare and Cigna are two top health insurance companies that offer indemnity plans with prescription coverage.

3. Short term health insurance

If you need coverage for a few months, such as if you're between jobs or are waiting for open enrollment, a short-term plan is a great way to get temporary prescription insurance.

Plans can begin the day after you enroll, helping you avoid having a gap in coverage.

Not all short-term plans will cover prescriptions so you may have to shop around. UnitedHealthcare and Pivot Health are the best short-term health insurance companies that cover prescriptions.

When buying a short-term insurance plan, pay close attention to the plan's benefits. Many short-term plans will only give you coverage if you're badly injured or very sick because you'll have to meet a high deductible before the plan's benefits kick in.

A cheap way to combine plans is to use a short-term insurance plan for catastrophic-style coverage and use a prescription discount card to save on routine medications. The downside with this is managing your coverage can be difficult. The drugs you buy with the discount card usually won't help you meet your insurance plan's deductible so you'll have to decide which coverage to use.

What's the best deal when you want a stand-alone prescription drug plan?

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If you only want coverage for prescriptions, the best deal is usually to get a regular health insurance plan and only use the drug coverage.

Even if you don't plan to use the medical benefits of a regular health insurance plan, the plans can have good drug coverage and cheap rates when you shop on HealthCare.gov or your state marketplace.

  • Look for a plan that covers common medications before the deductible. This means as soon as your plan starts, you could pay $5 to $20 at the pharmacy for these prescriptions.
  • Some companies, like UnitedHealthcare give you extra benefits like free insulin. But with all companies, you won't pay anything for preventive medicines such as vaccines or birth control.
  • If you expect to need expensive prescriptions, choose a plan with a low out-of-pocket maximum which will give you the best cap on your prescription spending for the year.

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How insurance covers prescriptions

How much you pay for prescriptions with insurance is based on several factors.

Drug formulary: which drugs your plan covers

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The drug formulary is the list of medications that are covered by your insurance plan.

Also called the prescription drug list, this document will have each medication that's covered and any details such as if there are limits to how many times you can refill your prescription.

If the prescriptions you need to take are not in your plan's drug formulary, you'll either pay full price or have to change your medication to a similar drug that's covered.

Plans are required to cover a wide range of medications across all types of medical conditions and treatments. However, plans can vary based on the specific medications or brand names they'll cover.

Formularies will also tell you how restrictive a plan is. For example, some plans will cover weight loss drugs when they're prescribed, and other plans would only cover the medication after you've first tried a cheaper drug.


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Drug tier list: how costs are split with insurance

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The coverage tier of your prescription tells you how much you'll pay for a prescription.

Tier 1 and 2 drugs, which are either generic drugs or common brand name drugs, will be the cheapest. Tier 3 and 4 drugs can be expensive or specialty medications, and you'll usually pay a higher percentage of these costs.

Typical prescription costs by drug tier

Tier
Avg. copay
Avg. coinsurance
Tier 1 (Generics)$1120%
Tier 2 (Preferred brand-name)$3626%
Tier 3 (Non-preferred brand name)$6638%
Tier 4 (New or specialty)$12528%

You'll pay either a copay or a coinsurance, which is determined by your plan. Average rates are based on coverage through employer health plans.

To find out the cost of a prescription, you'll usually need to look in two places. Start by looking up the medication in the plan's drug formulary. This will tell you what tier the drug is. Then look up that drug tier in the plan's benefit document to find out your copay or coinsurance for that drug tier.

Prescription plan restrictions: understanding the limits and rules

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Insurance plans may add coverage requirements for covered drugs, which can make it harder to get your insurance plan to help pay for medications.

  • Prior authorization for medication is when you have to get your insurance company's approval before it will cover your prescription. During the process, the insurance company will check that the drug is being used for approved medical conditions and that the dosage makes sense.
  • Step therapy is when an insurance plan will only cover your prescription if you first try a cheaper drug. For example, even if your doctor prescribes you the expensive drug Ozempic for diabetes, UnitedHealthcare will only cover it if you first try a cheaper diabetes for three months.
  • You'll usually need to use one of your plan's preferred pharmacies to get the best coverage. Each plan will have a list of preferred pharmacies where you'll pay the lowest rates for your prescriptions. The type of plan you have will determine your coverage.

Prescription deductibles: how they work with your medical deductible

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When you have insurance that covers both medical care and drugs, prescriptions are usually included in your plan's main deductible.

An insurance deductible is the amount you must pay for yourself before the plan's full benefits begin.

  • In most cases, prescriptions count toward your insurance plan deductible. That's because most plans have one deductible for both medical and prescription costs, which is called an integrated deductible.

    After you reach the combined deductible, both your prescription and medical costs will be cheaper because you'll be splitting the bill with the insurance company.

  • However, some plans will have separate deductibles for medical care and prescriptions. With these plans, you'll have two deductibles, and what you pay for drugs will only count toward your prescription deductible.

    This can be good if your costs are mostly for either medications or medical care. For example, if you take several prescriptions, it can be easier to meet a $500 drug deductible than a combined $3,000 deductible for both prescriptions and medical care.

What to do if you're struggling to get insurance to cover your prescriptions

  • You may be able to request a coverage exemption from your insurance company if you need a prescription that's not covered by your plan or that's in a high coverage tier. For example, if you've had an allergic reaction or another medicine didn't work, you might be able to get insurance to cover a different medication.
  • You can also appeal an insurance denial to get the insurance company to change its mind about a coverage decision.

3 ways to save on prescriptions

  1. Use generic drugs instead of brand name drugs

    Generic drugs have the same ingredients as a brand-name prescription, but they cost about 80% less, according to the FDA. Asking your pharmacist or doctor for a generic version of your prescription could save you hundreds or thousands of dollars.

    Newer drugs that are less than 17 years old won't have a generic version of the medication available. But most other medicines will because the drug company's patent has expired.

  2. Change insurance plans

    If you still have high drug costs with your prescription insurance plan, changing your coverage can help shift some of your costs to the insurance company. The rule of thumb is that if you pay more each month for better coverage, you'll pay less at the pharmacy.

    Shopping for insurance each year during open enrollment can also help you make sure you're getting the best deal for the medications you currently take.

  3. Look for prescription discounts

    Depending on the medications you take, you can get prescription discounts in three ways.

    • Discounts through the manufacturer: Drug makers often have coupons for brand-name drugs. Eligibility varies so you may need to meet income or coverage criteria.
    • State pharmaceutical assistance programs: Many states have drug discount programs. Eligibility varies, and you may need to have a low income, Medicare, or a certain health condition.
    • Discounts through a retailer: Large pharmacies also have discount programs for common medications. This can be a great way for those without insurance to save.

Walmart vs. Walgreens prescriptions

  • Walmart prescription prices without insurance let you pay $4 for a 30-day supply of drugs for cholesterol, diabetes, heart health, mental health, pain, and more. The downside is the program doesn't cover antibiotics, antihistamines, or steroids.
  • Walgreens prescription savings club gives you discounts on 8,000 medications, which is much more than Walmart's program. You have to pay $20 per year to join. But with drug prices that range from $7.50 to $15 per month, it's an affordable way to save on a wide variety of drugs.

Frequently asked questions

What does Rx stand for in medicine?

Rx is a short way to say a doctor's prescription or a prescription drug. For example, a Rx for an antibiotic is a prescription for an antibiotic.

What is the difference between prescription insurance and medical insurance?

In many cases, you'll have the same insurance plan for both prescriptions and medical care. Your prescription insurance will cover medications you get from the pharmacy. Your medical insurance will cover any medications given at a hospital or doctor's office, as well as vaccines you get at the pharmacy.

What is a RxBin on an insurance card?

The RXBin is a six-digit number that your pharmacy will use to bill your insurance when you fill a prescription. RxBIN stands for prescription banking identification number.

What should you do if you can't afford your prescriptions, even with insurance?

If you're facing high prescription costs, change to an insurance plan that covers more of your costs or look for options to double up on benefits. That can mean using discounts from drug manufacturers, getting an indemnity plan for supplemental drug coverage, or paying for prescriptions with a HSA or FSA. You may also be able to use the Medicaid spend down program to qualify for free coverage by looking at your income after what you spent on drugs and medical costs.

Sources

  • HealthCare.gov
  • American Pharmacists Association
  • Kaiser Family Foundation (KFF)
  • Federal Trade Commision (FTC)

Editorial note: The content of this article is based on the author's opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.