Prescription Drug Coverage

Updated: 29 February 2024

What Does Prescription Drug Coverage Mean?

Prescription drug coverage is a part of health insurance that pays a partial amount of the cost of medication, so long as it is prescribed to the insured by a health professional. Prescription drug coverage often comes with copayments and deductibles.

Insuranceopedia Explains Prescription Drug Coverage

The prescription drugs covered by a health plan are listed in a drug formulary. These are the only drugs that the health insurance will pay for. Insurance applicants are therefore advised to carefully read and review the formulary before purchasing a health insurance plan to make sure that the drugs they might need will be paid for.

How much a policyholder will pay out of pocket for the drugs depends on their particular insurance policy. Insurance plans can classify the drugs according to tiers, with generic drugs and brand-name drugs placed in separate categories. Insurers may encourage the insured to opt for the more affordable generic alternative to a drug in the band name tier.

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