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Decoding Prescription Coverage and Formularies at Renewal

One of the most common questions we get Thinq HR & Insurance Services while renewing our clients healthcare revolves around prescription medications; "what drugs are covered, and how much will they cost?"

As an HR professional, you're in the unique position to provide clarity on these issues. In this article, we'll explore:

  • How prescription coverage works?

  • What a formulary is?

  • How drug pricing tiers affect medication costs?

Prescription Medication Coverage

Prescription drug coverage is often included in health insurance plans, covering a significant portion of the cost of prescription drugs. However, not all medications are covered, and the extent of the coverage can vary from plan to plan. This is where a document called the "formulary" comes into play.

The Formulary Explained

A formulary is a list of prescription drugs covered by a prescription drug plan or another insurance plan offering prescription drug benefits. Formularies are created by a team of healthcare professionals and are designed to guide patients to the most cost-effective and beneficial drugs. Each plan's formulary can be found on the insurer's website or by requesting a copy directly from the insurance provider. It’s crucial to review this list carefully, as it will tell you which drugs are covered, how much they will cost, and whether there are any restrictions on the medication.

Formulary on popular carrier websites:

  1. Aetna Formulary

  2. Blue Shield of California Formulary

  3. Cigna Formulary

  4. United Health Care Formulary

Understanding Drug Pricing Tiers

Most formularies divide their list of drugs into "tiers," each with different cost levels. Here's a general breakdown:

  • Tier 1 usually includes generic medications and typically has the lowest co-pays.

  • Tier 2 often consists of preferred, brand-name drugs that are deemed effective but may be more expensive than their generic counterparts.

  • Tier 3 often includes non-preferred, brand-name drugs, which may be more expensive and have higher co-pays.

  • Tier 4 generally consists of specialty drugs, often high-cost or rare medications, which usually have the highest co-pays.

While these tiers are a common way of organizing a formulary, they can vary by insurance plan. It's crucial to understand the specific tiers in your potential insurance plan and how they impact the cost of prescription medications.

It's also important to note that some plans may have further stipulations. For example, certain medications might require prior authorization, or the plan may only cover a medication if certain conditions are met.


As an HR champion, understanding prescription coverage, formularies, and drug pricing tiers is a significant step in guiding your team to make informed healthcare decisions. It's not just about finding the right plan – it's about empowering employees to navigate their benefits confidently. And in doing so, you're doing more than managing; you're positively influencing lives! Stay tuned for more friendly, insightful tips from your trusted partner in the health insurance industry. Keep being the amazing HR hero you are!

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