These costs can eat up a large portion of your budget, especially if you develop an illness (like diabetes) that requires regular medication.
Fortunately, most health insurance plans have provisions for prescription drugs. But many of them don’t go far enough to protect you when you become ill and need medications. Prescription drug plans are insurance policies that cover the costs of prescription medications. If your current health insurance policy provides insufficient prescription drug coverage or none at all, you may want to
consider a prescription drug plan.
Traditional prescription drug plans
Traditionally, prescription drug plans were a benefit found in your health insurance policy, whether offered through an employer-sponsored group health insurance plan or through a private policy. The benefit typically reimbursed a percentage of your costs for certain prescription drugs after an annual deductible had been paid. This type of coverage had a number of flaws, including:
The insurance industry responded by developing a more managed approach to prescription drug plans that would minimize costs while satisfying consumers.
Managed prescription drug plans
In response to the needs of consumers and rising health-care costs,
the insurance industry instituted many management controls, including:
As a result of these changes, more prescription drug plans have moved to the use of a co-payment system where the patient pays a fixed fee for each prescription filled (e.g., $10), has no deductible, and handles no claim forms (claims are submitted electronically at the point of sale).
To decrease the cost of drugs, many health plans implemented a formulary, which is a list of preferred drugs that the plan has decided are the most effective and least costly pharmaceuticals to treat specific conditions. If your physician orders a nonformulary drug, there is usually a medical review process to determine if there is a comparable drug on the plan’s formulary. If your physician agrees to the change, a generic or less expensive drug in the same class may be substituted.
Another result is that patient information (including details regarding potential drug interactions) is readily available through a
computer database to pharmacists who are networked. There are some tradeoffs to this system, such as the inability of some patients to obtain more than a 30-day supply of a medication or take a high-priced brand-name drug. But overall, the managed approach to prescription drug plans has been effective.
Prescription drug plan as a separate insurance policy
To many, the term prescription drug plan refers to the coverage provided by your typical health maintenance organization or
other health-care plan. But a prescription drug plan can also be a completely separate and distinct insurance policy. You might
purchase such a plan if you had no prescription drug coverage at all, or if you wanted to supplement your current health-care
plan. You might seek an individual prescription drug plan, or in some cases, your employer might offer a separate prescription
drug plan. Here are some advantages of these plans:
It’s important to understand what your health insurance plan covers. You can then decide whether you need a separate prescription drug plan to supplement your coverage.