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Your Health

Understanding The Language Of Your Health Insurance Plan

Posted: 9/21/2011

It’s important to work with your doctor and ask questions about what therapy is best for both your medical and insurance needs.
It’s important to work with your doctor and ask questions about what therapy is best for both your medical and insurance needs.

(NAPSI)—How knowledgeable are you about your health insurance plan? Do you know what medications are on your formulary and if your plan requires you to use generic medications first?

If you found these questions difficult to answer, you are not alone. The following are definitions to some common terms you should be familiar with in order to make informed decisions about your treatment options.

Formulary

A formulary is a list of generic and brand-name medications approved by the U.S. Food and Drug Administration (FDA) that are covered under your health insurance plan.[1] More simply put, a formulary is a “preferred drug list” developed by your insurance company.

In the case of NEXIUM® (esomeprazole magnesium), it has preferred formulary status at all three of the nation’s largest prescription benefit providers—Medco, Caremark and Express Scripts.[2]

Drug Formulary Tiers

Most private and Medicare drug plans use a tier structure to classify medications on their formulary. Formulary tiers are a specific list of drugs that a health plan provides coverage for at different levels. The most common formulary system is 3-tiered, with each tier representing a higher copay. Generic and some brand-name drugs are usually covered at the Tier 1 level, and have the lowest copay. Preferred brand-name drugs are typically covered at the Tier 2 level, and non-preferred drugs are listed at the Tier 3 level with the highest patient copay.

For example, formulary coverage in 2011 for NEXIUM offers 72 percent of patients with private insurance, Medicaid or Medicare Part D access to it at the Tier 1 or Tier 2 copay level.[3]

Prior Authorization

Your doctor may be required to get prior approval from your health insurance company in order for your prescription to be covered under your health plan. This is known as a prior authorization.

For example, in the case of NEXIUM patients, the majority of NEXIUM prescriptions written require no prior authorization,[4] and NEXIUM has Tier 2 status with no prior authorization required on 332 Medicare Part D plans nationwide.[5]

Step Therapy

Step therapy is a treatment process that requires you to take certain medications on your formulary for a trial period before coverage is authorized for other medications in the same therapeutic class.[6],[7] To put it simply, you may have to take an alternate drug in the same therapeutic class, typically a generic, before your health plan will cover your doctor’s original prescription.6,7

Closed Formulary

A closed formulary plan provides coverage for certain generic drugs, certain formulary brand-name drugs and certain specialty drugs. Non-formulary drugs and most specialty drugs are covered only when prior authorization is given.

If you have questions about your health insurance plan, contact your insurance company. The customer service number is usually located on the back of your insurance card.


[1] Blue of California. “Drug Formulary.” Available at https://www.blueshieldca.com/bsc/pharmacy/faqs/pharmacy_faqs_drug_formulary.jhtml. Accessed on March 15, 2011.

[2] Data on file, [eSTaR# 269188, Atlas # 1046608]: Fingertip Formulary, December 15, 2010.

[3] Data on file, # 1045404: Fingertip Formulary database as of January 5, 2011.

[4] Data on file, eSTaR# 268197: Wolters Kluwer Health, Dynamic Claims, July, August, September 2010 (last accessed November 4, 2010).

[5] Data on file, eSTaR# 273833: Fingertip Formulary (last accessed August 11, 2010).

[6] American Cancer Society. Formularies and drug coverage.” Available at http://www.cancer.org/Treatment/FindingandPayingforTreatment/ManagingInsuranceIssues/Medicare/MedicarePartD/medicare-part-d-formularies-and-drug-coverage. Accessed on March 15, 2011.

[7] Pam Pohly’s Net Guid. Glossary of Terms in Managed Health Care.” Available at  http://www.pohly.com/terms_s.html. Accessed on March 15, 2011

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