The term “formulary” is defined as a list of drugs identified by the carrier that provides the highest degree of efficacy, or the capacity to produce a desired effect, for the treated condition in relationship to the most favorable cost. The list of drugs included on a health insurance carrier’s formulary is based on research and well documented results. Pharmaceutical companies will present scientific findings on the drugs they manufacture to health insurance carriers. The test results justify the decision to include a particular drug in a plan’s formulary. Formularies are designed to provide at least one brand name option for each drug class to ensure that more than generic drugs are available. Formularies are subject to change based on current research. Health insurance carriers make their formularies available either in a searchable format or as a PDF to download and print.
Formularies are divided into prescription tiers, which are drugs assigned to groups based on type (generic or brand name), efficacy and pricing
- Tier 1 or Tier I: Tier 1 drugs are usually limited to generic drugs, the lowest cost drugs. Occasionally, regularly lower price branded drugs will also fall into this tier. Tier 1 drugs offer the lowest cost option with co-pays ranging between $15 and $20.
- Tier 2 or Tier II: Tier 2 is typically comprised of brand name drugs or can also include expensive generics. If you must take a brand name drug, the insurance carrier will have a list of branded drugs it prefers which are typically referred to as preferred brand name drugs. These preferred brands are found in Tier 2, and these drugs cost the insured member slightly higher co-pay than those in Tier 1. The co-pays range between $15 and $50.
- Tier 3 or Tier III: The more expensive brand name drugs are assigned to Tier 3. Drugs are assigned to Tier 3 because the insurance carrier has determined the efficacy of the drug is not as favorable as another similar brand name drug. Tier 3 drugs are defined as non-preferred brand name drugs and will cost more than Tier 2, drugs with co-pays between $25 and $75.
- Tier 4 or Tier IV: Tier 4 drugs are referred to as specialty drugs and are typically recently approved drugs. Tier 4 drugs are very expensive, and the insurance carrier will closely monitor the drug use. Since Tier 4 drugs are the most expensive drugs. The insurance carrier does not assign a dollar co-pay, but rather assigns a percentage of the cost as the benefit.
Insurance carriers review pharmaceutical trial data and make formulary decisions based on results produced by one drug as compared to another drug. Consideration for formulary assignment is also made based on the pricing offered by the pharmaceutical company to the insurance carrier.
In order to take the most advantage of the health insurance plan’s tier assignment, the insured member should access the plan formulary and discuss the most suitable options with the physician. The insurance member can receive the most value from the plan prescription benefit by having the physician make prescription recommendations based on the formulary, which the result of can be a direct financial benefit to the insured member.
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Stateside Insurance Services, since 2003, has focused on providing comprehensive health insurance information, responsive customer service and expert industry knowledge for Texas consumers. Stateside has annually been recognized by health insurance carriers and the Health Insurance Marketplace as a Top Producer in Texas.
Whether the health insurance policy is for an individual, family, small business or supplemental Medicare coverage, Stateside dedicates the time, and our deep industry expertise, to ensure our clients have identified the best health insurance plan for their specific needs.
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By using the Telephone Appointment System, clients can take advantage of scheduling a health insurance discussion when convenient for their schedule. During Open Enrollment phone appointment availability is expanded to include extended hours and weekends.