With Medicare D now well underway, a greater number of seniors are having to deal with formularies, copays, deductibles, copay tiers, prior authorizations, plan limitations and more.  This month I would like to explain some of the confusing terminology that is used in the prescription insurance world explaining coverage and benefits.

A deductible in the amount of money that you have to pay before your insurance begins to pay.    A copay is the amount that you have to pay that is not covered by your insurance.  How do we know what the copay is going to be for a particular medication? 

First, you need to know if a particular medication is on your insurance plan's formulary.  A formulary is a list of medications that are covered by a particular plan.

If a medication is listed on a plan's formulary, then most likely a copay tier will be applied to the medication.  A copay tier describes how well an insurance will cover a medication.  Often first tier medications will be generics and will carry a lower copay, such as five or six dollars.  The higher the tier, the higher the copay.  Tier two medications might be preferred brand name drugs and tier three medications might be non-preferred brand name medications.

To make things even more confusing, medications might require prior authorizations or have plan limitations imposed on them.  A prior authorization is imposed on certain medications that are on the plan's formulary but require the physician to go through a certain procedure, such as filling out a form, to get the medication approved.  Plan limitations are limits on the coverage of a certain medication.  For example, for some headache medications you might only be able to receive eighteen tablets in a month's time.

Hopefully this has shed some light on the sometimes confusing world of insurance benefits.