Health insurance plans that offer prescription coverage use a preferred drug list to determine what prescription drugs are covered under their insurance plans. This list is called a "formulary."
There are two types of formulary plans used by health insurance companies. Most companies use a closed formulary, which means that only prescription drugs on the list will be covered by the plan. An open formulary may be offered, which means that the health plan may cover the costs of drugs that are not on the formulary list.
Open formulary plans are advantageous to consumers because they provide additional coverage for prescription drugs that otherwise might not be covered at all.
Open formularies may extend the benefits of a prescription plan, but may increase the health insurance premium. As a result, it is important to always check to see if prescription medications are already covered on the lower-cost closed formulary.
Many people assume that the health insurance companies decide what prescriptions belong on the formulary. However, formularies are researched and created by independent panels of physicians, pharmacists and medical specialists.
Most insurance companies have a printable formulary list on their website or per customer request. By bringing a copy of your prescription formulary to the doctor's office, your physician can prescribe the lowest-cost, yet still effective, medications for your plan.
Hillary Cirillo is a freelance writer and editor with more than 12 years in the beauty industry. Her work has appeared on various NBC, ABC, FOX and WB affiliates, as well as in several films and print advertisements. A graduate of the Aveda Institute and the Make-Up Designory, Cirillo's expertise is skin care and makeup.