When you switch health plans, the biggest surprise isn’t always the monthly premium. It’s the bill for your daily medication. A $5 generic copay can suddenly become a $40 coinsurance charge - and you won’t know until you fill your prescription. This isn’t a glitch. It’s how formularies work. And if you don’t check them before switching, you could be paying thousands more each year.
What Exactly Is a Formulary?
A formulary is just a list of drugs your plan covers. But it’s not as simple as “yes” or “no.” Most plans use tiers - like levels in a game - to decide how much you pay. Tier 1 is almost always generic drugs. These are the same as brand-name pills, just cheaper because the patent expired. They’re safe, effective, and often the first choice doctors make. But here’s the catch: not all generics are treated the same.Some plans put all generics in Tier 1 with a $3 copay. Others split them into Tier 1 (preferred) and Tier 2 (non-preferred). Why? Because different manufacturers make the same drug. Your plan might cover metformin made by Teva but not the one made by Mylan. Even though they work the same, your out-of-pocket cost could jump from $5 to $25. That’s not a mistake. That’s policy.
How Tiers Work Across Plans
Most health plans today use 3 to 5 tiers. Here’s what you’ll typically see:- Tier 1: Preferred generics. Copays range from $3 to $20. This is where most people should be.
- Tier 2: Non-preferred generics or brand-name drugs. Copays jump to $20-$50.
- Tier 3: Non-preferred brands or specialty generics. Coinsurance kicks in - you pay 20% to 40% of the cost.
- Tier 4/5: Specialty drugs. These can cost hundreds per month, even if they’re generic.
Medicare Part D plans often have 4 or 5 tiers. Marketplace plans (like those on Healthcare.gov) are required by law to use a 4-tier structure. Silver plans with Standardized Plan Design (SPD) are the most consumer-friendly: they waive your deductible for Tier 1 generics. That means you pay your $20 copay - no matter how much you’ve spent on medical care this year.
But not all plans do this. Some high-deductible plans (HDHPs) combine your medical and prescription deductible. So if your deductible is $3,000, you pay full price for every pill until you hit that number. For someone taking three daily generics, that could mean $1,200 in out-of-pocket costs before coverage even starts.
Why Your State Matters
Your location changes everything. California requires a separate $85 deductible for outpatient drugs - meaning you pay for prescriptions before insurance kicks in. New York, on the other hand, waives the deductible for generics and caps copays at $75 for specialty drugs. DC has a $350 drug deductible. Florida? No separate drug deductible at all.These rules aren’t random. States like California and New York passed laws to protect people on chronic medications. But if you move or switch plans without checking your state’s rules, you might assume your old plan’s benefits carry over. They don’t.
Cost Differences You Can’t Ignore
Let’s say you take three generics: metformin, lisinopril, and levothyroxine. In a Silver SPD plan, your annual cost is $240 ($20 x 12 months per drug). In a non-standardized plan with a $1,500 deductible, you pay full price until you hit that number. At $15 per pill, that’s $5,400 in drug costs before insurance helps. Even after the deductible, you might still pay 20% coinsurance - adding another $1,000.Medicare Advantage plans with drug coverage save users 18% on average compared to standalone Part D plans. But if you only take Tier 1 generics, the difference shrinks - because both types of plans often charge the same $0-$10 copay. The real savings come when you need more than just basics.
Employer plans vary wildly. Some charge $5 for generics before deductible. Others wait until you’ve paid $3,000 out of pocket. You can’t guess. You have to look.
What Most People Get Wrong
Here’s the truth: 68% of people switching plans don’t check if their exact generic version is covered. They assume “metformin” is metformin. But if your plan covers the 500mg tablet from Manufacturer A and your prescription is for the 1000mg from Manufacturer B, you might get bumped to Tier 2 - and your cost doubles.Another big mistake? Ignoring pharmacy networks. Your plan might say “$3 generic copay” - but only if you use a preferred pharmacy. Go to a non-preferred one? That same pill could cost $120. OptumRx data shows pharmacy network restrictions can raise generic costs by 300-400%.
And don’t forget mail-order. Some plans charge $0 for 90-day supplies via mail-order but $20 for 30-day retail refills. If you’re on three meds, that’s $720 saved a year.
How to Check Before You Switch
Follow this four-step process:- Get the full formulary. Don’t trust the summary. Download the complete list from the insurer’s website. Look for your exact drug names and manufacturers.
- Match your prescription. Check the strength (e.g., 500mg vs. 1000mg) and manufacturer. If your pill isn’t listed, assume it’s not covered.
- Check the pharmacy network. Use the plan’s tool to find your local pharmacy. Is it in-network? If not, how far do you have to drive?
- Run the numbers. Use the Medicare Plan Finder (for seniors) or Healthcare.gov’s plan selector. Plug in your meds. See what you’d pay annually.
CMS data shows people who complete all four steps reduce unexpected drug costs by 73%. That’s not luck. That’s strategy.
What’s Changing in 2025
The Inflation Reduction Act is changing the game. Starting in 2025, Medicare Part D will cap out-of-pocket drug spending at $2,000 a year. Insulin will stay capped at $35 per month. But here’s what’s new: generics will be split into Tier 1 (preferred) and Tier 1+ (non-preferred). That means even if you’re on generics, you could pay more if your plan decides your manufacturer isn’t “preferred.”More states are moving toward separate drug deductibles. California’s model is being studied by 12 other states. If you live in one of them, you’ll need to budget for drug costs separately from your medical bills.
AI tools like CMS’s new “Medicare Plan Scout” are making comparisons easier. In testing, they cut enrollment errors by 44%. Use them. They’re free.
Bottom Line: Don’t Skip This Step
Switching health plans isn’t just about premiums. It’s about what happens when you walk into the pharmacy. A $3 copay can turn into $40. A $0 monthly cost can become $1,200. And no one will warn you - unless you ask.If you take any daily medication - even just one - take 30 minutes before open enrollment. Download the formulary. Plug in your drugs. Compare the numbers. The difference between a good plan and a bad one isn’t the logo on your card. It’s what’s written on your prescription receipt.
Do all health plans cover generics the same way?
No. While all plans must cover generics, how they charge for them varies. Some have fixed $3-$20 copays. Others require you to meet a deductible first. Some split generics into preferred and non-preferred tiers. Medicare Advantage plans often have lower costs than standalone Part D plans, but only if your drugs are on their formulary.
Can I switch plans just to get better generic coverage?
Yes - during Open Enrollment (October 15-December 7 for Medicare, November-January for marketplace plans). You can switch based on drug coverage. But don’t wait until you need a refill. Check the formulary before you enroll. Once you’re locked in, you can’t change unless you qualify for a Special Enrollment Period.
What if my generic drug isn’t on the new plan’s formulary?
You have options. Ask your doctor if there’s a therapeutically equivalent drug on the formulary. You can also file an exception request - but approval isn’t guaranteed. Some plans offer temporary coverage while reviewing your request. If denied, you’ll pay full price or switch back.
Why does my generic cost more on a high-deductible plan?
Because high-deductible plans often combine medical and prescription deductibles. You pay full price for all drugs until you hit that deductible - which could be $3,000 or more. A Silver SPD plan waives the deductible for generics. If you take daily meds, avoid plans that don’t.
Is there a tool to compare drug costs between plans?
Yes. Medicare beneficiaries should use Medicare Plan Finder. Everyone else can use Healthcare.gov’s plan selector or insurer-specific tools like eHealthInsurance’s calculator. These tools let you enter your medications and see estimated annual costs. Use them - they’re accurate and free.
