- Why are prescription drugs important?
- How does prescription drug coverage work under the Affordable Care Act (ACA)?
- Does Medicare cover prescription drugs?
- What are prescription drug tiers and how do they affect my costs?
- What are my copays and deductibles for prescriptions?
- What is utilization management and how does it affect my prescriptions?
- What can I do if my prescription is denied or not covered?
- How can I save on prescription drugs without insurance?
Do you take any prescription medications? Most Americans do. In fact, two thirds of adults take at least one prescription drug, and about 30% take four or more.1 These medications can help treat conditions from infections to diabetes.
Your health insurance can help you pay for your prescriptions, and there are other ways to save when you visit the pharmacy. Here are answers to some of the most common questions about prescription drugs.
1. Why are prescription drugs important?
Prescription drugs help treat a wide range of conditions. These include:
- Infections
- Anxiety
- Depression
- High cholesterol
- Diabetes
“More times than not, you’re going to end up with some sort of prescription to treat whatever you went to the doctor for,” says Levi Sanderson, Pharm.D. He’s the senior director of clinical solutions at AdhereHealth, a company that works with health insurance plans to help members take medicine as prescribed.
Prescription drugs can help keep you healthy. That said, your doctor and care team should weigh the benefits and risks together with you for every drug they prescribe.
2. How does prescription drug coverage work under the Affordable Care Act (ACA)?
Whether you have prescription drug coverage depends on how you get your health insurance. Under the Affordable Care Act (ACA), prescription drugs are considered an essential health benefit, along with services such as preventive care and hospitalization.2
The ACA governs both individual health insurance plans and group health insurance plans offered by small employers (generally those with less than 50 employees).3 If you buy your health insurance through the federal Health Insurance Marketplace, your plan must cover prescription drugs.
If you get health insurance through a large employer, there’s a good chance your employer’s health insurance plan covers prescription drugs. “Nearly all (99%) covered workers are at a firm that provides prescription drug coverage to enrollees in its largest health plan,” according to a KFF annual survey on employer health benefits.4
It’s always a good idea, however, to check with your employer’s benefits administrator to understand your coverage.
Looking for a way to help save on prescriptions? Explore non-insurance prescription discount card options online.
3. Does Medicare cover prescription drugs?
Original Medicare (Medicare Parts A and B) generally doesn’t cover prescription drugs, although there are some exceptions.
- Part A (hospital insurance) covers medications that are part of the treatment you get while you’re an inpatient at the hospital.
- Part B (medical insurance) covers injected and infused drugs, such as vaccines, given by a licensed medical provider.5
“You’re not going to get medication coverage out of traditional Medicare that the average person would consider prescription drug coverage,” Sanderson says. “Almost anything you go to the pharmacy for is not going to be covered.”
To get broader coverage, you have two options: a standalone Medicare prescription drug plan (Part D) or a Medicare Advantage plan (Part C) that includes prescription drug coverage.
It’s important to note that if you don’t buy prescription drug coverage when you first get Medicare, you may face a penalty. For each month you wait to sign up, you’ll pay an additional 1% of the current “national base beneficiary premium” — currently $38.99 — when you do enroll.6 If this penalty applies to you, it’s permanent, and you’ll have to pay it every year you have Medicare drug coverage.
For example: If you wait a year (12 months) to enroll in a Part D plan, you’ll pay an additional 12% of the national base premium — $4.68 — on top of your monthly premium for your plan.
4. What are prescription drug tiers and how do they affect my costs?
Prescription drug tiers are pricing levels that insurance companies use to sort medications by cost. Drugs in lower tiers cost less. Drugs in higher tiers cost more.
To know how prescription drug tiers may affect your coverage, it can be helpful to look at how prescription drug coverage works. With prescription drug coverage, your insurance pays some or all of the cost of your prescription drugs. But not every plan covers every medication.
Each insurance company typically maintains a drug formulary (also called a prescription drug list or PDL). This is a list of commonly used brand-name and generic drugs covered by the plan, including the approved dosages.
The PDL may vary by the type of plan you have, and the list is broken down into tiers based on cost. You can find your plan’s PDL on your insurance company’s website.
Many higher tier drugs have lower cost alternatives in a lower tier. These are either generic equivalents or other drugs that treat the same condition.
When your doctor prescribes you a medicine, you can check your plan’s drug list to see what tier the drug falls in. Your plan benefits may vary, depending on the tier. If it’s a higher tier (and more expensive) drug, you can ask your doctor if a cheaper, lower tier alternative could work for you.
“You always have the option of getting what the prescriber wrote for you,” Sanderson says. “But sometimes that means you’re going to have to pay extra or you’re going to have to cover it all yourself.”
He also emphasizes the value of generic medications, which are required by the U.S. Food and Drug Administration to work in the same way as their brand-name counterparts.
“A generic medication is going to be cheaper for the patient, cheaper for the insurance company and cheaper for the pharmacy,” he says.
5. What are my copays and deductibles for prescriptions?
Each time you get a prescription filled, you’ll pay either a set amount, called a copayment (or copay), such as, for example, $25 for a tier 1 drug, or a percentage of the cost, such as 50% for a tier 4 drug.
Depending on your health insurance plan, you may have to pay the full cost until you meet your annual deductible. Some plans may also have limits on the total amount of prescription expenses covered.
6. What is utilization management and how does it affect my prescriptions?
“Utilization management” is an effort to keep costs down by encouraging providers to prescribe the most affordable drug options for patients.7 It also helps with safe and appropriate dosing of prescription medicines.
This is done through limits and requirements on certain drugs. Next to some drugs on your plan’s drug list, you might find limits such as:8
- Prior authorization: Requires your doctor to provide information about why you are taking a medication to determine how it may be covered by your plan.
- Step therapy (referred to as First Start in New Jersey): May require prior authorization for certain medications and may require you to try one or more other medications first.
- Quantity limit: Specifies the largest quantity of medication covered per copayment or in a defined period of time.
“Some patients — as well as doctors and pharmacies — can view it as a pain, but in the end, they’re trying to make sure that we’re using the most appropriate things we can that are available,” Sanderson says.
Learn how fixed indemnity insurance can pay a preset benefit for prescription drugs on most plans.
7. What can I do if my prescription is denied or not covered?
Your doctor may not know whether a medicine is covered by your insurance when they prescribe it. If your prescription isn’t covered, the pharmacist and your doctor may be able to suggest an alternative.
ACA health plans must include at least one drug in each category and class as defined by the U.S. Pharmacopeia. If your doctor prescribes something that isn’t covered, your health insurance plan may be able to cover another medication that treats the same condition. That could be a generic version or a “therapeutically equivalent” drug.
For example, let’s say you were prescribed a brand-name drug that treats high blood pressure. But it isn’t covered by your plan. Your plan might cover the generic version, or it might cover an equivalent brand-name drug.
“There are a lot of high–blood pressure medications that will do the same thing as the other ones. Some are more expensive, some are newer and some are older. And a lot of times there are very few differences,” Sanderson says. Ask your doctor or pharmacist if there is another medicine on your plan’s drug list that you can take instead.
If you and your doctor aren’t satisfied with what’s covered, you can request an exception from your insurance company. Your doctor will explain that other drugs aren’t as effective for you or that you have experienced side effects. Many insurance companies may cover the requested drug during this process. Check your insurance company’s website to learn how to request an exception or appeal a coverage decision.
8. How can I save on prescription drugs without insurance?
If you’re uninsured or your health insurance plan doesn’t cover prescription drugs, you may be able to reduce the cost of medication in other ways, including non-insurance prescription discount cards, drug company discounts and patient assistance programs.
1. Prescription discount cards, although they are not insurance, give you access to discounts on both brand-name and generic drugs at participating pharmacies. These are sometimes included with health insurance plans instead of full prescription drug coverage. Or you can sign up for one on your own.
2. Drug company coupons help reduce the cost of specific medications. These discounts come directly from the drug manufacturer in the form of coupons or rebates. Discounts are usually on brand-name drugs, so you’ll still want to ask about generic alternatives. The brand-name drug may still be more expensive than the generic version, even with a discount.
3. Patient assistance programs offer free or low-cost prescriptions to people who can’t afford their medications. Patient assistance programs (PAPs) can offer the most help. But you need to meet certain income requirements to qualify, notes Sanderson.
If you have to pay out of pocket for your prescriptions, it may help to shop around. Prices can vary depending on the pharmacy you choose to fill your prescription.
The main goal is to get (and take) the medications you need. They’re an important part of your healthcare plan.
Frequently asked questions
What is the Medicare out-of-pocket cap?
Medicare Part D beneficiaries currently have a total annual out-of-pocket limit (or cap) of $2,100.6 Once reached, your plan pays for 100% of covered drug costs for the rest of the year.
Can I pay for my prescriptions in monthly installments?
Yes, through the Medicare Prescription Payment Plan. This voluntary feature allows you to spread out-of-pocket drug costs into monthly payments instead of paying the full amount at the pharmacy.9
Why was my prescription denied by my health insurance plan?
Denials usually occur due to utilization management rules, such as prior authorization, step therapy or quantity limits.
What are GLP-1 medications and are they covered by insurance?
GLP-1 medications are used to treat type 2 diabetes and, in some cases, obesity. Coverage varies by plan. Many employer and ACA marketplace plans cover GLP-1s for diabetes, but may not cover them for weight loss alone. If you’re unsure, check your plan’s drug list or call your insurance company directly.
What is a “Maximum Fair Price” (MFP)?
The Maximum Fair Price, or MFP, is a lower price that Medicare has locked in for certain high-cost drugs. This applies to Medicare Part D only. It can lower what you pay out of pocket for these drugs, including some used to treat diabetes, heart disease and cancer.10
Have questions about your health insurance options? Call a licensed insurance agent 1-844-211-7730 to discuss your options or compare coverage online.
Levi Sanderson is the senior director of clinical solutions at AdhereHealth, a company that partners with health insurance plans to help members take their medications as prescribed and improve long-term health outcomes.
For informational purposes only. This information is compiled by UnitedHealthcare, and/or one of its affiliates, and does not diagnose problems or recommend specific treatment. Services and medical technologies referenced herein may not be covered under your plan. Please consult directly with your primary care physician if you need medical advice.
Sources
- Kaiser Family Foundation. “Public option and on prescription drugs and their prices.” March 31, 2026. Retrieved from https://www.kff.org/health-costs/public-opinion-on-prescription-drugs-and-their-prices/
- Healthcare.gov. “Essential health benefits.” Accessed May 15, 2026. Retrieved from https://www.healthcare.gov/glossary/essential-health-benefits/
- Internal Revenue Service. “Affordable Care Act tax provisions for small employers.” Updated August 8, 2025. Retrieved from https://www.irs.gov/affordable-care-act/employers/affordable-care-act-tax-provisions-for-small-employers
- KFF “Employer Health Benefits 2025 Annual Survey.” Accessed October 5, 2026. Retrieved from https://files.kff.org/attachment/Employer-Health-Benefits-Survey-2025-Annual-Survey.pdf
- Medicare.gov. “Prescription drugs (outpatient).” Accessed May 15, 2026. Retrieved from https://www.medicare.gov/coverage/prescription-drugs-outpatient
- Medicare.gov. “How much does Medicare drug coverage cost?” Accessed May 15, 2026. Retrieved from https://www.medicare.gov/health-drug-plans/part-d/basics/costs
- National Committee for Quality Assurance. “Utilization management accreditation.” Accessed May 15, 2026. Retrieved from https://www.ncqa.org/programs/health-plans/utilization-management/
- Medicare.gov. “Drug plan rules.” Accessed June 9, 2026. Retrieved from https://www.medicare.gov/health-drug-plans/part-d/what-drug-plans-cover/plan-rules
- Medicare.gov. “What’s the Medicare prescription payment plan?” Accessed May 15, 2026. Retrieved from https://www.medicare.gov/prescription-payment-plan
- Centers for Medicare and Medicaid Services. “Medicare drug price negotiation program.” November, 2025. Retrieved from https://www.cms.gov/files/document/fact-sheet-negotiated-prices-ipay-2027.pdf
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