When you’re switching health plans, one of the biggest mistakes people make is focusing only on monthly premiums and ignoring how your medications are covered. A plan might look cheap on paper, but if your daily generic pills suddenly jump from a $5 copay to $40, you could end up paying hundreds more each year. The key isn’t just finding a low-cost plan-it’s finding one that actually covers the generic drugs you take at a price you can afford.
How Formulary Tiers Work
Every health plan organizes drugs into tiers. These tiers determine how much you pay out of pocket. The lowest tier, Tier 1, almost always includes generic medications. These are chemically identical to brand-name drugs but cost a fraction of the price. In 2023, generics made up 90% of all prescriptions filled in the U.S., yet accounted for only 23% of total drug spending. That’s because they’re cheap-but only if your plan puts them in the right tier. Most plans use a 3- to 5-tier system:- Tier 1: Preferred generics-usually $3-$20 for a 30-day supply.
- Tier 2: Non-preferred generics or brand-name drugs with generic alternatives-$20-$50.
- Tier 3: Brand-name drugs without generics-$50-$100.
- Tier 4: Specialty drugs, including some generic specialty medications-coinsurance of 20-30% or $100+.
- Tier 5: High-cost specialty drugs-often with no cap on coinsurance.
What’s Different Between Plan Types?
Not all health plans are built the same. The structure of your coverage depends on whether you’re on Medicare, an employer plan, or a marketplace plan.Marketplace plans (ACA plans) must follow federal rules. Since 2014, they’ve been required to use a 4-tier formulary. Silver-level plans with a Standardized Plan Design (SPD) go further: they waive your deductible for Tier 1 generics. That means if you take daily medication, you pay just $20 per prescription-even if you haven’t met your $2,000 medical deductible. In 2023, KFF found that SPD plans saved users an average of $1,500-$5,000 a year compared to non-standardized plans.
Medicare Part D plans have their own rules. In 2023, the base deductible was $505, but most plans offered $0-$10 copays for generics after that. However, Medicare Advantage plans with drug coverage (MA-PDs) often have lower out-of-pocket costs than standalone Part D plans-18% lower on average. But here’s the catch: some MA-PDs split generics into two tiers. Preferred generics (Tier 1) cost $0-$10. Non-preferred generics (Tier 2) cost $20-$40. If your levothyroxine or metformin moves from Tier 1 to Tier 2, your annual cost could double.
Employer-sponsored plans vary wildly. Some, like MHBP Federal Health Plans, charge $5 for generics even before you meet your deductible. Others require you to hit the full medical deductible-sometimes $3,000 or more-before any drug coverage kicks in. That’s a nightmare if you take multiple generics daily.
State Rules Change Everything
Where you live matters more than you think.In New York, insurers are required to waive deductibles for generics and cap copays at $75 for specialty drugs. That means if you take a generic blood pressure pill, you might pay $3-no deductible, no coinsurance.
In California, there’s a separate $85 outpatient drug deductible. After that, you pay 20% coinsurance, capped at $250 per year. So if your monthly generic costs $40, you’ll pay $85 in January, then $8 per month the rest of the year.
In Washington, D.C., there’s a $350 separate drug deductible, but specialty drugs are capped at $150 per prescription. That’s great if you take insulin. Less helpful if you take five daily generics.
These differences mean two people on the same plan, living in different states, can pay completely different amounts for the same drugs. Always check your state’s rules before switching.
What You Must Check Before Switching
Don’t just look at the plan’s summary. Dig deeper. Here’s what you need to verify:- Find your exact generic drug on the formulary-not just the drug name, but the manufacturer and formulation. For example, “metformin ER 500mg” from Manufacturer A might be Tier 1. “Metformin ER 500mg” from Manufacturer B might be Tier 2. They’re the same drug. The plan just prefers one supplier.
- Check your pharmacy network. If your local pharmacy isn’t in-network, your copay could jump from $5 to $25-or even $70. OptumRx data shows non-preferred pharmacies charge 300-400% more for generics.
- Calculate your annual cost. Multiply your monthly copay by 12. Add any deductible you must meet first. Don’t forget mail-order options. Some plans offer 90-day supplies at a lower rate.
- Look for hidden caps. Some plans cap your annual out-of-pocket spending on drugs. Others don’t. If you take multiple medications, this could be the difference between $1,000 and $5,000 a year.
CMS reports that people who complete all four steps reduce unexpected drug costs by 73%. That’s not a small number. That’s life-changing.
Tools That Actually Work
You don’t have to guess. Use these tools:- Medicare Plan Finder (medicare.gov): Enter your drugs, zip code, and preferred pharmacy. It shows exact costs for every Part D plan.
- Healthcare.gov plan selector: For ACA plans, use the prescription cost estimator. It filters plans by your medications.
- Insurer-specific formulary search tools: Blue Cross, UnitedHealthcare, and others have their own searchable databases. These are 96% accurate-far better than third-party tools.
- eHealthInsurance’s drug calculator: Processes over 1.7 million queries monthly. It compares copays across plans side-by-side.
One user in Massachusetts saved $780 a year just by switching to a plan with $3 generic copays. She didn’t change doctors. She didn’t change her meds. She just used the tool.
Common Mistakes That Cost You Money
Most people make these errors:- Assuming all generics are equal. They’re not. A switch in manufacturer can bump you to a higher tier.
- Ignoring mail-order options. A 90-day supply might cost $40 instead of $15/month. That’s $180 saved per year.
- Not checking for changes mid-year. Plans update formularies every January. Your $5 generic could become $30 overnight.
- Overlooking pharmacy network restrictions. If your pharmacy isn’t in-network, you might pay full price-even if the drug is on Tier 1.
A 2023 study by the American Pharmacists Association found that 68% of people switching plans didn’t check if their exact generic formulation was covered. That’s why so many end up shocked at the pharmacy counter.
What’s Changing in 2025 and Beyond
The rules are shifting:- Medicare Part D will introduce a new tier structure in 2025: Tier 1 (preferred generics) and Tier 1+ (non-preferred generics). This could split costs even further.
- Insulin is now capped at $35/month under the Inflation Reduction Act-no matter your plan.
- Out-of-pocket maximums for Medicare Part D will be capped at $2,000 in 2025.
- Marketplace plans are expanding SPD options. In 2024, 32 states offer Silver SPD plans with $10 generic copays-no deductible.
AI tools like CMS’s “Medicare Plan Scout” are now helping users compare formularies in seconds. In pilot tests, they cut enrollment errors by 44%. The future is data-driven. Don’t rely on memory or guesswork.
Final Advice
Switching health plans isn’t about finding the cheapest premium. It’s about finding the plan that keeps your medications affordable. If you take even one daily generic, spend 30 minutes checking your formulary. Use the tools. Compare the tiers. Know your pharmacy network. That small effort could save you hundreds-or thousands-each year.How do I find out if my generic drug is covered by a new health plan?
Every health plan publishes a formulary-a list of covered drugs. You can search it online using the plan’s official website, Medicare.gov, or Healthcare.gov. Enter your exact drug name, dosage, and manufacturer. Don’t rely on general listings-check the specific formulation. For example, "metformin 500mg ER" from one manufacturer may be covered, while the same drug from another isn’t.
Why is my generic drug suddenly more expensive after switching plans?
It’s likely because the new plan uses a different manufacturer for the same generic drug. Even though the active ingredient is identical, insurers often prefer one supplier over another. If your drug moves from Tier 1 to Tier 2, your copay could jump from $5 to $35. Always verify the manufacturer, not just the drug name.
Do I have to meet my deductible before my generic drugs are covered?
It depends on the plan. In most employer and non-standardized marketplace plans, yes-you must meet the full medical deductible before drug coverage starts. But Silver Standardized Plan Design (SPD) plans on Healthcare.gov waive the deductible for Tier 1 generics. You pay a fixed $10-$20 copay, no matter what your deductible is. Always check if your plan has this feature.
Are mail-order pharmacies better for generic drugs?
Often, yes. Many plans offer 90-day supplies through mail-order pharmacies at a lower cost than retail. For example, a 30-day supply might cost $15 at a local pharmacy but only $35 for 90 days via mail-order. That’s $50 saved per month. Check if your plan offers this option and whether your pharmacy is in-network.
What should I do if my generic drug is removed from the formulary?
First, ask your doctor if there’s an alternative generic with the same active ingredient. If not, you can request a formulary exception. Submit a letter from your doctor explaining why the drug is medically necessary. Many plans approve these requests, especially for chronic conditions like diabetes or hypertension. Don’t assume you’re stuck paying full price.
How much can I save by choosing a plan with better generic coverage?
It varies, but the savings can be dramatic. For someone taking three daily generics, switching from a plan with $30 copays to one with $5 copays saves $900 per year. Those on Medicare Part D who avoid non-preferred generics can save $1,200 or more annually. KFF estimates that people who use cost calculators during enrollment reduce their prescription spending by 25-40%.
