Glossary
Formulary
The list of prescription drugs a health insurance plan covers, including which tier each drug falls into for copay or coinsurance purposes.
Last updated: August 19, 2026
A formulary is the list of prescription drugs a health insurance plan covers. Every plan has its own formulary, and the formulary determines:
- Whether a specific drug is covered at all
- Which “tier” the drug falls into (Tier 1 = cheapest, Tier 4-5 = most expensive)
- Whether you need prior authorization, step therapy, or a referral to fill it
If your medication is not on the plan’s formulary, you may have to pay the full price out of pocket, request an exception, or switch to a covered alternative.
How formularies are structured
Most plans use a tiered formulary:
- Tier 1: Preferred generics — Lowest copay ($0-$15 typically). Common, low-cost generic drugs.
- Tier 2: Generics / Preferred brand-name — Low copay ($10-$30 typically).
- Tier 3: Non-preferred brand-name — Moderate copay or coinsurance ($30-$80 or 20-30%).
- Tier 4: Specialty drugs — Highest cost share, often coinsurance 20-40%. Cancer drugs, biologics, etc.
- Tier 5 (some plans): Highest-cost specialty.
Generic drugs are almost always the cheapest. Brand-name and specialty are more expensive.
Why formularies matter
Two plans might both “cover prescriptions” but have very different formularies. A drug that costs $30 on one plan might cost $400 on another — or might not be covered at all. This is one of the biggest hidden differences between plans, and it is the most common surprise after enrollment.
Before enrolling: Make a list of every prescription drug you take. Check each plan’s formulary to see:
- Is the drug covered?
- What tier is it on?
- Does it require prior authorization or step therapy?
- Are there formulary alternatives (generic versions)?
A licensed agent can pull this for you for free.
Mail-order vs. retail
Many plans charge lower copays if you fill 90-day supplies through mail order or a network of preferred pharmacies. Maintenance drugs (blood pressure, diabetes, cholesterol) often have substantial mail-order discounts.
Formulary exceptions
If your drug is not on the formulary, you have options:
- Request a formulary exception — Your doctor submits documentation arguing that the drug is medically necessary and alternatives have failed.
- Try a covered alternative — Often a generic version or therapeutic substitute exists.
- Appeal a denial — You have the right to appeal if an exception is denied.
- Switch plans during Open Enrollment if a different plan covers your drug.
How formularies can change
Insurers can change their formularies during the year. The federal rule that governs Marketplace plans, 45 CFR 156.122, requires them to publish an up to date formulary and to run an exception process, but it does not set a notice period for mid-year changes and does not guarantee that your drug stays at its old tier. If your drug moves or drops off, the exception process below is your route.
The often-quoted rule about 60 days of advance notice belongs to Medicare Part D, a different program, not to Marketplace plans.
Source: 45 CFR 156.122: sets formulary publication and exception requirements for Marketplace plans, with no mid-year notice period or same-tier guarantee. 42 CFR 423.120: the advance-notice and continued-supply protections apply to Medicare Part D sponsors. Verified against the source on August 19, 2026.
Related terms
Check if your medications are covered — a licensed agent will run your prescription list against the plans in your zip code for free.