How Prescription Drug Coverage Should Factor Into Your Open Enrollment Decision
Key Takeaways
- Every health plan has a formulary — a list of covered drugs organized into cost tiers — that directly affects what you pay at the pharmacy.
- Checking your current medications against each plan's formulary before enrolling can prevent costly surprises mid-year.
- Brand-name drugs on a higher tier can cost dramatically more than a generic equivalent covered at a lower tier.
- Some plans require prior authorization or step therapy before covering certain medications — know this before you choose.
- If a plan doesn't cover one of your drugs, you may be able to request a formulary exception during or after enrollment.
- Open enrollment is the only time most employees can make plan changes without a qualifying life event.
Why Drug Coverage Deserves Its Own Enrollment Checklist
Most people compare health plans by looking at the monthly premium first. That number is visible, predictable, and easy to compare. But for anyone who takes regular prescription medications — even something as common as a statin, an inhaler, or a thyroid drug — the plan's formulary can matter far more than the premium.
A formulary is simply your plan's official list of covered medications. Every plan has one, and no two formularies are identical. A drug that costs you a $10 copay under your current plan might jump to $80 or more under a plan with a higher premium but a less favorable formulary. That math can flip the apparent value of an entire plan.
This is not a rare edge case. According to industry data, nearly half of American adults take at least one prescription drug regularly. If you're in that group, skipping the formulary check during open enrollment is one of the most expensive mistakes you can make.
The good news: checking formulary coverage is a straightforward process once you know where to look and what questions to ask. The steps below walk you through exactly that — from gathering your medication list to making your final enrollment decision with confidence.
Before diving in, it helps to understand how drug tiers work. See our guide to prescription drug tiers for a plain-language breakdown of how insurers categorize medications and what each tier means for your costs.
What You'll Need Before You Start
Gather these items before you begin comparing plans. Having everything in one place will make the process significantly faster and reduce the risk of missing something important.
What you will need
Once you have these materials ready, you can move through the steps below without stopping to hunt for information. If you share coverage with a spouse, partner, or dependents, collect their medication lists as well — their prescriptions are equally subject to formulary rules. For more on coordinating family coverage decisions, see open enrollment decisions that affect the whole family.
Insurer's Online Formulary Search Tool
Lets you search each plan's drug list by medication name to see whether it's covered and at which cost tier.
Summary of Benefits and Coverage (SBC)
The standardized plan document that describes cost-sharing rules, including how drug tiers map to copays and coinsurance percentages.
Spreadsheet or Comparison Worksheet
Track each medication's tier placement and estimated annual cost across two or more plan options side by side.
Your Pharmacy's Member Services Line
Can confirm whether a specific drug is covered under a new plan and what your expected copay will be before you enroll.
Plan's Prior Authorization List
Identifies which drugs require advance insurer approval before coverage kicks in — a critical document for specialty or high-cost medications.
GoodRx or Similar Drug Pricing Tool
Provides a benchmark cash price for your medications so you can compare against plan copays and identify when paying out of pocket may be cheaper.
Step-by-Step: Evaluating Drug Coverage During Open Enrollment
Follow these steps in order. Each one builds on the previous, so resist the urge to skip ahead to the comparison phase before your medication list is complete and verified.
Build a complete, verified medication list
Write down every prescription drug you take: brand name, generic name, dosage (e.g., 10 mg, 20 mg), and frequency (daily, as needed, etc.). Don't rely on memory — pull your actual prescription bottles or your pharmacy's medication history, which is usually available through your pharmacy's app or website.
Include medications you take occasionally but regularly, such as rescue inhalers, EpiPens, or migraine treatments. These can be among the most expensive drugs on a formulary, and they're easy to overlook because you don't refill them monthly.
Locate the formulary for each plan you're considering
Every insurer is required to publish its formulary. The fastest way to find it is through the insurer's website — look for a link labeled "Drug List," "Formulary," or "Prescription Drug Coverage" under the plan details page. Your HR benefits portal may link directly to each plan's formulary during the open enrollment window.
Download or bookmark the formulary document for each plan you're evaluating. Most insurers also offer an interactive search tool where you can type in a drug name and immediately see its tier and any restrictions. Use the interactive tool first — it's faster than reading a PDF.
Look up each medication and record its tier placement
Using the formulary search tool or PDF, look up each drug on your list. For each one, record:
- Whether the drug is on the formulary at all (covered or not covered)
- Its tier number (Tier 1, 2, 3, 4, or 5 — lower tiers cost less)
- Whether it carries any utilization management restrictions: prior authorization (PA), step therapy (ST), or quantity limits (QL)
If a drug appears as "not on formulary," that doesn't necessarily mean you can't get coverage — you may be able to request a formulary exception (covered in Step 6). But it does mean you need to investigate before assuming coverage.
Calculate your estimated annual drug costs under each plan
Now translate tier placements into actual dollars. Go back to each plan's Summary of Benefits and Coverage (SBC) and find the section that shows copays or coinsurance by tier. Then multiply:
Annual drug cost = (copay per fill × fills per year) for each medication
For example: if you fill a Tier 3 drug monthly and the plan charges a $50 copay per fill, your annual cost for that drug alone is $600. Do this for every medication on your list, then add them up for a total estimated annual drug spend under each plan.
Add this total to your other projected out-of-pocket costs (deductible, office visit copays) for a complete cost picture. A plan with a $30 higher monthly premium might actually save you money if it places your medications on lower tiers.
Check for prior authorization and step therapy requirements
Prior authorization (PA) means the insurer must approve coverage for a drug before you can fill it. Your doctor submits a PA request, and the insurer decides whether to approve it based on clinical criteria. This process can take days to weeks and is not guaranteed to be approved.
Step therapy requires you to try a less expensive drug first — and demonstrate that it doesn't work for you — before the plan will cover your preferred medication. If you're already stable on a medication, being required to switch can be both medically disruptive and administratively time-consuming.
If either restriction applies to any of your drugs under a plan you're considering, contact the insurer's member services line before enrolling. Ask directly: "If I have an existing prescription and my doctor documents medical necessity, how long does the prior authorization process typically take, and what's the approval rate for this drug?"
Request a formulary exception if a drug is not covered
If a medication you depend on isn't covered or is placed on an unaffordably high tier, you have the right to request a formulary exception. This is a formal request — typically submitted by your prescribing physician — asking the insurer to cover the drug at a lower cost-sharing level because a formulary alternative is not medically appropriate for you.
The process involves:
- Your doctor submitting a letter of medical necessity explaining why the covered alternatives are not appropriate
- The insurer reviewing the request (standard reviews must be completed within 72 hours; urgent reviews within 24 hours)
- An approval, denial, or request for more information
You can request a formulary exception before you enroll — call the plan's member services line during open enrollment and ask them to initiate or advise on the process so coverage is in place on day one of the new plan year.
Make your final plan selection based on total drug cost
With your side-by-side drug cost estimates complete, weigh them against the other plan factors: premium, deductible, copays for office visits, and network coverage for your current doctors. Then ask yourself:
- Which plan has the lowest total projected annual cost, not just the lowest premium?
- Are all of my critical medications covered without burdensome restrictions?
- If a drug requires prior authorization, am I prepared to manage that process in January?
- Does my preferred pharmacy fall within the plan's preferred pharmacy network?
If two plans are close in total cost, the one with better drug coverage and fewer utilization management restrictions is almost always the safer choice — it offers more predictability.
Once you've worked through these steps for each plan option, you'll have a side-by-side picture of your true drug costs — not just the premium. For a broader framework that incorporates deductibles, networks, and other cost factors alongside drug coverage, see our guide to comparing health plans side by side.
Formularies Change Every January 1
Even if you're staying on the same plan you had last year, the formulary may have changed. Insurers update their drug lists annually, and a medication that was covered at a low tier last year may have moved up — or been removed entirely. Always recheck your medications each open enrollment season, even if you plan to re-enroll in the same plan.
Mail-Order Pharmacies Have Different Tier Pricing
Many plans charge different copays depending on whether you fill a prescription at a retail pharmacy versus through the plan's mail-order service. For maintenance medications you take every day, mail-order can reduce your per-fill cost significantly — but only if the plan's mail-order pharmacy carries your drug at the same or lower tier. Confirm this before assuming the savings apply.
Use the Plan's Cost Estimator Tool
Many insurers now offer online cost estimators that let you enter your specific medications and calculate projected annual costs under each plan option. These tools are more accurate than manual calculations because they account for deductible timing and plan-specific cost-sharing structures. Look for this tool on the insurer's website or ask your HR department if a third-party benefits comparison tool is available.
Generic Substitutions Can Save Hundreds
If your brand-name drug has a bioequivalent generic, ask your doctor whether switching makes clinical sense. Generics are almost always placed in Tier 1 or Tier 2, meaning the lowest copays. Even a partial switch — using the generic for maintenance doses and keeping the brand for specific situations — can significantly reduce your annual drug spend.
It's also worth understanding the difference between plan types when it comes to drug access. Some HMO plans require you to use specific in-network pharmacies to get formulary pricing, while PPO plans may offer more flexibility. Review our HMO vs. PPO comparison to understand how plan structure interacts with drug coverage.
Missing Open Enrollment Has Serious Consequences
If you miss your employer's open enrollment window without a qualifying life event (such as marriage, divorce, birth of a child, or loss of other coverage), you're locked into your current plan for the entire following year — or left without coverage entirely. Prescription drug costs can escalate rapidly without coverage. Mark your open enrollment dates on your calendar and treat the deadline as non-negotiable.
Specialty Drugs Require Extra Scrutiny
Specialty medications — those used for complex conditions like rheumatoid arthritis, multiple sclerosis, or certain cancers — are almost always placed on the highest formulary tier and often require prior authorization, step therapy, and specialty pharmacy dispensing. If you take a specialty drug, do not make any enrollment decision without first confirming coverage details directly with each insurer's specialty pharmacy team. Annual out-of-pocket costs for uncovered specialty drugs can reach tens of thousands of dollars.
After Enrollment: Staying Ahead of Formulary Changes
Selecting a plan with favorable drug coverage is not a one-time task. Insurers are permitted to change their formularies during the plan year — removing drugs, moving them to higher tiers, or adding new utilization management requirements like prior authorization. These changes can affect your costs even if you do nothing differently.
Here's what you can do to protect yourself after enrollment:
- Read the Annual Notice of Change: At the start of each plan year, your insurer must notify you of significant formulary changes. Don't discard this document.
- Set a calendar reminder to recheck your drugs each October (for employer plans) or each fall (for marketplace plans), which is when the following year's formularies are published.
- Ask your pharmacist to flag substitutions early. Pharmacists often know before patients do when a drug is being removed from a formulary, because rejection notices appear at the point of sale.
- Keep your prescribing physician in the loop. If a formulary change forces a medication switch, your doctor needs lead time to evaluate alternatives and submit any required prior authorization paperwork.
For a deeper look at your rights and options when a drug is removed from your plan's formulary mid-year, read how formulary changes mid-year can affect your coverage.
If you're on Medicare or approaching Medicare eligibility, note that Part D drug plans have their own formulary rules, tier structures, and annual review process. Our Medicare Part D overview explains how those rules differ from employer-sponsored coverage. You can also explore the broader what's covered resource hub for a full picture of medication and service coverage across plan types.
All claims in this article are backed by peer-reviewed research. We follow strict editorial guidelines to ensure accuracy and reliability. Sources available on request from our editorial team.
