Prescription Drug Coverage: Formularies, Tiers and How to Check Yours

A formulary is your health plan's list of covered prescription drugs, and where a drug sits on that list, plus any rules attached to it, largely decides what you pay at the pharmacy. To check yours, look up every drug you take in the plan's drug list before you enroll, note its tier and any restrictions, and ask for an exception if a drug you need is missing.

That check matters most in the next few weeks. Medicare's open enrollment period is October 15 through December 7, 2026, for 2027 coverage, and HealthCare.gov open enrollment for 2027 coverage runs November 1, 2026 to January 15, 2027. Every plan sets its own formulary, so two plans with similar premiums can charge very different amounts for the same medicine.

Key takeaways

A formulary, also called a drug list, belongs to one plan. A drug one plan covers may be missing from another.
Tiers set the price. Most generics sit on the lowest tier, and very expensive drugs sit on a specialty tier with the highest cost.
Prior authorization, step therapy and quantity limits can apply even to drugs that are on the list.
Marketplace plans must decide a standard exception request within 72 hours and an urgent one within 24 hours. Medicare drug plans use the same timeframes, counted from when the plan gets your prescriber's statement.
Medicare Part D caps out-of-pocket costs for covered drugs at $2,100 in 2026 and $2,400 in 2027, and a month's supply of each covered insulin costs no more than $35.
In a Marketplace plan, what you pay for covered drugs at in-network pharmacies counts toward the plan's yearly out-of-pocket limit, which by law can be no more than $10,600 for one person in 2026 and $12,000 in 2027.

What a formulary is

A formulary is the list of prescription drugs a plan covers. Federal rules set a floor for what the list must include, but each plan chooses the drugs above that floor:

Marketplace plans must cover prescription drugs, one of the ten essential health benefits. Each plan must cover whichever is larger: one drug in every category and class of the United States Pharmacopeia, or the number of drugs in each category and class that the state's benchmark plan covers. It must also post its full, current drug list where anyone can read it without creating an account or entering a policy number.
Medicare drug plans must list at least two drugs in each of the categories and classes prescribed most often, and must include most drugs in six protected classes: cancer drugs, HIV/AIDS drugs, antidepressants, antipsychotics, anticonvulsants and immunosuppressants for organ transplants.

Those minimums leave plenty of room. A plan can meet the rule with one drug in a class while your doctor prescribes a different one. Medicare drug plans can also change their lists during the year, within Medicare's guidelines, and must tell you about any change that affects a drug you take.

How drug tiers work

Plans sort covered drugs into tiers, and each tier has its own cost. Medicare.gov describes this common layout, though plans may divide drugs differently and Marketplace and employer plans use similar but not identical structures:

Tier	What is usually on it	Your cost
Tier 1	Most generic drugs	Lowest copayment
Tier 2	Preferred brand-name drugs	Medium copayment
Tier 3	Non-preferred brand-name drugs	Higher copayment
Specialty tier	Very high-cost drugs	Highest cost

A copayment is a fixed dollar amount per fill. Coinsurance is a percentage of the drug's price, so it rises with the price. For some drugs the deductible comes first, so you pay the plan's full negotiated price until it is met; check this for each drug you take. Our guide to premiums, deductibles, copays and coinsurance explains how those pieces fit together.

Rules that can apply to covered drugs

Being on the formulary does not always mean the pharmacy will fill the prescription right away. Three common rules can stand in the way:

Prior authorization

The plan has to approve the drug, based on its own criteria, before it will pay. Your prescriber may have to show the plan that you need the drug for medical reasons. In Medicare drug plans, from January 1, 2027, your plan may be able to handle prior authorization electronically, with decisions you can view in your patient portal.

Step therapy

A kind of prior authorization: the plan covers a more expensive drug only after you have tried a cheaper one, such as a generic or a biosimilar, where one exists.

Quantity limits

The plan caps how much of a drug it covers in a set period, for safety or cost reasons. Medicare's example is a cap of 30 tablets a month.

How to check a drug before you enroll

List every drug you take, with the exact name and strength. Note whether you take the brand or the generic version.
For a Marketplace plan, enter your drugs when you compare plans on HealthCare.gov, and the site will tell you whether each plan covers them. Each plan also links to its full list of covered drugs.
For Medicare, use the plan finder on Medicare.gov to see which plans cover your drugs, then open each plan's drug list. Our guide to what to review during Medicare open enrollment covers the Annual Notice of Change.
For a job-based plan, look up the drug list on the insurer's or plan's website, check your plan documents, or call the insurer.
For each drug, write down whether it is covered, its tier, whether the deductible applies, and any prior authorization, step therapy or quantity limit. Check that your usual pharmacy is in the plan's network.
Turn that into a yearly cost and add the premiums, as shown below. The method in our guide to comparing health plans by total yearly cost adds the rest of your care.

The same drug in two plans: a worked example

Example: Jordan takes one brand-name drug every month and is comparing two Marketplace plans for 2027 (all prices and plan terms are illustrative). Plan A lists the drug on its preferred brand tier with a $60 copay that applies before the deductible. Plan B lists it on a non-preferred tier: Jordan pays the full negotiated price of $500 a month until the $3,000 deductible is met, then 50% coinsurance. Plan B's premium is $150 a month lower. Assuming no other medical bills, Plan A's drug cost is 12 fills at $60, or $720. In Plan B, the first six fills cost $500 each, which meets the $3,000 deductible, and the last six cost 50% of $500, or $250 each, for $3,000 plus $1,500, or $4,500. Plan B costs $3,780 more at the pharmacy and saves $1,800 in premiums, so Plan A comes out $1,980 cheaper for the year.

The example assumes each plan's own out-of-pocket maximum is above these totals. The legal ceiling for 2027 is $12,000 for one person, but a plan can set a lower limit, and if Plan B's limit were below $4,500 its drug cost would stop there. The example shows how a drug's tier can outweigh a gap in premiums. When all your drugs are low-cost generics, the drug costs are small and the premium difference carries more weight.

When your drug is not covered: asking for an exception

Marketplace plans

Right after you enroll, some insurers will cover a single refill of a medicine you already take, so ask while you sort out next steps. The formal route is an exception request. Your doctor must confirm to the plan, orally or in writing, that the drug is right for treating your condition.

Federal rules require the plan to decide a standard request within 72 hours. If your health condition could seriously endanger your life, health or ability to regain maximum function, or you are partway through a course of treatment with the drug, you can ask for a decision within 24 hours instead. If the plan approves a standard request, it must cover the drug for the length of the prescription, including refills; an urgent approval lasts as long as the urgent situation does. HealthCare.gov says the plan will generally charge the copay it uses for its most expensive covered drugs, and what you pay counts toward your deductible and out-of-pocket limit. The plan may let you have the drug until it decides. If the plan says no, you can have the denial reviewed by an independent review organization, which must decide within 72 hours, or 24 hours for an urgent request.

These rules come from the federal requirements for plans that must cover essential health benefits: every Marketplace plan, and in general insured plans sold to individuals and small employers.

Medicare drug plans

When your new plan's coverage begins, it may give you a transition fill: a one-time fill, for 30 days, of a medicine you were already taking that the plan does not cover or puts rules on. You, your representative or your prescriber can then ask the plan to cover a drug that is not on its list, to drop a rule such as step therapy, or to charge the lower preferred-tier amount for a drug on a non-preferred tier. Your prescriber must send a supporting statement, and the plan's clock starts when it arrives: 72 hours for a standard decision and 24 hours for a fast one. You cannot get a fast decision if you have already paid for and received the drug.

If the plan says no, you can ask it to look again (a redetermination) within 65 days of the date printed on its denial notice. If it still says no, you can ask an Independent Review Entity for a reconsideration within 65 days of the date printed on the plan's appeal decision. Our guide to appealing a denied claim covers appeal letters and documents.

Job-based plans

Large-employer and self-funded plans do not have to follow the exception rules described for Marketplace plans, so check the plan documents for how to ask for a drug the plan does not cover. A refusal can be appealed through the plan's claims process. Under Department of Labor rules for employer plans, you have at least 180 days to file an internal appeal, and an appeal involving urgent care must be decided within 72 hours.

Frequently asked questions

What is the difference between a formulary exception and a tiering exception?

In Medicare drug plans, a formulary exception asks the plan to cover a drug that is missing from its list, or to set aside a rule such as a quantity limit. A tiering exception asks the plan to charge the preferred-tier amount for a drug on a non-preferred tier, because the preferred-tier options will not work for you.

Do drug costs count toward your out-of-pocket maximum?

In a Marketplace plan, your cost sharing for covered drugs at in-network pharmacies counts toward the yearly limit, which is at most $10,600 for one person and $21,200 for a family in 2026, and $12,000 and $24,000 in 2027. Medicare Part D has its own out-of-pocket cap of $2,100 in 2026 and $2,400 in 2027.

What if you already paid for the drug?

In a Medicare drug plan, you can pay, keep the receipt and ask the plan to pay you back through a coverage determination. A decision about payment comes within 14 days, and a fast decision is not available once you have paid. Check your plan's Evidence of Coverage for the steps.

Does Medicare limit what you pay for insulin?

Yes. Each insulin product that Part B or Part D covers costs you at most $35 for a month's supply, and you do not have to meet a deductible first.

Can a plan stop covering your drug during the year?

Medicare drug plans can change their lists during the year under Medicare's guidelines and must notify you of changes that affect drugs you take. For other plans, check the plan documents and read any notice from the insurer as soon as it arrives.

Sources

Getting prescription medications (HealthCare.gov)
Out-of-pocket maximum/limit (HealthCare.gov)
45 CFR 156.122: Prescription drug benefits (Legal Information Institute, Cornell Law School)
How do drug plans work? (Medicare.gov)
Drug plan rules (Medicare.gov)
Medicare Appeals, April 2026 (Centers for Medicare & Medicaid Services)
Insulin (Medicare.gov)
Announcement of Calendar Year 2027 Medicare Advantage Capitation Rates and Part C and Part D Payment Policies, April 6, 2026 (Centers for Medicare & Medicaid Services)