Understanding Key Terms
Summary
Understanding a few common prescription drug terms can make it easier to compare plans, review your coverage, and estimate what you may pay for your medications.
Key Terms
| Term | Definition |
|---|---|
| Deductible | A deductible is the amount you pay for covered prescription drugs before your plan begins paying its share. Some plans have a $0 deductible, while others require you to pay a certain amount before coverage begins. |
| Copayment (Copay) | A copayment is a fixed dollar amount you pay for a covered prescription drug. For example, you may pay a $10 copay for one medication and a $25 copay for another, depending on how the drug is covered by your plan. |
| Coinsurance | Coinsurance is a percentage of the cost of a covered prescription drug that you pay. For example, if a medication costs $100 and your coinsurance is 25%, you would pay $25, and your plan would pay the remaining amount. Learn More About Coinsurance |
| Cost Sharing | Cost sharing is the amount you pay toward your health care and prescription drug coverage. This includes deductibles, copays, and coinsurance. |
| Drug Tier | A drug tier is a category used to group medications. The tier assigned to a drug helps determine how much you pay. Lower-tier drugs generally cost less than higher-tier drugs. Learn More About Drug Tiers |
| Formulary | A formulary is your plan's List of Covered Drugs. Only medications included on the formulary are covered by your prescription drug benefit unless an exception is approved. |
| Premium | A premium is the monthly amount you pay to maintain your health plan coverage. |
| Out-of-Pocket Costs | Out-of-pocket costs are the amounts you pay yourself for covered medications, including deductibles, copays, and coinsurance. |
| Coverage Stages | Coverage stages are the phases of your Medicare prescription drug coverage throughout the year. As you and your plan spend money on covered medications, you move through different stages of coverage, and the amount you pay may change. Learn More |