What is a formulary?

A formulary is defined as a list of medications that are covered by a specific health insurance plan. This list typically categorizes drugs according to tiers, which indicate the level of cost-sharing that the insured will encounter when accessing the medications. Tiers can affect the copayment or coinsurance rates; for example, generic drugs may be in a lower tier with lower costs, while brand-name drugs may be in higher tiers with increased out-of-pocket expenses.

The formulary is an important aspect of healthcare management because it guides both healthcare providers and patients in terms of medication options that are economically feasible under the specific insurance coverage. It also helps control costs for the insurance provider by encouraging the use of preferred medications.

In contrast to other options, such as a list of services that insurance plans do not cover, a schedule of premium payments, or a record of all medical claims submitted, a formulary specifically focuses on medications and their coverage, making it a critical element in the context of prescription drug benefits in health insurance plans.