What is a formulary, and how does it affect prescription benefits?

• A. A schedule of all physician salaries.
• B. A list of preferred hospitals by city.
• C. A catalog of medical devices with tax implications.
• D. A list of covered medications with tiered copays/coinsurance and potential prior authorization requirements.

Answer: (D)

A formulary is the plan’s approved list of prescription medications that are covered under the prescription benefit. It shapes what drugs are available to you through your plan and how much you pay for them. Drugs are organized into tiers, and each tier comes with a different patient cost share—lower tiers usually mean lower copays or coinsurance, while higher tiers cost more. This tiered system encourages choosing cost-effective and clinically appropriate options. Formularies often include rules like prior authorization or step therapy, which require documentation of medical necessity or trying a preferred, lower-cost alternative first before the plan covers a more expensive option. All of this affects both access to medications and out-of-pocket costs. So, a formulary is best described as a list of covered medications with tiered copays/coinsurance and potential prior authorization requirements. Items about salaries, hospital lists, or medical devices with tax implications don’t describe prescription coverage.