Understanding Drug Formularies On New Individual Health Insurance Plans In Colorado

Colorado residents only: Compare how each health insurance company covers your medication with our exclusive Colorado prescription drug formulary transparency tool.

Opponents of the ACA have raised the issue of drug formularies as a negative aspect of the new ACA-compliant plans, complaining that the new plans won’t cover all of the medications people need.  Just like many of their previous arguments against Obamacare, this one lends itself to plenty of sound bites, and the basic premise is all about fear mongering rather than reality.

The concern is that non-formulary drugs aren’t covered and could leave people with significant out-of-pocket costs if their drugs are not counted towards the out-of-pocket maximum on the policy.  There has also been some frustration with how difficult it can be to track down exactly which drugs are included on each plan’s formulary.

With regards to some medications not being covered, that has always been the case.  This helpful article was published four years ago.  If you spruced it up with some references to the ACA and exchanges and benchmark plans, it could easily pass for a new article about how prescription drugs are covered.

How formulary drugs are covered under the ACA Rx medication guidelinesNo, health insurance policies do not cover every drug approved by the FDA.  They didn’t in the past, and they still don’t.  Plans are required to cover at least one drug in each category, OR as many drugs in each category as the benchmark plan covers, whichever is greater.  Under the ACA, each state had to select a benchmark plan on which new individual and small group plans would be modeled.  In September 2012, Colorado selected a Kaiser small group plan, which was generally well-received by consumer advocate groups in the state (ie, it’s a good policy).  Now that Colorado’s individual plans are being designed to largely mimic the benchmark plan, the coverage provided by individual plans is just as good as that of group plans, which was not always the case in the past.   EDIT, 2/20/14:  Although the Kaiser small group benchmark plan is generally considered to be very good coverage, it’s drug formulary is not as extensive as those of other benchmark plans across the US.  There are roughly 1,040 “unique chemical entities” available in the US, and the average benchmark plan covers about 87% of them.  The Kaiser benchmark plan in Colorado covers 54% of the unique chemical entities – the lowest percentage of any of the benchmark plans in the country.  Although this is still far better than some of the old individual plans that didn’t cover prescriptions at all, or covered only generics and low-priced brand name drugs, it’s certainly not as good as many of the other benchmark plans.  This means that if you’re taking high-priced medications, it’s especially important to double check the formularies of the plans you’re considering.

EDIT, 3/2/14:  Please see Maggie Mahar’s comment at the bottom of this article.  Although it’s important for people shopping for a new health insurance plan in Colorado to be aware of the drug formularies and double check to see if the plan they’re considering includes coverage for their medications, a more restrictive formulary is not necessarily worse than one that includes more medications.

Over the past decade, individual plans in Colorado had been slowly cutting back on prescription coverage in response to rising medication costs.  Although most individual plans still covered prescription drugs, Rx deductibles were becoming very common, as were policies that limited coverage to only tier 1 and 2 drugs, or in some cases, only generic drugs.  And there were also policies available that didn’t cover prescription drugs at all.

Those plans are no longer for sale.  There is no such thing as a new policy that doesn’t cover prescriptions, or that limits coverage to only generics or low-cost brand names.  To skewer the new plans because they don’t cover every FDA-approved medication is disingenuous at best.  Critics are ostensibly looking out for consumers’ healthcare needs, but where were they when policies were being sold that didn’t cover any medications at all?

It’s true that if you are prescribed a drug that is not on your carrier’s formulary, you may have to pay the full price of the medication and it won’t necessarily count towards your out-of-pocket maximum (this is the case with ANY non-covered expense, including out-of-network charges for plans that do not have out-of-network coverage).  But your doctor should be able to prescribe you a similar medication from the same class that is on your health plans’s formulary.  If they cannot, and the non-covered medication is the only viable option, you and your doctor can work with your health insurance carrier to receive prior authorization to have the drug covered.

Connect for Health Colorado (should) make it very easy to see what medications are on each plan’s formulary.  When you’re browsing plans, each one has a link to the plan details, and under that is another link to the “preferred drug list”.  Clicking on that link (is supposed to) bring up the plan’s formulary, along with details about how prior authorization can be obtained for drugs that are not on the list, and how patients can request that new drugs be added to the list.  As an example, here is Anthem Blue Cross Blue Shield’s 2014 formulary and related FAQs that they have posted on the Connect for Health Colorado website. That feature doesn’t work as of 9/17/2014, but will hopefully get fixed.

Don’t let people who are selling fear convince you that the new plans offer inferior prescription coverage.  When compared with old plans that could be sold with no prescription coverage at all, the fact that the new plans don’t include ALL drugs seems like splitting hairs.

About Louise Norris

Louise Norris has been writing about health insurance and healthcare reform since 2006. In addition to the Colorado Health Insurance Insider, she also writes for healthinsurance.org, medicareresources.org, Verywell, Spark by ADP, and Boost by ADP, and Gusto. Follow on twitter and facebook.


  1. Maggie Mahar says


    Very helpful information. Just one comment–the fact that Kaiser covers a smaller percentage of all drugs doesn’t tell us whether its formulary is better or worse.

    Kaiser P. uses its own extensive electronic records to figure out which drugs are safe and effective for patients who fit a particular medical profile. In order words, when setting up a formulary it is practicing evidence-based medicine. (Many insures make the decision primarily by looking at price and what is popular. They don’t want to lose market share if they don’t include popular drugs.)

    Kaiser, on the other hand, worries about safety. In the past,Kaiser, the Mayo Clinic and the VA all took a very popular drug out of their formularies because there was concern that it was killing people. Turns out it was. A year or two later the drugmaker was forced to take it off the market. (Sorry I can’t remember the name of the drug–maybe you do?)

    Meanwhile, both Medicare and large-for-profit insurers continued to cover the medication until it was withdrawn.

    There are too many drugs out there that hurt some or even most patients.
    Good insurers narrow their formularies–just as they narrow their networks–in an effort to provide safe effective care. Btw, Kaiser docs can prescribe drugs not in the formulary for patients who, for some reason, cannot take the preferred drug.
    They just need to ask another doctor to sign off.

    • Good points Maggie! I’ve updated the article to refer readers to your comment. My purpose in writing this was to provide a resource for our clients who are wondering whether the medications they’re currently taking will be covered by a new plan. We want to make sure they’re aware of the formularies and how to compare the various options based on drug coverage, if that’s an issue for them. But you make a great point about the fact that narrow formularies – just like narrow networks – can be found on excellent plans.

      • Maggie Mahar says

        Thanks Louise. Most people want to be sure that the drugs they currently take will be covered by their plan. I do. But if a drug isn’t covered, it’s worth asking why. Try Goggling the name of the drug:
        are their questions about its safety and risks?

        Ask your pharmacist; he/she can be a valuable resource.

        • Absolutely. It’s also important to note that every category/class of drug has at least one covered medication on every formulary. If someone is taking a drug that isn’t covered, there’s a good chance that her doctor can switch her to a formulary drug that will work just as well. And if not, there’s a solid appeals process in place. That said, if given a choice between two plans, one of which covers the drugs a person is taking, and the other of which requires them to switch to different medications, most people seem to prefer the plan that covers their existing prescriptions. So knowing how to compare formularies is valuable for consumers with on-going prescription needs.

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