How are prescription drug benefits structured?
Most employee plans use a three-tier system for prescription drugs: lowest copays for generics, moderate for preferred brands, and highest for specialty drugs. Each tier impacts your out-of-pocket costs.
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Complete Guide to Prescription Drug Benefits Under Employee Plans
Why This Question Matters for Colorado and Utah Residents
Prescription drug costs are a major concern in both Colorado and Utah, where employees face higher-than-national-average contributions for family coverage. Rising medication costs and plan differences can add confusion, especially as nearly 50% of Coloradans and Utahns receive health benefits through employer-sponsored plans. Understanding your prescription benefits structure helps you avoid unexpected costs and get the most value from your coverage.
- Managing Out-of-Pocket Costs: Regional data shows family coverage contributions averaging over 30% of premiums in northern Colorado. Knowing your tier and copay can save hundreds per year.
- Access to Needed Medications: Colorado and Utah employers often have plans with strict formularies. Understanding tiers increases your chances of getting the right medication at an affordable price.
- Compliance with Regional Laws: Both states require disclosure of coverage details. Knowing how your plan’s prescription tiers work reduces your risk of surprises and missed treatment.
What Most People Get Wrong
Many believe all prescription drugs cost the same or that insurance will automatically cover any medication prescribed. In reality, costs vary greatly based on plan design, and some drugs (especially new or specialty medications) may require special approval or have limited coverage.
Another misconception is assuming that using brand-name drugs always offers more quality or effectiveness. In Colorado and Utah, nearly 85% of prescriptions filled are generics, which are equally effective and much less expensive for both employees and employers.
The Complete Picture
Most employer plans in Colorado and Utah utilize a tiered formulary system. Typically:
- Tier 1: Generic drugs—lowest copays, often $10–$20/month. These drugs are FDA-approved as equivalent to brands.
- Tier 2: Preferred brand-name drugs—moderate copays, usually $25–$50/month. These are selected based on cost-effectiveness and insurer negotiations.
- Tier 3: Specialty or non-preferred drugs—highest cost, $75+ per fill or coinsurance (often 25-40% of drug cost). These medications treat complex, chronic illnesses like cancer or autoimmune conditions.
Plans may also have a mail-order benefit (savings for 90-day supplies) or requirements for step therapy and prior authorization. Regional carriers—such as UnitedHealthcare, Kaiser, and Cigna—dominate the market and often leverage discounts, but costs are rising: Colorado family plan premiums rose 7% in 2024 alone. Smart navigation of the drug benefit can lead to savings of $500+ a year for a typical family. Always check your Summary of Benefits and Coverage (SBC) and review the plan’s list of covered drugs (formulary) to make the best choice for your needs.
Making the Right Decision for Colorado and Utah Residents
Question 1: Does my prescription have a lower-cost generic alternative?
Evaluate all options by:
- Asking your doctor if a Tier 1 generic is available for your medication—most are equally safe and effective.
- Reviewing your plan’s formulary (list of covered drugs), which you can access online or request from HR.
Question 2: How do out-of-pocket costs compare across pharmacies and mail order?
Pharmacy prices and discounts can vary greatly between local chains and online/mail-order services:
- Check whether your insurer offers preferred pricing at certain pharmacies.
- See if a 90-day supply by mail saves money (often does for ongoing meds).
Question 3: What assistance or exceptions are available for high-cost (specialty) prescriptions?
If you require a Tier 3 or specialty drug, don’t assume the highest cost is your only option:
- Ask your provider about manufacturer assistance programs—Colorado and Utah residents can often access co-pay support totaling thousands per year.
- Contact your benefits administrator to ask if step therapy or prior authorization could switch you to a more affordable alternative without impacting your care.
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Real World Examples
Fort Collins Family Gets Smart About Prescription Drug Tiers
Background: Emily, a marketing professional in Fort Collins, manages a family health plan through her employer. She, her husband, and their teenage son each have different prescriptions.
Coverage: Employer-sponsored PPO with prescription coverage: $15 Tier 1 copay, $35 Tier 2, $80 Tier 3 (or 30% coinsurance for certain specialty meds).
Monthly Premium: $457/month ($5,484/year) for family coverage.
The Incident: When her son was prescribed a brand-name allergy medication (Tier 2, $35), Emily asked the doctor about generics. Switching to the generic option moved the cost to Tier 1 ($15), saving $20/month.
Total Claim Cost: $110 for the month (three prescriptions: $15, $15, $80).
Emily's Cost: $110, with an extra $20/month saved after switching to generics for her son.
"Understanding how our prescription benefit worked saved us real money every month. FoCoIns helped explain the tiered system—now I always ask about generics first."
Denver Software Engineer Navigates a Specialty Drug Cost
Background: David, a software engineer in Denver, was diagnosed with rheumatoid arthritis and required a specialty biologic medication.
Coverage: HDHP with HSA (UnitedHealthcare): $2,300 deductible, specialty drug at 30% coinsurance after deductible met.
Monthly Premium: $322/month ($3,864/year) for individual coverage.
The Incident: The specialty prescription retailed for $4,200/month. After meeting his deductible, he owed $1,260 per month (30% of $4,200). David worked with both his doctor and insurer, enrolled in a manufacturer copay assistance program, and reduced his monthly cost to $250.
Total Claim Cost: $4,200/month (drug cost), $1,260 initially, but with assistance reduced to $250.
David's Cost: $250/month out-of-pocket for the medication, using all available support.
"Without my employer’s health plan and some good advice on assistance programs, I couldn’t have afforded the treatment that keeps me working. FoCoIns broke down all my options."
Salt Lake City Teacher Saves with Mail-Order Pharmacy
Background: Jessica, a public school teacher in Salt Lake City, manages hypothyroidism with a daily prescription.
Coverage: Group HMO plan (Cigna): $10 Tier 1 copay, $28 mail-order for 90-day supply.
Monthly Premium: $189/month ($2,268/year) for individual coverage.
The Incident: Jessica switched from filling her medication monthly at a local pharmacy ($10/month) to mail-order ($28 for 90 days). This reduced her annual prescription cost from $120 to $112, plus saved her time with automatic refills.
Total Claim Cost: $112/year for the medication (via mail order).
Jessica's Cost: $112/year compared to $120—plus the benefit of fewer pharmacy trips.
"Mail order’s convenience and savings made sense. The FoCoIns advisor explained how my plan’s mail benefit worked, and now I never run out."
Avoid These Common Mistakes
Mistake #1: Ignoring the Formulary—Taking for Granted a Drug is Covered
What People Do: Many employees assume every prescription ordered by their doctor is automatically included in the health plan’s formulary.
Why It Seems Logical: If the doctor orders it, insurance should cover it, right?
The Real Cost: In Colorado, a non-formulary drug can mean paying full price—sometimes $200–$1,300 per fill. With rising out-of-pocket maximums (often $6,000+), one oversight can quickly erase savings from an employer plan.
Smart Alternative: Always review your plan’s formulary or contact your FoCoIns advisor before starting a new medication. They can help find covered alternatives that keep your costs manageable.
Mistake #2: Overlooking Generic Alternatives
What People Do: Requesting or accepting a brand-name medication without asking about generics—despite generics accounting for 85% of all local prescriptions and costing $20 or more less per fill.
Why It Seems Logical: Brand names are often better advertised or familiar.
The Real Cost: In Utah and Colorado, that preference can mean $300–$600 in avoidable yearly spending for a family.
Smart Alternative: Make it a habit to ask your doctor and pharmacist about generics first. FoCoIns advisors can help you review coverage tiers for any prescription.
Mistake #3: Not Exploring Copay Assistance or Mail-Order Options
What People Do: Accepting steep coinsurance or a high monthly copay, especially for Tier 3 or specialty medications, without checking for manufacturer or mail-order discounts.
Why It Seems Logical: Many think assistance is only for the uninsured or that employer plans always offer the lowest rates.
The Real Cost: Specialty drugs can exceed $4,000/month in out-of-pocket costs for a single family member. Even everyday medications may cost more without mail-order discounts.
Smart Alternative: Ask your benefits administrator or FoCoIns advisor about manufacturer copay programs and mail-order options—both can cut costs dramatically, often by $400+ a year.
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