Switching Health Plans? How to Check Generic Drug Coverage to Save Money

When you switch health plans, your monthly premium might drop-but your medication costs could spike. Many people don’t realize that generic drug coverage varies wildly between plans, even within the same insurer. A plan that looks cheaper overall could end up costing you hundreds more each year just for your daily pills. This isn’t guesswork. It’s about knowing exactly how your prescriptions are covered-and where to look before you sign up.

Why Generic Drugs Matter More Than You Think

Generic drugs make up 90% of all prescriptions filled in the U.S., but they only account for 23% of total drug spending. That’s because they’re just as effective as brand-name drugs but cost far less. Insurance companies know this. That’s why they design their formularies-lists of covered drugs-to push you toward generics. But not all generics are treated the same.

In most plans, generics are split into tiers. Tier 1 is the cheapest. Tier 2 and higher cost more. Some plans even have five tiers. If your medication moves from Tier 1 to Tier 3 when you switch plans, your copay could jump from $5 to $40. That’s not a small change. For someone taking three maintenance meds a month, that’s over $1,000 extra per year.

How Formularies Work: Tiers, Deductibles, and Hidden Costs

Most health plans use a tiered system for drugs. Here’s what you’re likely to see:

• Tier 1: Preferred generics. Usually $3-$20 for a 30-day supply. Often covered before you meet your deductible.
• Tier 2: Non-preferred generics or brand-name drugs with generic alternatives. Copays of $20-$50.
• Tier 3: Non-preferred brand-name drugs. $50-$100+.
• Tier 4 and 5: Specialty drugs-even if they’re generic versions of complex medications. Coinsurance of 20-30%.

The real trap? Deductibles. In many plans, especially high-deductible health plans (HDHPs), you have to pay the full medical deductible before any drug coverage kicks in. But not all plans work that way.

Silver Standardized Plans (SPDs) on the Health Insurance Marketplace are different. They waive the deductible for Tier 1 generics. That means even if your deductible is $2,000, you still pay only $20 for your metformin or lisinopril. KFF found that consumers on these plans save $1,500-$5,000 a year compared to those on non-standardized plans.

Medicare Part D vs. Private Plans: What’s the Difference?

If you’re on Medicare, things get more complicated. Medicare Part D plans have a base deductible of $505 in 2023, but most plans lower or eliminate it for generics. Preferred generics often cost $0-$10 after the deductible. But here’s the catch: not all generics are created equal in Medicare.

Some plans label certain generics as “preferred” and others as “non-preferred,” even if they have the same active ingredient. For example, levothyroxine from Manufacturer A might be Tier 1, while the exact same drug from Manufacturer B is Tier 2. That’s because insurers negotiate deals with manufacturers. You don’t get to choose. But you can find out.

Medicare Advantage plans with drug coverage (MA-PDs) often have lower out-of-pocket costs than standalone Part D plans. But only if your drugs are on their formulary. A 2022 Medicare analysis showed MA-PDs saved beneficiaries 18% on average-but only for those taking multiple drugs. If you only need one generic, the difference shrinks.

State Rules Change Everything

Where you live affects your drug costs more than you think. California requires a $85 outpatient drug deductible before coverage starts, then charges 20% coinsurance (capped at $250). New York, on the other hand, waives the deductible for generics entirely and caps copays at $75 for specialty drugs. In D.C., there’s a separate $350 drug deductible with a $150 cap on specialty meds.

KFF’s 2023 state analysis found that states with separate drug deductibles-like California-had 22% higher adherence rates to generic medications. Why? Because people knew exactly what they’d pay. No surprises. States without these rules leave consumers guessing.

What to Check Before You Switch

Don’t just look at premiums. Don’t just glance at the plan’s summary. You need to dig into the formulary. Here’s exactly what to do:

1. Get the full formulary list-not just the tier breakdown. Look for your exact drug name and manufacturer.
2. Check the formulation. Is it immediate-release metformin or extended-release? Some plans cover one but not the other.
3. Verify your pharmacy. Is your local pharmacy in-network? OptumRx found that using a non-preferred pharmacy can triple your generic drug costs.
4. Calculate your annual cost. Multiply your monthly copay by 12. Add any deductible you’ll need to meet. Don’t forget mail-order options-they’re often cheaper.

People who complete all four steps reduce unexpected drug costs by 73%, according to CMS data. That’s not a small margin. That’s life-changing savings.

Tools That Actually Work

You don’t have to do this alone. Here are the best tools, tested and trusted:

• Medicare Plan Finder (medicare.gov): Lets you enter your drugs and see exact out-of-pocket costs across all Part D plans. Used by over 4 million people in 2022.
• Healthcare.gov Plan Selector: Filters plans by your medications and shows tier-specific costs. Best for Marketplace plans.
• Insurer-specific formulary search tools: Blue Cross, UnitedHealthcare, and Humana all have detailed online formularies. Accuracy rates? Up to 96%.
• eHealthInsurance’s prescription calculator: Processes 1.7 million queries a month. Great for comparing multiple plans side by side.

A 2023 study by the National Institute for Health Care Management found that people who used these tools paid 32% less out of pocket for prescriptions.

Common Mistakes That Cost You Money

Most people make the same three mistakes when switching plans:

• Assuming all generics are equal. Metformin from one maker might be $5. Another maker’s version? $40. Same drug. Different tier.
• Ignoring pharmacy networks. Your plan might say your drug is $10-but only if you use CVS. If you go to Walgreens, it’s $45.
• Not checking for changes. Insurers update formularies every January. Just because your drug was covered last year doesn’t mean it will be this year.

Reddit’s r/healthinsurance community tracked 147 cases in 2023 where people got hit with surprise costs after switching. Sixty-three percent of those cases involved a generic drug moving from Tier 1 to Tier 2-because the manufacturer changed.

What’s Changing in 2025 and Beyond

The Inflation Reduction Act capped insulin at $35/month starting in 2023. By 2025, Medicare Part D will have a $2,000 annual out-of-pocket cap on all drugs. That’s huge.

But there’s also more complexity coming. Starting in 2025, Medicare will split generics into two tiers: Tier 1 (preferred) and Tier 1+ (non-preferred). This could make formularies even harder to read.

Meanwhile, 32 states now offer Silver SPD plans with $10 generic copays before the deductible-up from 24 in 2023. Experts predict that by 2027, 80% of Marketplace plans will eliminate integrated prescription deductibles because consumers keep getting burned.

Final Advice: Don’t Guess. Verify.

Switching health plans is about more than premiums. It’s about your daily medication costs. A $100/month savings on your premium means nothing if your blood pressure pill jumps from $5 to $40. You can’t rely on customer service reps to get it right. You can’t trust the plan’s one-page summary.

Take 30 minutes. Use the Medicare Plan Finder or Healthcare.gov tool. Enter your exact drugs. Compare the total annual cost-not just the monthly premium. Look at the formulary. Check your pharmacy. Do this before you enroll. It’s the single most effective way to save money on your health care.

Generic drugs are the most cost-effective part of your treatment. But only if your plan covers them right. Don’t let a paperwork oversight turn your savings into a surprise bill.