Is Prescription Insurance Different From Medical Insurance?
Unravel the key distinctions between medical and prescription insurance, how they integrate, and their unique financial structures.
Unravel the key distinctions between medical and prescription insurance, how they integrate, and their unique financial structures.
Health insurance plans in the United States often distinguish between general medical coverage and prescription drug benefits. These two components frequently operate with different rules and structures. Understanding the specific roles of each type of coverage is important for managing healthcare expenses effectively.
Medical insurance covers a broad range of healthcare services and procedures. This includes physician visits, hospital stays, surgical interventions, and diagnostic tests like X-rays or laboratory work. It focuses on services provided by healthcare professionals and facilities to diagnose, treat, or prevent illnesses and injuries.
Prescription drug coverage, in contrast, addresses the costs of medications prescribed by a licensed healthcare provider. These are drugs dispensed by a pharmacy for self-administration, not those administered in a clinical setting. Medical insurance primarily handles services and procedures, while prescription drug coverage manages pharmaceutical products.
Prescription drug coverage is frequently integrated as a benefit within a broader medical insurance plan. Many employer-sponsored health plans or plans purchased through the Affordable Care Act (ACA) marketplaces include these benefits. In these cases, a single insurance card provides access to both medical and pharmacy benefits.
Alternatively, prescription drug coverage can be obtained as a standalone plan. A common example is Medicare Part D, which provides optional prescription drug coverage for Medicare beneficiaries. These plans are offered by private insurance companies approved by Medicare and can be purchased in addition to Original Medicare (Parts A and B). Pharmacy Benefit Managers (PBMs) manage these benefits, administering programs, developing formularies, and processing claims.
Health insurance plans, including both medical and prescription coverage, involve several financial components. Premiums are regular payments made to maintain coverage. Deductibles represent the amount an individual must pay for covered services before the insurance plan begins to pay. Some plans may have a single combined deductible for both medical and pharmacy expenses, while others feature separate deductibles.
After meeting a deductible, copayments and coinsurance come into effect. Copayments are fixed amounts paid for specific services or prescriptions, such as a set dollar amount for a doctor’s visit or a generic drug. Coinsurance is a percentage of the cost of a covered service that the insured person is responsible for paying. For prescription drugs, copayments and coinsurance vary based on a “formulary,” a tiered list of covered medications. Drugs on lower tiers, like generics, have lower out-of-pocket costs compared to brand-name drugs on higher tiers.
An out-of-pocket maximum caps the total amount an individual must pay for covered medical expenses within a given period. Once this maximum is reached, the insurance plan covers 100% of additional covered costs for the remainder of the benefit period. This maximum includes amounts paid towards deductibles, copayments, and coinsurance, but not premiums. For prescription coverage, this includes costs towards covered drugs.