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

Dec, 25 2025

When you switch health plans, your monthly premium might drop - but your medication costs could spike. That’s because generic drug coverage isn’t the same across plans. Two plans might look identical on paper, but one could charge $3 for your blood pressure pill while the other hits you with a $40 copay. This isn’t a glitch. It’s how formularies work.

What Is a Formulary, and Why Does It Matter?

A formulary is the list of drugs your insurance covers. It’s divided into tiers, and each tier has a different price. The lowest tier - usually Tier 1 - is for generic drugs. These are chemically identical to brand-name pills but cost a fraction of the price. In 2022, generics made up 84% of all prescriptions filled, but only 14% of total drug spending. That’s the power of good coverage.

But here’s the catch: not all plans treat generics the same. Some waive your deductible for Tier 1 drugs. Others make you pay the full deductible before you even see a copay. If you take three generic medications a month, that difference could cost you over $2,000 a year.

Tier Structures: 3, 4, or 5? Here’s What You’re Actually Paying

Most plans use 3 to 5 tiers. The more tiers, the more confusing it gets.

3-tier plans: Common in some employer plans. Tier 1 = generics. Copays usually $5-$10. Simple, but fewer options.
4-tier plans: Standard for marketplace plans under the Affordable Care Act. Tier 1 = generics ($3-$20). Tier 2 = preferred brand names. Tier 3 = non-preferred brands. Tier 4 = specialty drugs.
5-tier plans: Common in Medicare Advantage. Tier 1 = preferred generics ($0-$10). Tier 2 = non-preferred generics ($20-$40). Now your generic isn’t just a generic - it’s a preferred generic.

If your medication is on Tier 2 as a generic, you’re paying more than if it were on Tier 1 - even though it’s the exact same chemical. Why? Because the insurance company negotiated a better deal with one manufacturer over another. You don’t get to pick which one they favor.

Medicare Part D vs. Marketplace Plans: Big Differences

If you’re on Medicare, your drug coverage comes through Part D. In 2023, the base deductible was $505. After that, generics typically cost $0-$10. But many plans waive the deductible entirely for Tier 1 drugs.

Marketplace plans (those bought through Healthcare.gov) are different. Silver Standardized Plan Design (SPD) plans - available in 32 states as of 2024 - waive your deductible for Tier 1 generics and charge a flat $10-$20 copay. That’s huge. If you take metformin, lisinopril, and atorvastatin, you could pay $30 a month instead of $500 before coverage even starts.

Non-SPD plans? You pay the full deductible - medical and prescription - before any drug coverage kicks in. So if your deductible is $3,000 and you need monthly generics, you’re paying out of pocket until you hit that number. That’s not a savings. That’s a trap.

A person choosing between two health plan paths with deductible walls and copay signs.

State Rules Change Everything

Where you live matters more than you think.

In New York, generics have $0 deductible and $75 copays for specialty drugs - but regular generics? Often $0-$7.
In California, there’s a separate $85 outpatient drug deductible. After that, you pay 20% coinsurance - capped at $250 per month.
In Washington, D.C., you pay a $350 drug deductible, but specialty drugs are capped at $150 per script.

A plan that looks cheap in Texas might cost you twice as much in California because of these state-specific rules. Always check your state’s prescription drug regulations before switching.

What You Must Check Before Switching

Don’t just look at the tier. Look at the exact drug.

Manufacturer matters. Metformin made by Teva might be Tier 1. Metformin made by Mylan might be Tier 2. Same active ingredient. Different price.
Strength matters. Your 500mg metformin might be covered. Your 1000mg version? Not covered. Or it’s Tier 3.
Pharmacy network matters. Your plan might cover your generic at CVS - but charge 300% more at Walgreens if it’s not in-network.
Mail-order vs. retail. Some plans charge less if you get a 90-day supply by mail. Others don’t. Always compare.

A 2022 American Pharmacists Association study found 68% of people switching plans didn’t verify their specific generic formulation. That’s why so many get shocked by the bill.

How to Compare Plans Like a Pro

Use these tools - don’t guess.

Get the full formulary. Not just a summary. Download the PDF from the insurer’s website.
Search your exact drugs. Type in the brand name, then the generic name, then the manufacturer and strength.
Use a cost calculator. Medicare.gov’s Plan Finder and Healthcare.gov’s plan selector let you enter your meds and see real monthly costs. CMS says users who use these tools reduce prescription complaints by 37%.
Calculate annual cost. Multiply your monthly copay by 12. Add any deductible you’ll pay before coverage starts. Don’t forget mail-order discounts.

One Blue Cross member in Massachusetts saved $780 a year by switching to a plan with $3 generic copays. That’s not luck. That’s research.

A fragmented formulary with tiered drug prices and manufacturer labels in geometric design.

Pitfalls That Cost People Thousands

Here’s what goes wrong:

Assuming all generics are equal. They’re not.
Believing a low premium means low drug costs. Often the opposite.
Not checking if your pharmacy is in-network. Out-of-network pharmacies can charge 400% more.
Ignoring state rules. California’s $85 deductible? That’s real. You can’t skip it.
Waiting until after you enroll to check. Too late.

Reddit’s r/healthinsurance had 147 cases in 2023 where people switched plans and got hit with unexpected generic drug costs. Sixty-three percent of those were because their medication moved from Tier 1 to Tier 2 - even though it was the same drug.

What’s Changing in 2025?

The Inflation Reduction Act is reshaping drug costs.

Insulin is capped at $35/month - no deductible, no coinsurance.
By 2025, Medicare Part D has a $2,000 annual out-of-pocket cap on all drugs.
Medicare will split generics into Tier 1 (preferred) and Tier 1+ (non-preferred) - making formularies even more complex.
AI tools like CMS’s new “Medicare Plan Scout” are being rolled out to help people compare plans faster. In testing, they cut enrollment errors by 44%.

Experts say integrated deductibles (where medical and drug costs count toward one total) are dying. By 2027, 80% of marketplace plans will have separate drug deductibles - or none at all for generics. That’s good news for people on regular meds.

Final Rule: Don’t Switch Without a List

Before you switch:

Write down every drug you take - brand name, generic name, manufacturer, strength, and how often.
Check the formulary for every plan you’re considering.
Use the official cost calculator - not the insurer’s marketing page.
Call your pharmacy and ask: “If I switch to Plan X, what will my copay be for [your drug]?”

The goal isn’t just to save on premiums. It’s to stop paying more for your pills than you should. Generic drugs are the cheapest way to treat chronic conditions. But only if your plan lets you use them without a financial penalty.

Are all generic drugs covered the same across health plans?

No. Two plans might both cover metformin, but one places it on Tier 1 with a $3 copay, while another puts it on Tier 2 with a $25 copay. The difference comes down to which manufacturer the insurer negotiated with, not the drug’s effectiveness. Always check the exact brand name and manufacturer on the formulary.

Do I need to meet my deductible before generic drugs are covered?

It depends on your plan. Silver Standardized Plan Design (SPD) marketplace plans waive the deductible for Tier 1 generics - you pay a fixed copay instead. Most other plans, including high-deductible health plans (HDHPs), require you to meet your full medical and prescription deductible before any drug coverage kicks in. Always read the fine print.

Can I switch plans mid-year to get better generic coverage?

Generally, no. You can only switch during Open Enrollment (November-December) or if you qualify for a Special Enrollment Period - like losing other coverage, moving, or having a baby. Exceptions are rare. Don’t wait until you’re paying too much - check your options before your plan renews.

Why is my generic drug suddenly more expensive after switching plans?

Your medication may have moved from a preferred generic (Tier 1) to a non-preferred generic (Tier 2) because the insurer changed its contract with the manufacturer. Even if the active ingredient is the same, different manufacturers are treated differently. Always verify your exact drug’s tier and manufacturer before switching.

What if my plan doesn’t cover my generic at all?

You can request a formulary exception. Contact your insurer and ask for a coverage determination. You’ll need a letter from your doctor explaining why you need that specific drug. If denied, you can appeal. Some plans also offer a transition refill - allowing you to keep your current medication for 30-90 days while you find an alternative.

How do I know if a pharmacy is in-network for my plan?

Check your plan’s website for a pharmacy directory. Call the pharmacy and ask if they accept your insurance. Don’t rely on your plan’s online tool alone - some are outdated. Out-of-network pharmacies can charge 300-400% more for the same generic drug.

Is it better to get my generics through mail-order or retail pharmacy?

Mail-order often costs less - especially for maintenance drugs. Many plans offer a 90-day supply at a lower copay than three 30-day retail fills. But some plans don’t cover mail-order at all, or charge extra for shipping. Compare the total cost for a 90-day supply versus three monthly fills before deciding.