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Prescription Drug Insurance Terms

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Common Prescription Drug Insurance Terms Defined

Below are definitions of the most popular drug terms used in the area of supplemental medical insurance.  This list is meant to provide prospective policyholders with a better comprehension of the vocabulary, as well as a better understanding of the inclusions and exclusions specified in a typical insurance plan featuring drug coverage.

  • Beneficiary: The individual designated to receive the drug benefits, as specified in the insurance policy.
  • Drug benefit: The amount allotted to the policyholder as reimbursement for a prescribed drug expense.
  • Birth control and contraceptives: Any medical device or drug used as a preventative measure against pregnancy.
  • Brand-name drugs: Any type of patented medication that is produced by a single manufacturer for distribution and promotion under a trademarked name.
  • Cap: The dollar amount limit that the policyholder can receive in drug benefits over a specified time span, usually referred to as either an annual or a lifetime cap.
  • Chronic medical condition: A health problem or condition that is ongoing or reoccurring over an extensive period of time, generally requiring maintenance drugs for treatment.
  • Claim: A formal submission by the policyholder to the insuring company requesting expense reimbursement for a prescription medication.
  • Co-payment: The dollar amount charged to the policyholder each time he or she fills a prescription drug insured by their plan; the insuring company funds the balance.
  • Deductible: The fixed dollar amount the policyholder must pay before the insuring company can begin issuing drug benefits.
  • Dependent: A member of the policyholder’s family covered by their drug plan (e.g. spouse, child, etc.).
  • Dispensing fee (also known as a “professional fee”): The amount charged by a pharmacist for processing a doctor-prescribed drug.
  • Drug tiers: The different levels of drug coverage specified in an insurance plan. They are used to determine the amount the insured must pay out-of-pocket for medication. Deciding factors include brand-name versus the availability of generic (equivalent) medicines, as well as preferred versus non-preferred medicines.
  • Exclusions: Any prescription drugs or therapeutic devices not covered by a supplemental insurance plan.
  • Fertility drugs: Any specialty medicine used by man or woman to increase their chances of reproducing with their partner.
  • Formulary: A compiled list provided by the insurance company of all the drugs and related products covered by a given policy.
  • Generic drugs: Any medication produced as a lower-cost alternative to a brand-name drug. These “equivalents” are tested and must prove to be as equally effective as their better-known counterparts.
  • Maintenance drugs: Medications used regularly to treat a chronic health condition such as cardiac failure, hypertension, etc.).
  • Open access plan: An all-encompassing drug insurance plan that supplies benefit coverage for all prescription medications, except for those noted in the fine print (exclusions).
  • Over-the-counter medication: A drug that is obtainable without a doctor’s prescription, such as standard pain relievers, antihistamines, decongestants and vitamin supplements. These are generally not covered by drug insurance plans.
  • Participating pharmacy: A pharmacy linked under contract with the insuring company. The policyholder is assigned to a particular pharmacy to fill his or her prescriptions in order to be reimbursed by the insuring company.
  • Prescription drugs: Any medication prescribed by a medical practitioner to treat a specified health condition, and dispensed solely by a pharmacist.
  • Rx: A universal symbol meaning “pharmaceutical prescription”.
  • Smoking cessation aids: Any nicotine replacement medications or therapeutic devices used to help individuals quit smoking.