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Navigating the fine print of your benefit plan can be a daunting task. Here is a listing of commonly used terms:


A shared cost arrangement between the insurer and plan member, usually a specified percentage of costs as set out in the health plan.

Coordination of benefits

If both you and your spouse have a health plan, you can lower or eliminate out of pocket costs through coordination of benefits. This means that if the medication is covered the costs will be shared. Typically, the insurance plan will bill the primary carrier first with the secondary plan picking up the remaining expense.


Co-pay is a fixed (or flat fee) out of pocket a patient is responsible for paying for a prescribed medicine covered by a drug plan.

Cost sharing

The amount insurance plans require patients to pay out of their own pocket. For example, co-pays, coinsurance and deductibles.


Amount of out of pocket costs before coverage begins. For example, you may pay a fixed amount for each prescription and this deductible amount would apply to all members of your family for their medicines as well.


A list of prescription medicines covered by an insurance plan. If a medicine is not on the formulary, it will not be covered, and plan members will be required to pay out of pocket or go through an appeal process.


Some drug plans take a more complex approach by dividing their list of covered medicines into tiers. The medicines are reimbursed based on which tier they occupy on the formulary. For example, if the prescribed drug is on tier one, the cost the patient must pay is lower. If a prescribed medicine is on a tier two level, the payments are higher and tier three would have the highest cost to the plan member.


Amount paid by the plan member for health insurance coverage, typically on a monthly, quarterly or yearly basis. The member may be required to pay a deductible in addition to the premium.

Prior authorization

Your plan may require you to get permission from the insurer before a prescribed medicine is covered.

Step therapy

Patients may be required try a more cost-effective drug rather than what was originally prescribed. This may also be referred to as fail first.

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