Your health insurance plan includes a list called a formulary, a directory of the medications it covers. If you’ve ever been surprised at how much it cost to fill a prescription, chances are the medication wasn’t on your formulary.

The formulary is also called the preferred drug list (PDL). At first glance, you may think you need a decoder ring to understand it. But understanding your PDL can help you pay the lowest price for the medications you need.

Your plan list is created by a committee made up of doctors and pharmacists. The group works together to ensure the formulary is based on safety, effectiveness and overall value, says Louise Norris, a licensed insurance broker and healthinsurance.org analyst.

A PDL puts drugs into tiers, usually three to five, based on their cost. Tier 1 drugs are the cheapest and are often generic versions of brand-name drugs that are in higher, more expensive tiers, Norris says.

Your insurance plan may not cover all possible medications. It depends on whether your PDL is open or closed.

With an open form, Your health plan covers any FDA-approved medications. “Every drug imaginable is on some level. The worst-case scenario is that the most expensive medications are at the highest tiers,” says Michael Botta, PhD, co-founder of direct-to-patient healthcare company Sesame.

Many business plans are open or very close to it, he says.

With a closed formulary, “there are some drugs that are not in any of the tiers and therefore are not subject to your drug benefits,” Botta says.

One-third of Americans use Medicaid, state-funded health insurance for those with low incomes, he says. Most of these plans have closed formularies.

Go to your insurance plan’s website and search for it. It could be on a tab like “find medications” or “covered medications.” The formulary may include medications:

• Alphabetically
• By level
• By type of drug
• Due to medical condition they treat

If you can’t find the medication you’re looking for, call the number on your insurance card for information, Botta says.

“Your health plan may have an interactive formulary page that shows you covered alternatives if your drug is not on the formulary,” Norris says. It can also give you lower-tier alternatives if your medication is on a higher tier, she adds.

The PDL generally includes other important information about your coverage, including:

• Prior authorization (PA), or if your plan requires you to get prior approval for a drug to be covered
• Step therapy (ST), which means you must try cheaper medications first to see if they work for your condition.
• Quantity limits (QLs), when a drug is covered only for a certain number of refills or for a specific number of doses per day.

Most forms change at the beginning of each calendar year. Before you order your first refill of the year, check to make sure your medications are still on the list, if they have been replaced by generics, or if any new ones you need have been added.

If you are thinking about changing your health insurance plan, check to see if all of your family’s medications are on the formulary before making a decision.

Norris says it’s common to have low, flat-rate copayments for Tier 1 drugs, but coinsurance (where you pay a percentage of the cost) for Tier 1 drugs. To reduce your costs, ask your doctor for a lower tier drug, if one is available.

You may be wondering if generics are as good as brand name drugs. FDA-approved generics have the same ingredients and are just as effective as their brand-name counterparts. They are cheaper because they do not have to repeat expensive efficacy and safety studies. There is also more competition in the market because many different generics may be available.

Be sure to share the most current formulary list with your doctor, especially if you are concerned about cost. Let them know you want the lowest-cost option that meets your needs, Botta suggests.

In some cases, you and your doctor may need to get creative. For example, an extended-release drug may not be covered, while the standard-release version of the same drug is covered. Your doctor may prescribe the covered drug for you to take at different times of the day. This can mimic the effect of an extended-release medication.

If you need a drug that is not on your health plan’s list, your doctor can file a formulary exception request for you. You may need to do this for several reasons, says Norris.

• You are allergic to the alternatives found on the formulary.
• He already tried alternatives in the PDL and they didn’t work.
• Medications that are on the formulary may interact poorly with other medications you take.
• Formulary drugs may cause problems due to other health conditions you have.

It usually takes a while for insurance plans to add newly approved medications to their formularies. If your doctor believes that a new drug is the best or only option for your medical needs, he or she may file a formulary exception if your health plan has not yet begun covering the new drug.

There is no guarantee that your insurance provider will grant a formulary exception. If not, there is an appeals process. It starts with an internal appeal. If that doesn’t work, you can use an external appeal, an appeal reviewed by a third party instead of your health plan.

Sometimes this is an uphill battle, says Botta. He advises visiting the drug manufacturer’s website to look for discounts. Your pharmacist can also suggest ways to save.