What is prescription insurance and how much does it cost?

Usually called a prescription drug plan, prescription insurance pays a portion of your prescription drug costs. In many cases, a health insurance plan includes coverage for prescription drugs.

When choosing a health plan, it's a good idea to check whether the medications you take are part of the insurer's drug formulary – the insurance company's preferred drugs for coverage. You'll pay more out of pocket for drugs that aren't included in the formulary than for those that are.

If your drugs aren't included in the plan's formulary or your plan doesn't include coverage for prescription drugs, you can buy a standalone prescription drug plan. Costs of the plans vary, and some provide discounts if you order prescription drugs by mail order.

Beware that some companies market prescription drug card programs that merely provide discounts on prescription drugs; they aren't actual insurance plans. When shopping for a prescription drug plan, make sure you compare insurance plans with one another and not with discount programs.

Medicare prescription coverage

If you qualify for Medicare, you have two choices for getting prescription drug coverage:

• Purchase a Medicare prescription drug plan, known as Medicare Part D, along with original Medicare Part A and Part B, which cover hospitalization, doctors visits and preventive care.
• Purchase a Medicare Advantage plan that includes prescription drug coverage. Medicare Advantage plans operate like health maintenance organizations or preferred provider organizations, and they cover everything that original Medicare Part A and Part B cover.

If your medication costs are high, your annual Medicare Part D drug plan coverage might run out before the end of the year, trapping you in what's called the "donut hole." Under health reform, you now can get a 50 percent discount when purchasing prescription drugs covered by Part D if you fall into the donut hole. In coming years, the savings will increase until the hole is closed in 2020.

For more, see "All you need to know about health insurance."