No, not every healthcare benefits plan includes a prescription drug formulary. Pharmacy benefits are a design choice made by the plan sponsor, typically an employer, and shaped by plan type, regulations, and cost. Most major medical group health plans in the U.S. include drug coverage. But it's not a universal mandate. For HR leaders evaluating options, this distinction matters.
Understanding Formularies and Plan Types
A formulary is a list of covered prescription drugs, usually split into tiers that set your copay or coinsurance. Whether a plan has one comes down to whether it includes pharmacy benefits, though the two do not always travel together. A plan could cover drugs without a defined tier list, but that is uncommon because the formulary is the main tool for steering members to generics and negotiating rebates. Common plan structures break down like this:
- Fully Insured Major Medical Plans (for example, from BUCA carriers: Blue Cross, UnitedHealthcare, Cigna, Aetna): These almost always include an integrated prescription drug benefit with a formulary, often managed by a Pharmacy Benefit Manager (PBM). It's standard and bundled.
- Self-Funded (Self-Insured) Employer Plans: Employers have flexibility. Most include a PBM-managed drug benefit with a formulary to control costs, but carving out pharmacy coverage is possible. It's rare, given employee expectations and the fact that self-funded plans are exempt from the ACA's essential health benefits requirement regardless of size.
- Exclusive Provider Organizations (EPOs) & Health Maintenance Organizations (HMOs): Similar to fully insured plans, these typically bundle pharmacy benefits with strict network rules.
- High-Deductible Health Plans (HDHPs): HSA eligibility doesn't require prescription drug coverage. But if an HDHP, or a separate drug plan, covers drugs, that coverage generally can't pay before the minimum deductible is met, except for certain preventive drugs. In practice, most HDHPs bundle a drug benefit with a formulary, subject to the deductible.
- Stand-Alone or Limited Benefit Plans: This is where you commonly find plans without drug formularies. Examples include:
- Hospital Indemnity or Critical Illness Plans
- Accident-Only Coverage
- Some "Minimum Essential Coverage" (MEC) plans designed only for ACA compliance
- Certain supplemental or niche plans
The ACA, Essential Health Benefits, and Pharmacy Coverage
The ACA is key here. For small group plans (typically employers with 1-50 employees, though some states extend to 100) sold on the Small Business Health Options Program (SHOP) marketplace or off-exchange, the ACA mandates coverage of ten "Essential Health Benefits" (EHBs). Prescription drugs are one of these ten categories. Therefore, an ACA-compliant small group major medical plan must include a prescription drug benefit, which inherently includes a formulary.
For large group plans (generally 51+ employees) and self-funded plans of any size, the ACA does not require coverage of the EHBs. But due to market norms and employee demand, the overwhelming majority include strong pharmacy benefits. A large employer without drug coverage would struggle to compete for talent.
Where Formularies Are Mandatory: Medicare Part D
The employer market is flexible by design, but Medicare Part D is the exception. Every Part D prescription drug plan, whether stand-alone or bundled into Medicare Advantage, must maintain a formulary. CMS requires each plan to list at least two drugs in each therapeutic category and class, and to cover substantially all drugs in six protected classes: antidepressants, antipsychotics, anticonvulsants, immunosuppressants for transplant rejection, antiretrovirals, and antineoplastics. Members whose prescribed drug is not on the list can request a formulary exception. The contrast matters for HR teams with employees nearing 65: on the employer side, drug coverage is a sponsor decision, while on the Part D side, a CMS-regulated formulary is a condition of offering the benefit.
Strategic Considerations and the WellthCare Ecosystem Model
Modern benefits strategy has moved past simply having a formulary. What matters now is how it's designed, how much it costs, and whether it improves health. Traditional PBM-managed formularies are often opaque, with complex rebate structures that don't always pass savings to the plan sponsor or member. WellthCare, the first Health-to-Wealth Benefit System, offers a direct alternative with its WellthCare Pharmacy™, a transparent, aligned PBM that eliminates spread pricing and passes savings directly to employers and employees.
The WellthCare ecosystem changes this relationship. While a standard formulary is a passive list, WellthCare integrates pharmacy directly into a proactive Health-to-Wealth system. Its WellthCare Pharmacy™ component acts as a transparent PBM replacement. Strategically, medication adherence and smart drug use are tracked as preventive health actions within the platform. This data feeds the proprietary WellthCare Readiness Index™, which analyzes actual medication usage against transparent pharmacy pricing to prove savings opportunities, shifting the focus from just having a formulary to optimizing its economics and health impact.
Key Compliance and Employee Communication Points
If a plan includes prescription drug coverage (and thus a formulary), several compliance obligations follow:
- ERISA & SPDs: The Summary Plan Description (SPD) must clearly describe the pharmacy benefit, including how the formulary works, cost-sharing, and procedures for exceptions.
- HIPAA: Pharmacy data is Protected Health Information (PHI), requiring strong safeguards.
- Formulary Changes: Plans and PBMs can revise formularies. A mid-year material modification that affects the Summary of Benefits and Coverage (SBC) generally requires at least 60 days' advance notice to enrollees; changes effective at renewal are instead reflected in the updated SBC.
- Transparency in Coverage (TiC) Rules: Plans must post machine-readable files with in-network negotiated rates and out-of-network allowed amounts. A separate prescription drug pricing file requirement exists, but the Departments have deferred enforcement pending further rulemaking.
Most major medical plans for active employee groups do include a prescription drug formulary, but it's not an absolute rule. The real shift now is from just having a formulary to making pharmacy benefits transparent, cost-effective, and part of a broader strategy that improves health and builds wealth. That turns a cost center into a strategic asset for both employer and employee.