Donut Hole: What is it and how to avoid it

Your Part D Prescription Drug Benefit is split into three phases, your initial coverage period, the coverage gap, and catastrophic coverage. The coverage gap phase is what many refer to as the "Donut Hole" – a phase where you are responsible for a larger portion of your prescription drug costs until you reach the catastrophic coverage phase. For an explanation of these phases please see below.

Initial Coverage Period

During the initial coverage period, we will pay part of the costs for your covered drugs and you will pay the other part. The amount you pay when you fill a covered prescription is called the "coinsurance or copayment". Your coinsurance or copayment will vary depending on the drug and where the prescription is filled. See the EOC for the copayments for your covered prescription drugs.

Once your total drug costs reach $4,020, you will reach your initial coverage limit. Your initial coverage limit is calculated by adding payments made by Essence and you. If other individuals, organizations, current or former employer/union, or another insurance plan or policy help pay for your drugs under your Essence plan, the amount they spend may count towards your initial coverage limit.

Coverage Gap (Donut Hole)

After your total drug costs reach $4,020, you, or others on your behalf, will pay 25% of the plan’s cost for most of your generic drugs and 25% of the plan’s cost for brand drugs in 2020. This is what many may refer to as the "Donut Hole". Once your total out-of-pocket cost reaches $6,350, you qualify for "catastrophic coverage". Some plans have additional generic coverage through the coverage gap.

Catastrophic Coverage

All Medicare Prescription Drug Plans include catastrophic coverage for people with high drug costs. In order to qualify for catastrophic coverage, you must spend $6,350 out-of-pocket for the year. When the total amount you have paid toward "co-insurance or co-payments", and the cost for covered Part D drugs after you reach the initial coverage limit reaches $6,350, you will qualify for catastrophic coverage. During catastrophic coverage you will pay: the greater of $3.60 for generics or drugs that are treated like generics and $8.95 for all other drugs or a 5% co-insurance. We will pay the rest.

Coverage Phase Who pays for my medicine in this phase? How long will I be in this phase?
Initial coverage For covered medications, you pay your copayment or coinsurance amounts and Essence pays the remainder. Until your total drug costs reach $4,020. Your total drug costs are the total amount that you, others on your behalf, and Essence pay for your Part D prescription drugs.
Coverage gap* "Donut Hole" You pay 25% of the plan's cost for most generic drugs and 25% of the plan's cost for most brand name drugs.* Some plans have additional coverage for drugs during the coverage gap.

Until your out-of-pocket amount reaches $6,350.

Your out-of-pocket amount is your copayments and coinsurances, plus any amounts paid by you during the coverage gap.

Catastrophic coverage

You pay the greater of:

  • $3.60 copayment or 5% coinsurance for one-month supply of generics or preferred brands
  • $8.95 copayment or 5% coinsurance for one-month supply of any other covered drug
  • The plan pays the remainder
Until the first day of the next calendar year.

* If you get "Extra Help" you already have coverage for your drugs during the coverage gap, so the discounts do not apply. You will continue to pay your regular copayments for generic and brand drugs.

If you are a member of the Essence Advantage Plus® plan, Essence covers Tier 1 and Tier 2 medications in the gap after your copayment. Your copayment will depend on which drug tier the medication is in and whether you choose a preferred pharmacy or another in-network pharmacy.

Generics – A great way to avoid the "Donut Hole"

When possible using generic medications can be a great way to avoid reaching the Donut Hole. We highly recommend speaking with your doctor about the medicines you take and find out if there are generic alternatives available to you that can save you money.

Y0027_20-322 - Last updated 01/30/2020