Key insurance terms that start with "F"

A formulary is your health insurance plan’s official list of covered prescription drugs. It organizes medications into tiers, with lower tiers generally costing you less and higher tiers costing more. Not all drugs are covered — if your medication isn’t on the formulary, you’ll either need to request an exception or pay full price out-of-pocket.

Most formularies use a 3–5 tier structure:

• Tier 1 (preferred generic): Lowest cost, usually $5–$20 copay
• Tier 2 (non-preferred generic or preferred brand): Moderate cost
• Tier 3 (non-preferred brand): Higher cost
• Tier 4 (specialty drugs): Highest cost, often requires prior authorization

Formularies can change during the year. Your insurer is required to notify you if a drug you’re currently taking is removed from the formulary, but it’s worth checking before each plan year during Open Enrollment to confirm your medications are still covered and at what tier.

If your drug isn’t covered or is placed on a high-cost tier, you can request a formulary exception through your insurer, asking them to cover the drug at a lower tier if a covered alternative isn’t appropriate for your condition.

A Flexible Spending Account (FSA) is an employer-sponsored benefit that lets you set aside pre-tax dollars to pay for eligible health care expenses. Unlike an HSA, you don’t need a high-deductible health plan to use one — but FSAs are only available through employer benefit packages.

Key FSA rules:

• Use-it-or-lose-it: FSA funds generally must be used within the plan year. Employers may offer a grace period of up to 2.5 months or a rollover of up to $640 (2026 IRS limit) — but not both, and not all employers offer either.
• Contribution limit: $3,300 per year for 2026 (employee contributions)
• Front-loaded: Your full annual election is available on day one of the plan year, even before you’ve contributed it through payroll
• Not portable: You lose unused funds if you leave your employer mid-year (with limited exceptions)

FSA funds can be used for deductibles, copays, coinsurance, prescriptions, dental and vision care, and other IRS-qualified medical expenses. A dependent care FSA is a separate account used for childcare expenses.

The Federal Poverty Level (FPL) is a measure of income set annually by the federal government. It's used as the benchmark to determine who qualifies for health insurance subsidies, Medicaid, CHIP, and other assistance programs.

Your household's income as a percentage of the FPL determines what help you can get. A family earning 200% FPL earns twice the poverty guideline for their household size. The higher your FPL percentage, the less subsidy you typically receive — and in 2026, subsidies phase out entirely once your income exceeds 400% FPL. The subsidy cliff is back after enhanced subsidies expired December 31, 2025.

If you're not sure where your income falls, a licensed broker can run the numbers for your household size and help you estimate your subsidy before you enroll.

Family coverage is a health insurance plan that covers you and your eligible dependents — typically a spouse or domestic partner and children under 26. It’s the alternative to an individual plan, which covers only one person.

Under family coverage, all members share the same plan, network, and benefits. Cost-sharing works differently than individual coverage in two important ways:

• Family deductible: Once the family’s combined spending reaches the family deductible, the plan starts covering costs for all members — even those who haven’t individually met their deductible
• Embedded individual deductible: Most plans also include an individual embedded deductible, so no single family member has to contribute more than that amount before their costs are covered

The same embedded structure applies to the out-of-pocket maximum: there’s both a family ceiling and an individual limit so one high-cost family member doesn’t drain the entire family limit before others are protected.

On the ACA Marketplace, family premiums are higher than individual premiums, but adding dependents doesn’t increase the premium for children in the same way it does for adults — only the three oldest children under 21 affect the premium calculation.