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EMPLOYER TAX BRIEF
Should your organization add GLP-1 coverage to its health plan?
Interest in GLP-1 medications has grown rapidly over the past few years. Originally developed to manage diabetes, drugs such as Ozempic and Wegovy are now also widely used for weight management.
As awareness has increased, many small and midsize employers have been fielding employee questions or holding internal discussions about covering GLP-1s under their health insurance plans. If your organization is considering the issue, it’s important to understand both the potential costs and risks.
Direct costs
Perhaps the most immediate financial consideration is the price of the drugs.
GLP-1s can cost well over $10,000 per participant per year, depending on dosage, duration of use and plan structure. If you sponsor a fully insured plan through an insurance carrier, these costs could lead to higher premiums at renewal — especially if overall claims increase. In the event you sponsor a self-funded plan and pay claims as they occur, you may feel the financial impact more directly and quickly.
Many employers are surprised by how quickly utilization of such coverage grows once it’s offered. Even a relatively small percentage of employees receiving GLP-1 therapy can substantially affect a health plan’s total cost. This particularly holds true for smaller organizations with fewer employees to spread the risk among.
Ongoing financial exposure
GLP-1s generally aren’t short-term treatments. Many patients take them for an extended period, and some remain on them long-term. It’s also not uncommon for people to use the meds for a while, then quit — only to decide they want to go back on them when the weight returns. For employer-sponsors, this raises thorny questions about how long to commit to coverage and whether their plans can absorb the costs year after year.
In addition, you must consider the administrative impact. Prior authorization requirements, eligibility monitoring and claims oversight all add complexity — and, by extension, “invisible costs” — to offering coverage.
Downsides and upsides
Research on the long-term health impacts of GLP-1 usage continues to evolve. As with most drugs, GLP-1s can benefit some people. But they have potential side effects as well, some of which can be serious.
GLP-1s will likely remain part of the benefits landscape for years to come. That means you may continue to feel pressure to add coverage, whether in response to employee demands or competitors adding the benefit to their packages. However, you’ll also have a growing body of information and insights to work from. Contact us for help evaluating the financial implications of expanding your health plan in this or any way.