Employers’ Dilemma Over Weight Loss Drugs: To Pay Or Not To Pay?

Updated on October 30, 2024

Employers are increasingly grappling with a “to pay or not to pay” dilemma when it comes to their health plans’ coverage of the popular injectable weight loss drugs.

The use of GLP-1 medications such as Ozempic, Wegovy and Mounjaro, originally for diabetes but really taking off for weight loss, has more than doubled over the last decade.

No surprise, the costs have more than kept pace, putting tremendous pressure on payers. Ozempic®, for example, carries an annual price tag of about $10,000 per person. The University of Texas System, for one, having seen GL-1 costs to its health plans triple to $5 million a month, has said, “Enough.” It is ending its coverage for two GL-1 brands. 

Balancing Obesity-Pharma Cost Impacts

Obesity has long-since been declared an epidemic in the U.S., affecting seven out of 10 adults. Such adults spend an average of $1,861 annually more on healthcare; that mounts to $3,100 for the severely obese.

It’s not merely the higher healthcare costs that impact employers, though. Overweight and obese employees cost U.S. businesses $82.3 billion in missed workdays, $160.3 billion in reduced productivity related to illness, drive up disability costs by $31.1 billion, and add $5.2 billion in Workers’ Compensation costs.

When weight loss treatment and medications are covered under their health plans, employers also are typically obligated to cover GLP-1 medication costs, too. Today, more companies than ever cover GLP-1 drugs for both diabetes and weight loss – over 33%, up from 26% in 2023. Further, among those that offer these drugs for diabetes, 19% are considering adding weight loss to the mix.

Their potential long-term savings are important calculations. Moving an obese 40-year-old from obese to overweight could produce lifetime savings of $17,000 in direct medical costs and productivity. Achieving and maintaining a healthy weight could drive savings to over $18,000.

Consider, though, how demand and skyrocketing costs of all specialty drugs (GLP-1s included) are affecting healthcare benefits when pharma benefits costs alone rose 8.4% in 2023 and 2022’s 6.4% increase.

To pay or not to pay? How to evaluate

Employers need to look at the long-term implications of obesity and its costs across the spectrum of business issues and the difference that covering GLP-1 treatments – and to what extent – will make. Here are some considerations to guide the decision-making. 

  • Look at the data. Is it viable to offer weight-loss drugs? Gain important insights through data analytics. At a minimum, analytics should examine health plan enrollment allocations, paid claims for various conditions per member, per month and off-label GLP-1 utilization rates. A best-in-class broker should provide access to proprietary modeling tools for this and to forecast the cost-benefit analysis of covering GLP-1s or not. 
  • Take a long-term perspective. Over time, do the benefits of weight-loss drugs outweigh the costs? Obesity complications cost employers more than $30 billion annually in higher disability payments and more than $80 billion in higher health-related absenteeism. Weigh the long-term effects of improved employee physical and mental health and productivity and reduced absenteeism. 
  • How are recruitment and retention affected. Employees may expect their employers to cover their GL-1 prescriptions for weight loss as they become more mainstream, negatively affecting recruiting and retention if removed altogether. But will premium increases associated with the additional costs will be sustainable?
  • Consider other cost-saving opportunities. Healthcare is one of employers’ greatest expenses for employers. Creative new funding alternatives can help offset them. Bundling particular benefits is one option; another is alternate funding strategies like patient assistance programs that make these drugs more affordable.

Emerging sourcing options through online pharmacies that cut out the middleman may help with prices and supplies: think Mark Cuban’s Cost Plus Drugs. And Amazon Pharmacy being added as Eli Lilly’s second third-party pharmacy. 

But employers should step carefully around long-term prescription contracts, which could hinder affordability and availability in today’s fluid marketplace.

Kryijztoff Novotnaj
Kryijztoff Novotnaj

Dr. Kryijztoff (Kryz) Novotnaj, DNP, MPH, CPHIMS, is the Chief Clinical Informatics Officer (CCIO) for global insurance brokerage Hub International.

Kryz has over 20 years of experience in employee benefits, healthcare and wellness. He previously held roles in executive clinical consulting and health informatics for regional and national consulting firms.  Kryz has led several key initiatives around analytic reporting using clinical methodology that has assisted employers with understanding their population’s health/illness burden.

Kryz holds multiple credentials, including a Practical Nurse (LPN) from Gurnick Academy of Medical Arts, a Registered Nurse (RN) from Excelsior College, a BSN in Nursing from the University of Cincinnati, and an Advanced Practice Registered Nurse (ACNP) from Gonzaga University with a concentration in acute care nursing practice, three designations as a Certified Wellness Specialist (CWS), Certified Professional in Health Information Management Systems (CPHIMS) and Certified Corporate Nutrition Professional (CCNP). Kryz possesses a B.S. in Applied Science in Healthcare Management from Waldorf College, an M.S. in Public Health with emphasis in Clinical Epidemiology and Biostatistics from University of Liverpool, UK. In 2019, Kryz completed his Doctorate in Nursing Practice at the University of San Diego with an emphasis in infectious disease and health informatics and is pursuing his second PhD in Psychiatric Nursing from the University of Honolulu (2025).