GLP-1 Medications and Employer Health Plans: What You Need to Know

GLP-1 medications—such as Ozempic, Wegovy, Mounjaro, and Zepbound—are growing in popularity for their ability to promote weight loss. While many employers already cover these drugs for diabetes treatment, fewer offer coverage for weight loss purposes. With increasing interest in using GLP-1 medications to address obesity, more employers are reconsidering whether to include them in their health plans.

If you’re an employer considering coverage for GLP-1 medications for weight loss, here are a few key points to keep in mind:

1. Coverage Options for GLP-1 Medications

Employers have two main options when it comes to offering coverage for GLP-1 medications:

• Prescription Drug Benefit: You can include coverage through your medical plan or as a standalone prescription drug benefit. Before offering this, you’ll need approval from your insurance carrier or stop-loss provider. A supplemental rider might also be necessary. It’s important to consider how covering these drugs could impact the cost of future renewals.
• Health Reimbursement Arrangement (HRA): HRAs allow employers to reimburse employees for GLP-1 medication costs. These must be employer-funded and tied to a major medical plan. Employees on high-deductible health plans (HDHPs) must meet IRS minimum deductible requirements to remain eligible for health savings accounts (HSAs).

2. Tax Implications

When prescribed for diabetes, GLP-1 drugs are typically tax-free. However, if they are prescribed for weight loss, they may only remain tax-free if there’s a medically diagnosed condition, such as heart disease or hypertension. Otherwise, the benefit could be considered taxable income for employees.

3. Managing Costs

Covering GLP-1 medications can be expensive, so employers may need to adopt strategies to manage plan costs while still supporting employee health. Here are a few options:

• Restrict Coverage: Consider limiting coverage to employees who meet specific criteria, such as a BMI of 30 or higher, or 27 with an obesity-related condition. You can also restrict coverage to employees actively participating in lifestyle programs.
• Prior Authorization: Require prior authorization to ensure the medication is being used for legitimate medical reasons, not cosmetic purposes.
• Provider Restrictions: Limit prescriptions to certain healthcare providers, such as primary care physicians or endocrinologists.
• Lifetime Maximums: Set lifetime maximums for GLP-1 medications, but ensure these limits comply with Affordable Care Act (ACA) regulations.
• Separate Cost Structure: Consider placing GLP-1 medications in a higher-cost tier within your health plan to help offset expenses. Be sure to consult legal counsel to ensure compliance with regulations like HIPAA and the ADA.

4. Balancing Employee Health and Cost Management

Although covering GLP-1 medications can strain health plans due to their high cost (which can reach $18,000 per employee annually), employers should weigh the potential long-term benefits. These medications may improve employee health and ultimately reduce healthcare expenses. Many employers have noted improved employee satisfaction and engagement when offering such coverage.

As demand for these medications rises, experts believe that most corporate health plans will eventually include weight loss drugs. For now, employers must navigate the complexities of covering these treatments, consulting with pharmacy benefit managers (PBMs) and carriers to find a balance that fits their goals.

Final Notes

The conversation around covering GLP-1 medications for weight loss is growing, and employers are grappling with the costs and benefits. While most plans currently cover these medications for diabetes, only about 27% extend coverage for weight loss. As the market expands and more data becomes available, it’s likely that more companies will adopt this coverage. For now, it’s important to work through the details and consult a benefits consultant to find the best approach for your group health plan.

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