Cost of weight loss drugs prompts employers to evaluate ROI

The high cost of medical services and specialty drugs such as GLP-1 and other weight-loss medications are the largest health care cost drivers for employers, prompting new data to prompt employers to consider ways to better manage rising costs.

A new Gallagher report, which compiled insights from 3,552 organizations, found that just over half of employers (52%) reported managing healthcare costs effectively. The vast majority of employers (92%) experienced an increase in health insurance premiums during their last renewal, and 24% of them reported those increases were in the double digits.

Are GLP-1s worth the high prices?

Employers cited the high cost of medical services (68%) and specialty drugs (44%) as their two biggest challenges in controlling healthcare costs, which Gallagher said is causing employers to take a close look at return on investment (ROI). In the specialty drug space, HR and benefits managers are evaluating whether GLP-1 and other weight-loss drugs are worth the high prices. They are increasingly controlling use by requiring prior authorization and tying coverage to ongoing participation in a weight management program.

Gallagher's survey comes at a time when more and more employers are covering the cost of GLP-1 drugs for their employees.

An employer survey by the International Foundation of Employee Benefit Plans (IFEBP) found that employer coverage of the drugs has increased 8 percentage points since last fall. More than half of employers (57%) currently cover only diabetes – the original use of the drugs – up from 49% in 2023. Perhaps more importantly, 34% cover both diabetes and weight loss (up from 26% in 2023), according to the benefits organization's survey of 279 employers in May.

Employee demand for the drugs as a weight-loss tool, as well as the potential health benefits, is likely the reason for this initiative. A recent KFF survey found that one in eight, or about 13 percent, of U.S. adults have taken a GLP-1 agonist at some point. A survey conducted last fall by healthcare company Accolade found that three-quarters of HR professionals said GLP-1 drugs were helpful in controlling blood sugar levels, losing weight, improving blood pressure and reducing the risk of heart disease.

But with the interest comes a high price tag—typically between $1,000 and $1,500 a month. On average, 8.9% of organizations' total annual claims are for GLP-1 weight-loss drugs, up from the 6.9% average in 2023, according to IFEBP.

Julie Stich, vice president of content at IFEBP, said the cost of GLP-1 drugs is a concern for employers, saying: SHRMOnline Late last year, he explained that the immediate costs and potential long-term costs are important considerations for employers considering GLP-1 coverage.

“Conscious approach to performance design”

Those costs can't be ignored, said William F. Ziebell, CEO of Gallagher's Benefits & HR Consulting Division. While new obesity and weight loss treatments have benefits, “employers who successfully meet this challenge tend to be very thoughtful in how they design their benefits,” he said.

For example, according to Ziebell, they could require an employee to exceed a certain body mass index threshold and actively participate in an employer-sponsored health program before they will cover the cost of a GLP-1 prescription.

“A holistic strategy like this is likely to lead to better results and greater employee engagement,” Ziebell said.

Other strategies

In addition to controlling GLP-1 coverage, employers are also resorting to other strategies to manage rising healthcare costs, including offering multiple health insurance plans.

Consumer-directed health plans (CDHPs) with health savings accounts (HSAs) are among the fastest-growing plan types, now offered by 56% of employers, up 16 percentage points from 2020, according to Gallagher. These plans are also attracting greater interest from employees—about a quarter of these organizations (24%) enroll more employees with an HSA in their CDHP than in any other plan.

Employers are also using value-based strategies to provide high-quality care at the lowest possible cost. Nearly one in five (17%) are reducing employee costs for prescription drugs to treat chronic diseases. Other employers (14%) are reducing employee costs for using designated centers of excellence for certain medical procedures. Employees may be motivated by lower copayments, travel costs to the treatment site, or both, Gallagher found.