GLP-1s, which are indicated mainly for diabetes and obesity, have seen skyrocketing demand. This dramatic rise has resulted in historic challenges for employers’ bottom lines throughout the United States. These drugs have quickly become the drugs of choice since their introduction a few years ago. They allow patients the opportunity to achieve substantial weight loss. Now their exorbitant expense is more of a liability to employees and employers, on both ends. As a result, many employers continuing to provide health insurance are recalibrating their approach to coverage.
GLP-1 drugs, which include well-known medications such as Ozempic and Wegovy, have been embraced by millions seeking effective solutions for weight management. They have demonstrated huge benefits in improving diabetes control. Beyond that, they provide critical assistance to Americans battling the debilitating effects of obesity and other related diseases. As the effectiveness of these drugs becomes widely recognized, the demand continues to rise, resulting in unprecedented expenses for employers who provide health insurance.
The financial consequences of this trend are reflected in skyrocketing annual health insurance premiums. This year, the average cost for family coverage hit $27,000, marking an increase of 6% over last year. Workers only pay about $6,850 of that cost, employers make up the difference. The average premium for individual coverage exceeded $9,300 – a 5 percent jump. Employees today shoulder an average of $1,440 of that burden.
The growing obesity epidemic among the working population is an important underlying driver of demand for GLP-1 drugs. Recent statistics indicate that over 36 million individuals with job-based insurance have a body mass index (BMI) that qualifies them for these drugs. In response, we have seen a wave of large employers start to expand their health plans to permanently cover GLP-1 medications. In other words, this year the percentage of very large firms actively offering coverage for GLP-1s for obesity treatments jumped to 43%. That’s a huge increase from only 28% last year!
Despite the rising costs associated with these medications, nearly 60% of large firms reported that the use of GLP-1 medications for weight loss surpassed their initial expectations. Two-thirds of these employers said the effect on their prescription drug spending was “significant.” This new environment forced these companies to reconsider their overall drug dollars spending priorities. One employer even shared that this year, it has spent more on GLP-1s than its 32nd most expensive drug—the last in its formulary—now the most expensive.
To our surprise, firms of intermediate size (200-999 employees) have consistently provided coverage for weight loss drugs. As of this year, just 16% do, unchanged from last year. The sentiment around these medications is still strong among employers. As of this week, 73% of firms have yet to offer coverage for GLP-1 drugs. Almost 50 percent of them say providing this benefit is “very important” or “important” to keeping employees happy.
There’s no doubt employers will have to make a decision about health insurance coverage for GLP-1 drugs. At the same time, employers are seeing increasing demand for coverage of evidence-based weight loss treatments. As new applications for these treatments emerge, they will come under greater public demand to adopt stronger policies. The national dialogue on the cost of healthcare and the need for employee wellness and satisfaction will certainly shape how corporate America continues to make choices about providing insurance.