What you need to know about health insurance coverage for new weight loss drugs, and how to save on costs

Many U.S. companies are grappling with health insurance coverage issues for workers when it comes to GLP-1 drugs for weight loss.

Despite the hefty price tag — typically between $1,000 to $1,500 a month — consumers are clamoring for drugs like Novo Nordisk‘s Wegovy and Eli Lilly‘s Zepbound. This class of drugs, historically used to treat diabetes, has gained broader appeal, and while some employers are providing coverage, often with limitations, others are struggling to determine how to cover them without breaking the bank.

An October survey of 205 companies by the International Foundation of Employee Benefit Plans found 76% of respondents provided GLP-1 drug coverage for diabetes, versus only 27% that provided coverage for weight loss. But 13% of plan sponsors indicated they were considering coverage for weight loss.

“Right now, there’s still a lot of questions among employers,” said Julie Stich, vice president of content at the International Foundation of Employee Benefit Plans. In addition to high costs, companies don’t have long-term data on effectiveness and potential side effects to support coverage, and some are just biding their time until more of this information exists.

Still, many benefits experts say it’s a matter of when, not if, more employers will cover GLP-1 drugs.

Certainly, prescription volumes of GLP-1 weight loss drugs are soaring. Novo Nordisk recently became Europe’s largest publicly traded company due to investor enthusiasm about the obesity market, and it just made a major acquisition in a bid to increase manufacturing capacity of GLP-1 treatments due to demand, buying drug manufacturer Catalent for $16.5 billion to increase the supply of Wegovy and diabetes shot Ozempic.

Meanwhile, Eli Lilly’s recent results were buoyed by the launch of Zepbound, which won approval from U.S. regulators in early November and raked in $175.8 million in sales for the fourth quarter. Wall Street’s most optimistic assessment sees a drug that can post more than a billion dollars in sales in its first year on the market and eventually become the biggest drug of all time. 

Here’s what employers and employees need to know about the changing landscape for weight-loss drugs and health insurance coverage.

Annual cost is the elephant in room at $18,000 per employee

At least 70% of the top 18 commercial health plans Tufts Medical Center tracks in its specialty drug database cover GLP-1 drugs for obesity, with varying limitations. But the largest companies in the U.S. are generally self-insured, so they’re the ones calling the shots when it comes to coverage — and for them, cost is a major issue.

States can decide whether to cover weight-loss drugs under Medicaid, which means coverage can vary, according to a report from KFF. The state of North Carolina recently made the decision to stop coverage of obesity drugs for state employees.

Medicare doesn’t cover weight-loss medications, with the exception of patients with Type 2 diabetes. Notably, 76% of older adults think Medicare should cover prescription medication for weight management, according to recent findings from the National Poll on Healthy Aging. 

At $1,500 a month, employers could be paying $18,000 a year for just one employee’s supply of weight-loss drugs, said Greg Stancil, a senior account executive at Scott Benefit Services. If you’ve got, say, 56 employees on the drug, that’s over $1 million a year. That’s a cost that “just didn’t exist in 2022, now they have this potential long-term expense they’re trying to figure out what to do with,” Stancil said.

“The balancing act is maintaining a robust benefits package so they can recruit and retain employees, but also managing the cost of that package to keep costs down for employees and the employer,” Stancil said. “Every employer would love to cover everything to make everybody happy, but somebody’s got to pay for it.”

Employers already covering weight-loss drugs say it’s worth it

Ninety-nine percent of companies already covering GLP-1s say they plan to continue covering them, according to a survey by Accolade, a personalized health-care company. Among other things, these employers cite higher employee satisfaction and wellbeing, increased engagement in other wellbeing programs and improvement in other health conditions as reasons for covering.

“HR benefit leaders recognize this is something employees want because a lot of people do want to lose weight,” said James Wantuck, associate chief medical officer at Accolade.

BMI, obesity and questions in plan design

There are obvious benefits to losing weight and associated health benefits, but there are other health-care and cost concerns employers have to factor in.

What might the utilization be within the company? Who should be covered? Should there be limitations such as someone who has an obesity diagnosis, or BMI over a certain limit?

A majority of companies (79%) that cover these drugs do require insured members to jump over some hurdles before coverage is approved, according to the survey by the International Foundation of Employee Benefits Plans. This includes requiring prior authorization; using step therapy (32%), which requires the use of other lower cost medications first; and specific eligibility requirements (16%). The survey also found that companies allowed to select multiple cost-controls, if applicable, also use annual and lifetime maximums. Fourteen percent of respondents who cover these drugs said they had no cost-control mechanisms in place.

Potential long-term costs to employers is an issue, and an especially hard calculation since no one really knows how long people will need to stay on the drugs for long-term effectiveness, while going off the drugs is associated with gaining weight back.

Employers are “really struggling to determine the cost versus benefit,” Stich said. 

Even though GLP-1 drugs are high-priced, they currently represent only 6.9% of annual claims, according to data from the International Foundation of Employee Benefit Plans.

How consumers can try to save in the meantime

Consumers whose companies don’t cover the drugs are in a tough position. Many will be forced to pay out of pocket, or lose out, said Brian O’Connell, an analyst who covers the insurance marketplace for InsuranceQuotes.com. “It really depends on your bank account. If you’re making $45,000 a year, have a mortgage and a child in college, there are limited options,” O’Connell said.

First, employees should find out from their employer what the benefits actually are, Wantuck said. In some cases, these drugs may be covered, but restrictions or requirements may apply, such as a BMI threshold to qualify, or the employee may have to participate in an exercise or dietary program.

Consumers with commercial insurance may be able to get assistance through the manufacturer if they are eligible for savings programs. The websites for Wegovy and Zepbound do lay out terms for discount manufacturer programs that may apply. For example, with Wegovy you must have a prescription and can’t be enrolled in a plan where the drug is covered. Consumers should read the restrictions carefully.  

Novo Nordisk says approximately 50 million adult Americans have coverage for anti-obesity medicines — 40 million through commercial insurance and 10 million through Medicaid — and approximately 80% of U.S. Wegovy patients with commercial coverage pay $25/month or less. For commercially insured patients who do not have insurance coverage, or pay cash for their prescriptions (but are not government beneficiaries), Novo Nordisk and Eli Lilly cite potentially significant savings off the full retail price: as much as $500, according to Novo Nordisk, and up to 50%, according to Eli Lilly, though monthly and annual caps on discounts apply.

“For consumers, it never hurts to look for manufacturer coupons or discounts and apply for them,” wrote Krutika Amin, associate director at health care policy, research and news organization KFF, in an email. “The answer may be no in certain cases but in other situations patients could stand to save several hundred dollars.”

Amin added that as more manufacturers enter the GLP-1 market, manufacturers may be offering competing discounts to try to get patients to pick their drug. “The market is still new but as demand stabilizes and there is more competition in the GLP-1 market, manufacturers may change prices to stay competitive. So even if the answer was no last time, it might be worth keeping an eye out,” she wrote.

Looking overseas, which some U.S. consumers do when it comes to high-priced drugs, is less likely to help out in this case, at least right now. While recent KFF research indicates that even with coupons and discounts, prices in the U.S. are higher than in other large, wealthy countries, Amin said that as countries have faced shortages for people using these drugs for diabetes it may not be possible to get these drugs abroad.

Meanwhile, benefits consultants expect the coverage problem will eventually resolve itself, given the need and long-term benefits these drugs may be able to provide.

“It’s a matter of time before most companies will be covering these drugs in some fashion,” Wantuck said. “There’s a lot of evidence that they help people lose weight and prevent really serious illnesses like stroke and heart attack. It’s going to be harder and harder not to cover these drugs because the benefits seem to be so great.”