Employers’ New Decision Point: Whether to Cover Expensive Weight Loss Drugs

Kathryn Mayer By Kathryn Mayer June 5, 2023

​Thanks to buzzy results and popularity among celebrities, there's a big spike in demand for GLP-1 drugs, such as Ozempic and Wegovy, as a tool to help people shed pounds. The injectable medications, originally prescribed for diabetes management, have also shown promising results for weight loss.

That demand is creating an important decision point for employers: whether or not their health insurance plans should cover the pricy drugs for weight loss.

"It's a really big issue for employers," said Dr. Jeff Levin-Scherz, M.D., population health leader at consulting firm WTW. "We're seeing a pretty dramatic increase in the rate of the prescription of [drugs such as] Ozempic, which is only approved for diabetes but is now showing to be very effective for weight loss."

As a result, employers are thinking about how to handle coverage of the drugs, industry experts say, a decision made all the more difficult by competing priorities of trying to hold down rising health care costs for themselves while also retaining and wooing talent in an employee-driven job market. Covering desirable drugs for weight loss could help them with the latter.

"There's a lot of discussion about it," said Nancy Price, vice president of human resources strategic sourcing at HealthTrust, a Nashville, Tenn.-based group-purchasing organization focused on the health care space, who says it's one of the top issues on employer clients' minds. "This whole concept around covering weight loss drugs is really coming to the forefront right now."

Ozempic, for instance, is only approved for Type 2 diabetes, and employers primarily cover the drugs for that diagnosis. While it's showing results for weight loss, many employers aren't yet covering it for that purpose. Wegovy is also a diabetes medication, but it was approved by the U.S. Food and Drug Administration (FDA) for chronic weight management in 2021. Meanwhile, drugmaker Eli Lilly is seeking FDA approval for use of Mounjaro, another anti-diabetes medication administered weekly through injections, for the treatment of adults with obesity or those who are overweight and have weight-related comorbidities.

In general, weight loss drugs are not widely covered by employers: Data from the International Foundation of Employee Benefit Plans (IFEBP) finds that fewer than a quarter (22 percent) cover any prescription drug specifically for weight loss, although that number is higher for employers with 5,000 or more employees.

"It's definitely being offered more frequently by larger employers than by smaller employers," said Julie Stich, vice president of content at IFEBP.

In general, she said, "Employers are considering it and taking into consideration what their employees are asking for. But they are concerned about the price."

That's for good reason: Drugs such as Ozempic cost more than $1,000 per month on average. The other issue, Price added, is that a significant number of employees may want to use the drug—which would substantially hike drug costs for employers. Plus, the drugs are not designed for short-term use. Studies show the weight will stay off only on continuation of the drugs, pointing to a long-term commitment for employers—and a much higher price tag.

"That's going to be an ongoing expense that employers have to take into consideration," Stich said.

Employer Considerations

Where does that leave employers? Soul searching, conversing with employees and pharmacy benefits managers, and thinking about putting restrictions in place, Price said.

Those restrictions might entail requiring special authorization from doctors and insurers; limiting quantities of the drug; or allowing the drug for certain criteria—say, if an employee meets specific requirements, such as having a body mass index of at least 30.

More employers will likely think about how to proceed with the drug coverage for 2024 ahead of open enrollment, industry experts say. "For 2023, their budgets are in, so they are going to put very tight controls," Price said. "There is no way they could have budgeted wholly for what we're seeing in the market."

Generally speaking, many organizations are in wait-and-see mode, given the fact that the drugs are still fairly new for weight loss purposes. "A lot are saying, 'Maybe we wait a little bit longer to see how effective these drugs are in the long term, ' " Stich said.

In the interim, many HR and benefits leaders are having internal conversations—with their employees, with their chief financial officer, with other company leaders—surrounding both prescription drug coverage and weight loss initiatives in the workplace. They're finding out what employees are looking for, if paying for the weight loss drugs would be a wise investment, and more.

"Some employers might want to take a look at the impact of obesity on their employees' overall health and well-being and what that means," Stich said.

Workplace Weight Loss Conversations

The question about GLP-1 drug coverage is contributing to a larger conversation about weight loss coverage in the workplace—on what to cover, what not to cover and how to address weight loss efforts among employees.

"It's really causing a lot of soul searching," Price said.

Workplace weight loss initiatives have historically been limited to physical wellness challenges—such as step challenges or biometric screenings and even weight loss competitions—but in recent years there has been more recognition that obesity is a disease, which is changing the conversation employers are having about how to address it. Do they want to cover weight loss drugs? What about bariatric surgery?

"There's more recognition that paying for someone's gym membership or having a walking challenge isn't enough anymore," Stich said.

There are significant advantages to helping employees shed some pounds. By combating obesity or helping employees lose weight, other conditions, such as high blood pressure or Type 2 diabetes, may be better controlled. That could not only keep employees healthier and more productive, but also save on health care costs for the employer. Obesity is a significant contributor to company pocketbooks: A quarter of U.S. employers said obesity has the largest impact on overall health care costs, according to 2022 data from IFEBP.

"If the employer wants to help manage weight, that might make a positive impact on some of the resulting health conditions," Stich said. "And I think in the workplace, we should get beyond any stigma surrounding weight and look to provide support, solutions and understanding. We should look at it when we talk about whole-person well-being."

Price agreed, saying that the drug question is just the beginning of the conversation.

"This is really getting employers to ask, 'Where do we want to be on weight loss?' " Price said. "That's a great question. And everybody should be asking it."



Hire the best HR talent or advance your own career.

Member Benefit: Ask-An-Advisor Service

SHRM's HR Knowledge Advisors offer guidance and resources to assist members with their HR inquiries.

SHRM's HR Knowledge Advisors offer guidance and resources to assist members with their HR inquiries.



HR Daily Newsletter

News, trends and analysis, as well as breaking news alerts, to help HR professionals do their jobs better each business day.