As GLP-1 medications become an increasingly significant cost driver for employer-sponsored health plans, plan sponsors are seeking creative solutions beyond conventional pharmacy benefit manager (PBM) channels. Direct-to-consumer reimbursement models have emerged as a compelling alternative, enabling participants to obtain these medications at reduced prices while shifting claims processing outside traditional PBM frameworks. Here are key legal and administrative considerations plan sponsors should address before adopting these arrangements.
How Direct-to-Consumer Programs Work
These programs largely operate by removing GLP-1 coverage from the plan’s standard formulary and redirecting participants to a specialized weight management vendor. The vendor conducts medical necessity evaluations, issues prescriptions, and manages ongoing utilization. Participants then fill prescriptions through direct-to-consumer pharmacies, often at prices significantly lower than those negotiated through PBMs and submit for plan reimbursement.
This model works particularly well for GLP-1s because these medications have developed a robust direct-to-consumer market. But before jumping in, employers should consider the full picture: vendor fees, administrative burden, and compliance requirements may eat into projected savings.
Check Your PBM Contract First
A threshold issue for any plan sponsor is whether existing PBM arrangements permit formulary modifications. Many PBM contracts include exclusivity provisions requiring all prescription claims to flow through their network. Removing GLP-1s without authorization from your PBM could breach your contract — and potentially cost you favorable pricing on your entire drug formulary, not just weight-loss medications.
Some PBMs also offer their own weight-management programs. Bringing in a competing vendor could trigger penalties or void rebate guarantees. Plan sponsors should review PBM contracts early to evaluate these risks and negotiate any necessary waivers before proceeding.
Four Ways to Structure the Program
Four ways to structure the program are a health reimbursement arrangement (HRA), excepted benefit HRA (EBHRA), health flexible spending account (health FSA), and a carve-out from the group health plan.
HRA. If you use employer funds to reimburse employees for GLP-1 costs, regulators likely will treat this as an HRA, even if you call it something else. An HRA typically must be integrated with your major medical plan to comply with Affordable Care Act (ACA) coverage requirements and generally must comply with COBRA and Employee Retirement Income Security Act (ERISA) requirements. Fortunately, many employers likely have ERISA and COBRA compliance frameworks already in place for other employer-sponsored health plans.
Nondiscrimination testing is another factor to consider. IRS rules prohibit HRAs from disproportionately benefiting highly compensated employees, so plan sponsors should review eligibility criteria and benefit levels to ensure compliance.
EBHRA. As an alternative, plan sponsors may consider structuring the arrangement as an EBHRA. Because EBHRAs qualify as excepted benefits, they are not subject to the ACA’s market reform requirements and do not need to be integrated with a major medical plan. However, EBHRAs carry their own constraints: annual employer contributions are capped at a relatively modest inflation-adjusted limit ($2,200 for plan years beginning in 2026); employees must be offered a traditional group health plan (though enrollment is not required); and EBHRAs also remain subject to ERISA, COBRA, and the nondiscrimination rules applicable to self-insured health plans.
Health FSA. A health FSA may similarly be used to reimburse participants for GLP-1 prescription drug costs, provided the medications are prescribed to treat a medical condition rather than for purely cosmetic purposes. Plan sponsors considering an FSA-based approach should be mindful that health FSAs carry their own set of regulatory requirements, including annual contribution limits and use-or-lose rules, which may affect the practical utility of this option for higher-cost GLP-1 medications.
Carve-out from the group health plan. Some plan sponsors may prefer a carve-out structure where GLP-1 drugs remain covered under the group health plan but are processed outside the PBM arrangement. Under this approach, participants obtain prescriptions through the plan’s designated weight management vendor, purchase medications via direct-to-consumer pharmacies, and seek reimbursement under the plan’s standard claims procedures.
The carve-out model offers certain administrative simplicity compared to establishing a stand-alone HRA. However, because GLP-1 drugs remain a covered benefit under the group health plan yet are processed outside the PBM’s network, this arrangement may conflict with PBM exclusivity provisions. As a result, plan sponsors typically must obtain exclusivity waivers from the PBM before proceeding.
Watch Out for HSA Compatibility
For plan sponsors maintaining high-deductible health plan (HDHP) options, direct-to-consumer GLP-1 programs may present additional compliance considerations. Coverage provided before a participant satisfies their annual deductible may constitute impermissible first-dollar coverage, disqualifying the participant from health savings account (HSA) contributions for the entire year.
Although HDHPs may provide preventive care without cost-sharing, whether GLP-1s qualify as preventive care depends on the specific facts. IRS guidance acknowledges that weight-loss medications may qualify as preventive care, but GLP-1s prescribed for underlying conditions — such as diabetes, cardiovascular disease, or sleep apnea — generally fall outside this safe harbor. Providing coverage on a pre-deductible basis in these situations could jeopardize HSA eligibility.
Plan sponsors should be mindful of these requirements in designing their programs. For HRA- or FSA-based models, this may involve limiting reimbursements to preventive-use GLP-1s or delaying reimbursement until the participant satisfies at least the IRS minimum annual HDHP deductible. For carve-out structures, claims administration should ensure that deductible credits and cost-sharing accumulators are properly tracked to preserve HSA compatibility.
Key Takeaways for HR Leaders
Direct-to-consumer GLP-1 programs can offer meaningful cost savings, but they require thoughtful implementation. Plan sponsors should:
- Review PBM agreements in advance to identify exclusivity clauses, pricing guarantees, and potential waiver requirements before engaging alternative vendors.
- Structure and document HRA or EBHRA arrangements carefully, ensuring proper integration with the group health plan (for standard HRAs) or compliance with excepted benefit requirements and contribution limits (for EBHRAs), to satisfy ACA requirements and align with existing ERISA and COBRA frameworks.
- Protect HSA eligibility for HDHP participants by incorporating safeguards such as preventive-care limitations or deductible-first reimbursement structures.
- Engage benefits administrators, legal counsel, and vendors early in the process to develop an implementation roadmap that balances cost savings with regulatory compliance and participant protections.
The GLP-1 coverage challenge isn’t going away. But with careful planning, employers can manage costs without leaving employees — or compliance — behind.
Susie Bilbro is an attorney with Bass, Berry & Sims in Nashville. Catherine Simpson is an attorney with Bass, Berry & Sims in Memphis, Tenn.
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