Weight Loss Drug Costs Causing Employers to Evaluate ROI

The high cost of medical services and specialty drugs, such as GLP-1s and other weight loss medications, are employers’ top health cost pain points and are causing them to think of ways to better manage soaring costs, new data finds.

A new Gallagher report, which gathered insights from 3,552 organizations, found that just over half of employers (52%) said they effectively manage health care costs. The vast majority of employers (92%) experienced health plan premium increases during their most recent renewal, and 24% of those said those increases were in the double digits.

Are GLP-1s Worth the High Prices?

Employers ranked the high costs of medical services (68%) and specialty drugs (44%) as their top two health care cost management challenges, which Gallagher said is causing employers to take a hard look at return on investment (ROI). Within the specialty drug segment, HR and benefits decision-makers are examining whether GLP-1s and other weight loss medications are worth the high prices. Increasingly, they’re managing utilization by requiring prior authorization and tying coverage to ongoing participation in a weight management program.

Gallagher’s survey comes as more employers are covering GLP-1 medications for their employees.

An employer survey from the International Foundation of Employee Benefit Plans (IFEBP) found that employer coverage of the drugs is up 8 percentage points since last fall. More than half of employers (57%) currently provide coverage for diabetes only—the original intended use for the drugs—up from 49% in 2023. Perhaps even more significantly, 34% provide coverage for both diabetes and weight loss (up from 26% in 2023), according to the benefits organization’s May survey of 279 employers.

Employee demand for the drugs as a weight loss aid, along with the potential health benefits, is likely behind the push. A recent KFF survey found that 1 in 8, or about 13%, of U.S. adults have used a GLP-1 agonist. A survey out last fall from health care firm Accolade found that three-fourths of HR decision-makers said GLP-1 medications are beneficial for controlling blood sugar, boosting weight loss, improving blood pressure, and lowering the risk of heart disease.

But along with the interest comes a big price tag—typically between $1,000 and $1,500 a month. On average, 8.9% of organizations’ total annual claims are for GLP-1 drugs used for weight loss, an increase over the 2023 average of 6.9%, according to IFEBP.

Julie Stich, vice president of content at IFEBP, said that GLP-1 drug costs were a concern for employers, telling SHRM Online late last year that the immediate costs and the potential for long-term costs  are major considerations for employers thinking about GLP-1 coverage.

‘Mindful Approach to Benefits Design’

Those costs cannot be ignored, said William F. Ziebell, CEO of Gallagher's Benefits & HR Consulting Division. Even though there are advantages of new treatments for obesity and weight loss, he said, “employers that successfully navigate this challenge tend to take a mindful approach to their benefits design.”

For example, Ziebell said, they may require an employee to clear a body mass index threshold and actively participate in an employer-sponsored well-being program before they cover GLP-1 prescription costs.

“A holistic strategy, such as this, will likely result in better outcomes, as well as improved employee engagement,” Ziebell said.

Other Strategies

In addition to putting controls on GLP-1 coverage, employers also are turning to other strategies to manage rising health costs, including offering more than one medical plan.

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

Employers also are turning to value-based tactics to offer high-quality care at the lowest possible cost. Nearly 1 in 5 (17%) reduce employee costs for prescription drugs that treat chronic conditions. Other employers (14%) reduce employee costs for using designated centers of excellence for specific medical procedures. Employees may be incentivized through lower out-of-pocket costs, travel accommodations to the site of care, or both, Gallagher found.