Half of Workers May Have Difficulty Obtaining Obesity Drug Insurance Coverage

Companies are increasing their employees' access to blockbuster new weight-loss drugs, but employer size can make a big difference in early access. Small businesses and their workers often find themselves caught between a rock and a hard place when it comes to this burgeoning health insurance coverage market.

Small businesses employ about half of the workers in the U.S. labor market and have been adding jobs at a faster rate than large employers. As of the first quarter of 2021, small business hiring accounted for 53% of the 12.2 million total net jobs created across all employers, according to the U.S. Bureau of Labor Statistics, in line with the trend longer term.

Successful anti-obesity drugs, called GLP-1 agonists, cost about $1,000 a month on average and are typically taken for a long time. Access to these weight loss medications comes from an increasing number of sources on the market, drug manufacturers are increasing production and use cases continue to increase, with clinical trials showing benefits for conditions ranging from sleep apnea to the risk of heart disease. But many of the 100 million American adults who are obese can't afford to pay out of pocket for drugs like Novo Nordisk's Wegovy and Eli Lilly's Zepbound, and are turning to their employers for help.

A survey last October of 205 companies by the International Foundation for Employee Benefit Plans found that 76% of respondents provided coverage for GLP-1 diabetes medications, compared to just 27% who provided coverage for diabetes. weightloss. But 13% of plan sponsors indicated they were considering coverage for weight loss. However, covering these medications is more difficult for smaller employers, many of whom rely on off-the-shelf plans offered by their insurance companies. While there are plans that cover GLP-1 medications, the cost can be prohibitive for many small businesses.

There is strong employee demand for coverage and smaller employers would like to be able to do so, but there are tradeoffs, said Shawn Gremminger, president and CEO of the National Alliance of Healthcare Buyer Coalitions, a nonprofit organization. buyer-driven profit. Companies should consider the impact on salaries or other benefits they would like to offer. “The company's money has to come from somewhere,” he said.

In some cases, small employers, even if they want to cover weight loss drugs, are simply pricing themselves out of the market and may have to accept that they can't offer the coverage they would like.

“Given the price of these drugs, you have to do a cost-benefit analysis and many small companies, even some larger ones, simply can't do that,” Gremminger said. “It doesn't matter how much they want.”

Below are some issues that small business employers and employees should understand when accessing expensive weight loss medications as part of workplace benefits.

Annual benefit agreements are now being negotiated. Open enrollment season for health insurance doesn't occur until the fall, but employers should have conversations about renewal with their broker or benefits agent now, and that conversation should include weight-loss medications. Small business employers should tell a broker that they would like to be able to provide weight-loss medications to their employees and ask them for help finding the right provider or plan, said Gary Kushner, president of Kushner & Company, a design and marketing firm. profit management.

The market is changing rapidly. Last year, an insurance company asked about coverage of weight loss drugs may have said no, but it's worth asking the company again because they may have been forced to make changes to their offers for competitive reasons, said Kate Moher, president of national employee health. and benefits for Marsh McLennan Agency, which advises employers on plan designs and benefit programs. “We should ask ourselves the question every year,” she said.

Insurance premiums may increase. To gain access to weight loss medications, many small businesses may have to change insurance companies and likely pay more. “It will most likely be more expensive if one doesn't cover the medications and the other does,” Kushner said.

Employers also have to decide how much of that can reasonably be passed on to employees, without unduly burdening workers who may never need these medications. “If 20% of the population takes it, everyone's premium will increase by any percentage to cover the cost,” Gremminger said.

Small businesses should consider a “captive health” plan. Generally speaking, any company with at least 50 employees could consider working with a captive health insurance plan such as Roundstone, ParetoHealth, Stealth and Amwins, Moher said. These deals allow groups of companies that couldn't self-insure (the approach most large corporations take) to pool resources and design a group health plan together.

This approach can allow a small business and its employees more flexibility, Moher said, but owners still have to weigh the costs and there are requirements to qualify. It's also not something companies can change every year like they would when working with a traditional insurance company. “It's a long-term play; you can't just go in and out,” Moher said.

These plans are designed for the long term because, as member owners, all participants agree to spread the risk, an approach that can keep costs low over time and decrease volatility. But if business owners are looking for a quick fix or prefer to wait and see how the market develops over the next year, it's probably not the right model.

A standalone coverage option for GLP-1 drugs could also work for some small businesses. Companies like Vida Health, Calibrate, Found Health and Vitality Group offer these offerings separately from the employer's primary provider, Gremminger said. Employers should do the math to determine if it could be more cost-effective and if the option truly fits the needs of their employees based on the offerings.

Use an FSA to help cover the costs of weight loss medications. If insurance coverage options are not an effective solution today, small employers may have other ways to help employees defray the cost of weight loss medications. They might consider, for example, making contributions to flexible spending accounts or employee health savings accounts. They might also consider a health reimbursement arrangement, or HRA, which is an employer-funded plan that reimburses employees for qualified medical expenses.

However, there are strict rules and requirements for each of these options. For example, with an FSA, the IRS limits an employer's contribution based on how much the employee contributes, and this may still not be enough to cover the cost of these medications in the long term. “Does it help? Sure. Does it solve the problem? No,” Kushner said.

Nor is it a decision that should be made without first obtaining approval from legal counsel. “You need guidance from your ERISA attorneys to make sure you meet all the criteria,” Moher said. “It's a creative way to do it, but you have to make sure you meet all the compliance requirements.”

Right now, the bottom line may be very discouraging for small businesses and their employees given the costs and limited options, but it's also important to know that there are approximately 20 drugs in the approval process. Once they are approved, costs will likely come down, Moher said. “This is something that may be short-term until more GLP-1 drugs are approved.”