Navigating the Current Landscape of GLP-1 Coverage

As glucagon-like peptide-1 medications have exploded in popularity, the majority of Americans who get health coverage from their employers increasingly expect employer health plans to cover the high costs of these drugs. Although participants may demand coverage of these drugs and there appears to be medical evidence of many beneficial uses of GLP-1s, there is currently no legal requirement for insurance to cover GLP-1 medications for weight loss purposes. Plan sponsors are left to grapple with the question of whether and how to cover GLP-1s and often seek out innovative plan designs to meet participant demand.

What are GLP-1s?

Sarah Raaii, Jayda Greco, and Haley Dow

GLP‑1 medications are prescription drugs that work by mimicking a natural hormone in your body. They help manage blood sugar, slow digestion, and reduce appetite. These medications have been used for many years to treat conditions like Type 2 diabetes. More recently, they’ve become widely known for their role in weight loss and long‑term weight management. Some of the most common GLP‑1 medications include semaglutide, tirzepatide, and liraglutide.

Not all GLP‑1 medications are approved by the U.S. Food and Drug Administration for weight loss. The FDA has approved certain medications—such as Wegovy, Saxenda, and Zepbound—for weight loss and long‑term weight management, when they are used along with diet and exercise and when specific medical criteria are met. Other GLP‑1 medications may be prescribed “off‑label” for weight management. Off‑label use means a medication is prescribed for a purpose that is not specifically listed on the FDA’s approval label. This is a common and accepted practice in medicine, but insurance coverage can vary and may require additional approval—or may not be covered at all.

Current Application

With so many GLP‑1 options available, differences in FDA approvals, and the growing use of off‑label prescriptions, it is understandable that employees have questions about what is available to them through their health benefits—and what options may exist outside of their benefits. At the same time, the growth of telehealth providers and self‑pay pricing has made these medications more visible and accessible, but also more confusing. Many people find it challenging to understand what their health plan may cover, what costs they may be responsible for and how provider visits and medications fit together.

Costs of GLP-1 Coverage for Employers

Plan sponsors should evaluate GLP-1 coverage in the context of both near-term pharmacy spend and potential longer-term medical savings. Although GLP-1 medications may increase prescription drug costs, clinically appropriate use may help reduce future costs if treatment prevents or delays obesity-related, diabetes-related, or other health conditions. Because such savings are uncertain and may not fully offset the cost of coverage, plan sponsors often monitor utilization on an ongoing basis.

Should Employers Cover GLP-1 Medication?

Whether to provide GLP-1 coverage as an employer is a complex decision that depends on employer preferences and resources, in addition to the needs of participants.  Employers that decide to cover GLP-1 medications can help prevent chronic conditions that raise costs for their workforce, including obesity and diabetes.  However, coverage of GLP-1 medication can be costly or difficult to structure for employers.

Current state and federal guidelines do not require employers to cover GLP-1 medications.  Both fully insured and self-insured health plans have discretion over whether to include or exclude weight-loss GLP-1 coverage as a benefit-design choice, although it is possible that a state may impose requirements for its fully insured plans.  However, coverage of GLP-1 medications has been rising, with a targeted focus on treating diabetes and obesity.

Section 1557 of the Affordable Care Act provides that an individual may not be subjected to discrimination in certain covered health programs or activities.  While recent cases have alleged that failure to cover GLP-1 medications is discrimination, the cases have been dismissed for failure to state a claim. However, employers that choose to cover or exclude GLP-1 medications need to design and administer benefits consistent with applicable ACA requirements and nondiscrimination laws.

Employers should also consider HIPAA’s health status nondiscrimination requirements and other considerations under the Internal Revenue Code and ERISA. For example, coverage restrictions that are connected to medical conditions or that practically disadvantage certain participants may be riskier. In addition, plan sponsors should carefully consider their high-deductible health plan population when designing GLP-1 coverage options by considering whether such coverage pre-deductible may make HDHP participants ineligible for contributions to a Health Savings Account. Plan sponsors should consult with legal counsel to ensure that any limitations or criteria placed on the coverage of GLP-1 medications are compliant.

How can Employers Structure GLP-1 Medication Coverage?

If an employer decides to offer coverage for GLP-1 medications, coverage can be structured in various forms.  The following are a few of the more popular coverage arrangements:

• An employer can place GLP-1 medications on its plan’s formulary and determine the cost-sharing tier along with any coverage limits. Offering coverage through PBMs can provide a streamlined experience with a vendor, since employers often already have an existing relationship with a PBM.

• An employer can design coverage so that GLP-1 medication is covered only when it is prescribed to treat certain diagnoses, such as diabetes or chronic weight management, or only for preventive care. Under this arrangement, an employee cannot receive GLP-1 medication coverage if the drug is not prescribed to treat one of the specified clinical criteria. This approach can reduce the number of individuals diagnosed under the plan and ultimately lower treatment costs for such conditions in the long term.
• An employer can decide to offer GLP-1 coverage while also requiring medical management techniques, such as prior authorization, quantity limits, step therapy, and site-of-care requirements.
• Requiring one or any combination of medical management techniques before employees are provided with access to GLP-1 coverage can help treat symptoms using a different approach and limit the number of employees requiring GLP-1 medication coverage. Consequently, implementing medical management techniques can help employers maintain control of costs and administration.

• An alternative to adding GLP-1 medications to a group health plan’s formulary is using an HRA to pay or reimburse GLP-1 medication costs. HRAs allow employees to access pre-tax dollars to reimburse or cover a portion of GLP-1 medical costs.
• Participants typically must enroll and participate in a weight management program to qualify for HRA reimbursement for a GLP-1 prescription. The program evaluates the individual’s need for the prescription on an ongoing basis and determines whether to approve the GLP-1 prescription request. If approved, participants fill GLP-1 prescriptions at a direct-to-consumer pharmacy. Then, employers can use an HRA to reimburse a portion or all of the prescription cost.
• An HRA can be structured to cover GLP-1 medication if it is designed to reimburse prescription drug costs as a “medical care expense” under the tax code.

• Plan sponsors may choose to enter into an agreement with third-party vendors that have relationships with drug manufacturers to access discounted pricing and/or specialized providers and lifestyle management programs.

• Alternatively, plan sponsors may consider contracting directly with manufacturers to provide plan participants discounted access to GLP-1 medications.

Sarah Raaii devotes her practice to issues impacting group health and welfare benefit plans by counseling employers, digital health and point solution clients, plan administrators, insurers, consultants and other health plan service providers.

Jayda Greco works at the intersection of healthcare regulatory, privacy and compliance, product counseling and marketing law, with particular emphasis on digital health products and services. Often working cross-functionally with stakeholders in sales, finance, marketing and product, Jayda is adept at devising creative and practical legal solutions for digital health initiatives to meet business objectives.

Haley Dow focuses her practice on employee benefits and executive compensation matters. She reviews qualified retirement plans, cafeteria and welfare plans, and executive compensation and employment agreements to ensure conformity with the Employee Retirement Income Security Act of 1974 (ERISA), Section 409A, the Affordable Care Act, and the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the authors do not necessarily reflect the stance of ISS STOXX or its affiliates.