Half of staff might have problem acquiring medical health insurance for weight problems medicine

An injection pen of Zepbound, Eli Lilly's weight loss drug, is displayed in New York City on December 11, 2023.

Brendan McDermid | Reuters

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

Small businesses employ about half of all workers in the U.S. labor market and have added jobs faster than large employers. Since the first quarter of 2021, new hires at small businesses accounted for 53% of the 12.2 million net jobs created across all employers, according to the U.S. Bureau of Labor Statistics, consistent with the longer-term trend.

The blockbuster obesity drugs, called GLP-1 agonists, cost around $1,000 a month on average — and are typically taken over a long period of time. Access to these weight-loss drugs is coming from more sources on the market, drugmakers are ramping up production, and use cases are continuing to expand. Clinical trials are showing benefits for conditions ranging from sleep apnea to heart disease risk. 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, so they're turning to their employers for help.

A survey of 205 companies by the International Foundation of Employee Benefit Plans last October found that 76% of respondents covered GLP-1 drugs for diabetes, while only 27% covered weight loss. However, 13% of plan sponsors said they are considering covering weight loss. Covering these drugs is more difficult for smaller employers, however, as many of them rely on prepackaged plans from their insurance carriers. While there are plans that cover GLP-1 drugs, the cost can be prohibitive for many small businesses.

There is strong demand from employees for health insurance, and smaller employers would like to do so, but there are trade-offs, says Shawn Gremminger, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, a nonprofit, purchaser-led organization. Companies must consider the impact on wages or other benefits they want to offer. “Corporate money has to come from somewhere,” he says.

In some cases, even if small employers want to cover the cost of weight loss medications, they are simply priced out of the market and must accept that they cannot provide the coverage they would like.

“Given the prices of these drugs, you have to do a cost-benefit analysis, and many small companies – even some larger ones – just can't do that,” Gremminger said. “No matter how much they want to.”

Here are some points that small business employers and employees should consider when considering receiving expensive weight loss drugs as part of their benefits.

Agreements on additional annual benefits are currently being negotiated. The open enrollment period for health insurance doesn't begin until the fall, but employers should start talking to their insurance broker or agent now about renewing their insurance, and that conversation should include mentioning weight-loss drugs. Small employers should tell their broker they would like to provide weight-loss drugs to their employees and ask for help finding the right provider or plan, said Gary Kushner, chairman and president of Kushner & Company, a benefits design and administration firm.

The market is changing quickly. Last year, an insurer asked if it covered weight-loss drugs might have said no, but it's worth asking again because it may have been forced to change its offering due to competitive pressures, says Kate Moher, president of national employee health and benefits at the Marsh McLennan Agency, which advises employers on plan and benefit program design. “You should be asking this question every year,” she said.

Insurance premiums could rise. To get access to weight-loss drugs, many small businesses may have to switch health insurance providers and likely pay more. “It's most likely going to be more expensive if one insurance company doesn't cover the drugs and another 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 those drugs. “If 20% of your population takes them, the premium for everyone goes up by the percentage that's supposed to cover the cost,” Gremminger said.

Smaller companies should consider setting up their own company health insurance. In general, any company with at least 50 employees could consider working with a captive health plan such as Roundstone, ParetoHealth, Stealth and Amwins, Moher said. These companies allow groups of companies that could not self-insure – the approach most large companies take – to pool their resources and work together to create a group health plan.

That approach may give 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 can when working with a traditional insurer. “It's a long-term game; you can't just get in and out,” Moher said.

These plans are designed for the long term because participants agree to spread risk as members and owners. This approach can keep costs low over time and reduce volatility. However, if business owners are looking for a quick fix or would rather wait and see how the market performs over the next year, this is probably not the right model.

For some small businesses, a standalone insurance option for GLP-1 drugs might also work. Companies like Vida Health, Calibrate, Found Health and Vitality Group offer these plans independently of the employer's primary insurer, Gremminger said. Employers need to weigh whether this might be more cost-effective and whether the option really meets the needs of their employees based on the plans.

Use an FSA to cover the cost of weight loss medications. If insurance options aren't an effective solution today, small employers may have a few other options to help their employees cover the cost of weight-loss medications. For example, they could contribute to employees' flexible spending accounts or health savings accounts. They could also consider a health reimbursement arrangement (HRA), an employer-sponsored plan that reimburses employees for qualified medical expenses.

But each of these options comes with strict rules and requirements. With an FSA, for example, the IRS caps an employer's contribution based on the employee's contributions, and that still may not be enough to cover the cost of these drugs in the long term. “Does it help? Sure. Does it solve the problem? No,” Kushner said.

It's also not a step you should take without prior approval from legal counsel. “You need the advice of your ERISA attorneys to make sure you meet all the criteria,” Moher said. “It's a creative way to go, but you need to make sure you meet all of your compliance requirements.”

Right now, the bottom line can be very daunting for small companies and their employees, given the cost and limited options, but it's also important to know that there are about 20 drugs in the approval phase. Once they're approved, costs will likely come down, Moher said. “That may be a short-term thing until we get more GLP-1 drugs approved.”