What to Consider Before Adding Weight Loss Drug Coverage to Your Plan

Weight loss drugs are on everyone’s minds, including our clients’. As drugs like Ozempic have risen in popularity, a related group of drugs — using the same antidiabetic medication called semaglutide — have been approved for weight loss purposes. We have had several organizations reach out to ask if these drugs, such as Wegovy and Zepbound, are covered, but our answer is never a simple “yes” or “no.” There is much to consider before deciding whether or not this coverage is right for your plan, especially for international NGOs.

Pew Research says that in 2021 (the most recent year for which data was available), nearly 2 million people were taking semaglutide medications — and that’s just in the U.S. That number tripled between 2019 and 2021, and it’s only continued to grow since then. A 2023 study showed that 25% of employers currently offered coverage of these drugs and that the number could double in 2024. Interestingly, the study found the biggest barrier to coverage seems to be a lack of trusted information about alternative uses of the drugs (48%) versus 38% who said cost was the issue.

As a matter of course, most insurance providers have not historically covered weight loss drugs. Starting in 2003, Medicare was prohibited from covering these types of medications at all, according to Scientific American: “The ban was implemented in part because of concerns over the safety of weight-loss drugs at the time, such as the combination of fenfluramine and phentermine, or fen-phen, which was associated with life-threatening hypertension and heart valve issues.”

Today, most private health insurance carriers do not offer standard coverage of weight loss drugs. However, they will cover almost anything if an organization is willing to pay. So, in our view, the more appropriate question is, “How would covering weight loss drugs impact our plan in the long term?” Let’s dive into the factors Allegiant Global Partners advises our clients to consider before deciding whether or not to cover weight loss drugs.

5 questions to answer before covering weight loss drugs

Is providing insurance coverage for weight loss drugs sustainable?

Any time a client considers changing their coverage, we like to consider the long-term plan. Where do you want your premiums to be in five or ten years? Offering employee benefits is a business strategy and a critical part of retaining the employees that allow you to achieve your mission. Will offering these enhancements make a difference to your employee satisfaction? Are you losing employees to a competitor? Then, perhaps, offering these drugs makes sense for your organization. Whatever conclusion you come to, answering these questions before redesigning a health plan is a must.

Drugs like Wegovy and Zepbound cost upwards of $1,000 a month, and generic alternatives will not be available until 2031. Additionally, these drugs must be taken indefinitely to be effective. Users who go off semaglutide drugs not only regain the weight they lost, they often gain even more. 

So, before one of our clients makes the leap to cover weight loss drugs, we like to walk them through what it could mean for their plans in the long run. In the early days of these drugs, adding them to a plan cost an additional 2% of the entire plan. However, as people see their co-workers losing weight, usage tends to go up, and so do costs. We’re now seeing carriers raise rates by 12% to cover these drugs. If healthcare costs are a concern, covering these drugs may not be practical.

Could covering weight loss drugs drive down costs in the long run?

When a new “miracle drug” hits the market, it’s common for employees and the drug’s creators to suggest that investing in the product now may drive down costs in the future — but employers and their advisors must be careful not to jump to conclusions without the data to back them up. Even if there are long-term savings, they could take years to show up and may never be a 1:1 comparison in terms of the money you spend to cover these drugs. Still, plenty of research is underway to help answer whether or not the investment is ultimately a sound business investment. 

“Clinical trials are underway to see whether the drugs can reduce the risk of heart attack, stroke, kidney disease and other chronic diseases in people with obesity,” reports NBC News. If semaglutide proves capable of reducing the rate of chronic illness and acute events, like heart attacks, it could theoretically lower the cost of healthcare in general. 

The World Health Organization (WHO) estimates1.28 billion adults between 30 and 79 years old have hypertension, and 46% are unaware of their condition. Only 42% are diagnosed and seeking treatment, and only 21% have their hypertension under control. These startling statistics have caused the WHO to set a goal of reducing the prevalence of hypertension by 33% between 2010 and 2030.

If your workforce falls in line with these statistics, 46% of your staff could have hypertension, and about half of those people will not have it under control — which could have devastating consequences. There could come a day when paying for weight loss drugs makes financial sense because of its ability to reduce other, more expensive claims. Personally, I think this is likely — especially as the makers fine-tune the drugs to reduce the number of side effects. Before the data is in, employers must remember this is a business strategy decision and that adding a benefit, only to have to take it away later, could increase employee dissatisfaction. Until we know more, it may be wise for employers to find other ways to provide access to these drugs while limiting their investment.

What type of plan do you have?

Some of our clients — especially in the higher education space — have self-funded (aka self-insured) insurance plans. For organizations with fully insured plans, the decision to allow adding weight loss drug coverage is likely going to be up to your insurance company. Self-insured plans have more flexibility to make these changes, but many self-insured policies have stop-loss and other components requiring order within the benefit offerings. 

As we have already noted, there tends to be a trend within organizations that cover weight loss drugs; a few employees take them and see results. Then, before you know it, more and more employees are following suit, and your self-funded plan is hemorrhaging funds. None of this means you cannot choose to cover these drugs, but it does mean you must plan accordingly.

Are you prepared to provide a wellness program?

Much like bariatric surgery, drugs like Wegovy and Zepbound are not cure-alls. They must be used in conjunction with a healthy lifestyle to really work. In other words, it’s still important to eat healthy foods and exercise — weight loss drugs just help boost the efficacy of those efforts. Moreover, your employees who choose not to use these drugs — or perhaps do not need them in the first place — will end up footing part of the bill for adding the coverage to your health plan. It’s also important to note that almost all of the questions Allegiant receives about weight loss drugs come from U.S.-based populations, meaning this could raise benefit equity issues for organizations with global staff. What will you give them in return? 

Traditional wellness plans often encourage healthy lifestyles among employees by reimbursing them for gym memberships or offering rewards for reaching specific activity goals. These incentives may help offset any hard feelings employees who do not use weight loss drugs may have when their premiums increase. 

How will your donors feel about this added expense?

For INGOs and nonprofits, it’s always essential to use funds wisely. Choosing to cover one drug that has the potential to increase costs by 12% could be a hard case to make for budget-conscious supporters. You may want to talk to your fundraising team before making any decisions that could impact their ability to support your mission.

Alternatively, you could find other ways to enhance access to the drugs employees desire without over-investing. For example, consider creating employee communications about when leveraging FSA contributions to save for these drugs tax-free is allowed. This strategy shows your organization is forward-thinking and signals to employees you are taking small steps in the right direction. It has the added benefit of potentially reducing the employer's payroll tax burden. Meanwhile, you can measure the interest in coverage before committing to covering them indefinitely.

Weight loss drugs may be the future, so start thinking about coverage now

Even if your employees are not currently asking about weight loss drug coverage, it’s almost certain to come up in the future. Last year, Scientific American reported that “Novo Nordisk, which makes Ozempic and Wegovy, announced clinical trial findings that indicate semaglutide does more than help people lose weight. In a trial of more than 17,000 people, the drug cut the risk of cardiac complications, such as heart attacks and strokes, by 20 percent.” 

As research continues and legislation changes, these drugs will likely become even more popular. Doing your due diligence now can better prepare you to answer the inevitable questions from employees and make an informed decision when the time comes. And, as always, Allegiant is here to help guide your organization through the tough decisions.