Many employees may face challenges in obtaining insurance coverage for weight-loss drugs.

• Blockbuster weight-loss and diabetes drugs such as Ozempic, Wegovy, Zepbound, and Mounjaro are now being covered by health insurance for large corporations.
• Since 2021, small businesses in the U.S. have accounted for more than half of new jobs in the labor market, with roughly half of the workforce employed by these businesses.
• Insurance carriers offer off-the-shelf benefits plans to small businesses, but the high cost of obesity drugs could result in difficult decisions regarding wages and other benefits.

Employers of varying sizes are increasingly providing new weight-loss drugs to their employees, but access may vary based on company size. Small businesses and their workers often face challenges in accessing burgeoning health insurance coverage in the weight-loss drug market.

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

GLP-1 agonists, which are blockbuster obesity drugs, cost approximately $1,000 per month on average and are typically taken for an extended period. These weight-loss drugs are increasingly being produced by drug makers and are being used for a variety of conditions, including sleep apnea and heart disease risk. However, many of the 100 million American adults who are obese cannot afford to pay for these drugs out of pocket and are turning to their employers for assistance.

In October 2020, a survey by the International Foundation of Employee Benefit Plans revealed that 76% of respondents provided GLP-1 drug coverage for diabetes, while only 27% offered coverage for weight loss. However, 13% of plan sponsors indicated they were considering weight loss coverage. Although there are plans that cover GLP-1 drugs, the cost can be prohibitive for many small businesses.

Shawn Gremminger, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, stated that there is a strong demand from employees for coverage, but smaller employers also want to offer it. However, there are trade-offs, and companies must consider the impact on wages or other benefits they may want to offer. "The company money has to come from somewhere," he said.

Even if small employers desire to provide coverage for weight-loss drugs, they may be unable to do so due to cost constraints, ultimately forcing them to accept that they cannot offer the desired coverage.

"According to Gremminger, small companies, including some larger ones, cannot perform a cost-benefit analysis due to the high cost of these drugs."

Small business employers and employees should be aware of certain issues when accessing expensive weight-loss drugs as part of job benefits.

Employers should be having renewal discussions with their benefits broker or agent now, including weight-loss drugs, even though open enrollment season for health insurance doesn't occur until the fall. Small business employers should inform their broker of their desire to provide weight-loss drugs for employees and request assistance in finding the appropriate carrier or plan, according to Gary Kushner, chair and president of Kushner & Company, a benefits design and management company.

The insurance market is rapidly evolving, and it's possible that a carrier that previously declined to cover weight-loss drugs may have changed their stance due to competitive reasons. As such, it's important to revisit the question with the carrier annually, according to Kate Moher, president of national employee health and benefits for Marsh McLennan Agency.

Weight-loss drugs may become inaccessible to small businesses due to rising insurance premiums, forcing them to switch carriers and pay more.

Employers must decide how much of the drug can be reasonably passed to employees without overburdening workers who may never need it. According to Gremminger, if 20% of the population takes it, everyone's premium will increase by 20% to cover the cost.

Small businesses with at least 50 employees should consider a 'captive health' plan, such as Roundstone, ParetoHealth, Stealth, and Amwins, as these plans allow groups of companies to pool resources and design a group health plan together, even if they cannot self-insure like large corporations.

Moher stated that while a small business and its employees may benefit from more flexibility with a self-insured plan, owners must still consider the costs and meet certain qualifications. Unlike traditional insurance carriers, self-insured plans cannot be changed frequently. Instead, it is a long-term commitment, as Moher emphasized, "You can't jump in and out."

If members agree to spread the risk and keep costs down over time, these plans are designed for the long-term. However, if business owners prefer a quick-fix or want to wait and see how the market develops, this model may not be suitable.

Some small businesses may benefit from a GLP-1 drug standalone coverage option, which is offered separately from an employer's primary carrier by companies such as Vida Health, Calibrate, Found Health, and Vitality Group. Employers should evaluate the cost-effectiveness and suitability of this option for their employees based on the offerings.

To help employees with weight-loss drug costs, small employers may consider contributing to their flexible spending accounts or health savings accounts, or implementing a health reimbursement arrangement.

"Does it help? Sure. Does it solve the problem? No," Kushner said.

To ensure compliance with ERISA regulations, it is recommended to seek guidance from your attorneys.

Although the current situation may be discouraging for small businesses and their employees due to high costs and limited options, it's important to remember that there are approximately 20 drugs in the approval pipeline. Once these drugs are approved, costs are likely to decrease, according to Moher. "This is a short-term issue until more GLP-1 drugs are approved."