Pharmaceutical companies kicked off a revolution in obesity treatment when they reformulated a class of diabetes drugs known as GLP-1s to control weight gain. They also triggered a familiar predicament for managers of employee health plans: Should we pay for it?
Obesity is one of the nation’s leading health problems, consuming half a trillion dollars a year in direct medical costs and far more in indirect economic costs, according to the Milken Institute. But unlike their lower-dose diabetes cousins, GLP-1 drugs like Ozempic and Wegovy are still considered “cosmetic” treatments and not required under most state and federal regulations.
Chronic Costs
At a cost of $200 or more a month, these wildly popular drugs could significantly increase current health plan costs for employers while promising an uncertain reduction in other costs, such as treatment for obesity-related chronic conditions and lost time due to sick days. A recent KFF survey found one in eight U.S. adults were taking a GLP-1 for diabetes or weight loss, so the demand is there.
Before signing off on an expensive new benefit, however, employers must consider the legal and regulatory patchwork that covers such decisions. Not only do states and the federal government have different rules, but those rules depend on whether companies are self-insured or buy conventional health coverage for their workers, itself a question partly governed by state law.
Large employers who cover the first $20,000 of costs per employee are generally protected by the federal Employee Retirement Income Security Act or ERISA, which overrides state insurance coverage mandates. But smaller employers are governed by the regulations in the state that issued their insurance. Those can be complex: Partly due to pressure from special interest groups, states can require group insurance plans to pay for everything from chiropractic care to wigs for patients undergoing chemotherapy.
Then there are anti-discrimination laws. The Americans with Disabilities Act and the Affordable Care Act prohibit employers from excluding coverage or charging higher premiums according to a worker’s health status or weight, except for compliant wellness programs. The rules allow employers to discount employee premiums by 30 percent for general health programs and 50 percent for smoking cessation, for example. But wellness programs “must be reasonably designed to promote health or prevent disease,” and alternatives must be offered to employees who can’t meet standards due to medical problems.
Disability Dilemmas
So a plan to offer to pay for Ozempic only if employees meet weight-loss goals might run afoul of any number of federal regulations and court decisions. They also might get in trouble if they offer GLP-1 drugs for diabetes but not obesity, says Jennifer Kiesewetter, an employment lawyer and partner with Fisher Phillips. Most federal courts have held obesity is not a protected disability under the ADA, she says, but some have.
If this is beginning to sound familiar, that’s because employers have fought similar battles over health coverage, sometimes all the way to the U.S. Supreme Court. Federal appellate courts are currently split over whether employers must pay for gender-reassignment drugs and surgery, for example, and the Supreme Court exempted religious employers from the ACA mandate to provide contraception in its landmark Hobby Lobby decision.
California, Illinois and other states have added “social infertility” as a condition requiring health plans to pay for in vitro fertilization for same-sex couples, at the same time the Trump administration changed Essential Health Benefits to bar insurers from paying for “sex-trait modifications” under the ACA.
Bottom line: Before deciding to be generous and offer employees that new blockbuster drug, or be Scrooge and strike it off the coverage list, consider all the different ways it might lead to legal trouble.
