GLP-1 Therapies Increasing Employer Healthcare Costs
New York, NY – Gallagher Re has released an analysis of the growing impact of GLP-1 weight management drugs on health insurance costs for employers. The report examines the potential risks and implications for insurers, employers, and payers arising from increased use of medications like Ozempic, Wegovy, and Mounjaro.
These drugs, initially developed to treat type 2 diabetes, have gained considerable traction for weight management, leading to a surge in prescription spending among employer-sponsored health plans. Plan sponsors and reinsurers are closely monitoring the long-term financial impact of GLP-1 therapies, balancing the possibility of improved health and lower costs with the reality of higher utilization rates, according to Gallagher Re.
Data shows that GLP-1 medications now account for at least 9% of overall prescription spending in many employer plans. The non-specialty prescription drug trend has risen dramatically, from approximately 3.2% in 2023 to between 10% and 12% in 2024, largely because of the increasing use of these therapies.
In its report, Gallagher Re estimates that GLP-1 drugs could add an extra 1% to 2% to overall medical cost trends. This estimate is based on per-member-per-month (PMPM) prescription costs compared to total medical PMPM spending.
The Business Group on Health projects a 7.8% increase in healthcare spending in 2025, with an adjusted estimate of 6.6% after accounting for plan changes. However, the precise contribution of GLP-1 therapies to these cost increases remains dynamic and difficult to isolate completely.
Insurance Coverage of GLP-1 Medications
Weight management drugs such as Ozempic have gained significant attention in the United States for their effectiveness in facilitating weight loss. However, insurance coverage for these medications varies widely, based on the intended use (diabetes management vs. weight loss), state regulations, and policy specifics.
Coverage varies by state under the Medicaid program. Some states list medications like Wegovy on their preferred drug lists, but prior authorization can be needed and quantity limits might apply. On the other hand, Medicare Part D does not cover weight-loss medications, including GLP-1 drugs like semaglutide, when prescribed solely for obesity treatment.
Private insurers’ coverage is highly variable. Some employer-sponsored plans include these medications, while others do not. The insurance policy’s specific terms and the employer’s decisions regarding health benefits often determine coverage.
Reinsurance Strategy Considerations
Gallagher Re indicates that the direct impact of GLP-1 drugs on specific stop-loss insurance is presently minimal. The annual cost of GLP-1 therapies per member ranges between $10,000 and $12,000, usually not exceeding high-excess stop-loss deductibles.
However, insurers are assessing whether complications such as pancreatitis, gallbladder disease, and gastrointestinal issues could raise exposure to large claims over time.
Gallagher Re also notes that future approvals of these therapies for conditions like heart failure or Alzheimer’s could change risk profiles, potentially reducing the severity of some claims.
While the effect on high-excess claims has been limited, Gallagher Re reports that insurers expect a moderate impact on aggregate medical cost trends. Many employees and dependents are using GLP-1 medications for purposes beyond type 2 diabetes, including for weight loss or pre-diabetes, contributing to a rise in total PMPM costs.
Many stop-loss and reinsurance carriers are waiting for additional claims data before adjusting underwriting models, surcharges, or offering premium discounts related to GLP-1 medication coverage, according to Gallagher Re. While some carriers see potential cost offsets from reduced obesity-related complications, near-term challenges include rising prescription drug spending, potential side effects, and increasing demand for weight-loss-related medical procedures.
The development of new weight-management drugs is another factor influencing the risk landscape. Gallagher Re highlights the potential for compounded versions of GLP-1 therapies and also future biosimilars to reduce unit costs. However, these alternatives may introduce new safety and efficacy concerns that could further complicate underwriting decisions.
As carriers update annual aggregate trend assumptions, Gallagher Re stresses the importance of tracking advancements in GLP-1 therapies and their broader impact on healthcare costs.
