Ozempic Hype Forces Employer Calls on Obesity Coverage
September 28, 2023
photo credit: myskin
Employers are facing a big dilemma: How do they pay for the new highly effective and popular obesity medications without breaking the bank? This week, the questions are forcing companies to re-examine their attitudes on obesity as the understanding of the disease deepens.
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Spending on a new class of diabetes and weight loss medications hit nearly $7 billion in the first half of the year, as people are clamoring for these highly effective drugs.
Employer health insurance plans are shouldering the bulk of that financial burden as half of Americans get their coverage through work.
“The cost of this is threatening to increase [company prescription drug] budgets, maybe even bust them,” said Jeff Levin-Scherz, population health leader for the benefits consulting firm WTW.
Employers are scrambling to find solutions to help improve worker health while simultaneously keeping a lid on rising health care spending.
Industry surveys show less than half of large employers are paying for these medications for workers with obesity. Benefits consultants say many businesses are now re-evaluating their coverage as the country shifts from seeing obesity as a lifestyle choice to a disease.
High Prices Force Decisions
The quick rise in popularity of the drugs over the last two years caught many employers flat footed.
Other businesses are hoping to limit prescriptions by guiding workers to diet programs, steering them towards cheaper alternative medications or requiring insurer pre-approval.
“Employers are in this terrible situation because they want to offer this medication,” said Levin-Scherz, “But on the other hand, they also want to be sure that their health insurance isn’t so expensive, that a lot of employees drop out of it.”
These new costly obesity medications have put the state of Connecticut in a bind.
The state’s health plan, which covers more than 200,000 public employees, retirees and their dependents, is on track to pay more than $30 million for these drugs a year, triple the spending in 2020.
State Comptroller Sean Scanlon, who manages the plan, said he felt a moral imperative to cover these new highly effective treatments for weight loss.
“There’s a million different reasons why somebody is clinically obese,” he said, “We know that there are ways to treat this to improve your life and your health.”
Scanlon developed a plan to expand access while hoping to temper ballooning costs. As of July, employees’ can get treatment covered, as long as they work with Intellihealth, a company which specializes in obesity care.
Intellihealth clinicians identify treatment options which may be a new anti-obesity drug, or could be an alternative lower-cost therapy. The firm also emphasizes behavior changes like changing eating habits, and increasing exercise.
“These drugs should be covered,” Scanlon said. “But we shouldn’t be just covering these drugs without actually requiring people to do what makes the drugs work even better for our investment in them.”
Consultants who advise employers say the approach Connecticut is taking – pairing old school thinking on lifestyle changes with the new medications that help people address a chronic medical condition – is common as these drugs gain popularity.
While these efforts are designed to slow spending, they also add hurdles for workers. Olivia Quagliani is in the first wave of employees going through Connecticut’s experiment.
The 26-year old high school counselor has struggled with weight all her life. She internalized the messages that her weight was due to her lack of willpower.
“I kind of just, like, hated myself for it,” she said. “It was just a lot of, what is wrong with me?”
After years of failed diets, doctors prescribed Quagliani Ozempic for her weight and related medical problems this spring. In four months she lost 30 pounds without major changes to her eating or exercise habits.
After Quagliani switched off her parents’ insurance and signed up for the state’s health plan this summer, she was hit with a $900 bill for one month of the drug, unaffordable. on her salary,
“I start[ed] freaking out,” she remembered saying, “This is actually working for me. Don’t do this.”
Quagliani signed up for the Intellihealth program and was relieved the clinician decided to keep her on Ozempic.
“If these are the amount of hoops I have to jump through, fine. And that was my initial kind of attitude towards it,” Quagliani said.
The state plan will continue to pick up the tab for the 1,000 employees who have signed up for the program as long as they return for follow-up visits and track their progress.
Chasing Cost Savings
The $10,000 annual price tag for this groundbreaking class of weight loss drugs have put employers in a tough spot. The state of North Carolina, for example, which covers 750,000 employees and their family members, spent $120 million on these new diabetes and weight loss drugs in just the first half of this year. State officials now say they are reviewing whether it can afford to continue paying for these drugs.
Benefits consultants say companies want to offer treatments that can help people lose up to 20 percent of their weight and improve health as a way to increase productivity and boost morale.
Some employers are hopeful that helping workers with obesity will cut expensive hospitalizations and visits to the emergency department and result in savings. But experts who study workplace health urge the optimists to tap the breaks.
“There might be an individual person who won’t have a heart attack and a $100,000 hospitalization next month,” said WTW consultant Levin-Scherz. “But that’s going to be very few people.”
Levin-Scherz explains the biggest savings will come from treating the sickest people, and less than 10 percent of adults have severe obesity.
Health economists explain in many cases the treatment companies pay for today will avoid heart disease or other health problems years down the road. By then workers may have switched employers or retired.
At the same time the costs will saddle the employer and all employees with what amount to new health care costs, likely in the form of higher monthly premiums.
Relief may be on the horizon. Competitors are clamoring to get into the fast-growing, lucrative obesity market. The entry of new drugmakers could drive prices down. But prices could also spike. Pharmaceutical companies actually raised the prices on old multiple sclerosis treatments after new more expensive products were approved.
Mike Thompson, president of the employer group the National Alliance of Healthcare Purchaser Coalitions said businesses are trying to balance rising health care costs with the rich health insurance packages they want to offer to attract employees.
“I think this is likely to play out over the next three, it could even be five years,” he said, “it will be gradual and there will be some fits and starts and corrections along the way.”
Tradeoffs’ coverage of health care costs is supported, in part, by Arnold Ventures and West Health.
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Selected Reporting and Research on Obesity Medications:
Alarmed by popularity of Ozempic and Wegovy, insurers wage multi-front battle (Elaine Chen, STAT, o8/03/2023)
Employers Cut Off Access to Weight-Loss Drugs for Workers (Peter Loftus, Wall Street Journal, 08/02/2023)
Payer strategies for GLP-1 medications for weight loss (AJ Ally, et al; Milliman, 08/2023)
What Could New Anti-Obesity Drugs Mean for Medicare? Tricia Neuman and Juliette Cubanski, KFF, 05/18/2023)
A systematic review of the economic value proposition for commercially available nonsurgical weight-loss interventions (Eric A Finkelstein, Parth A. Chodavadia, Kiersten Strombotne, Obesity, 05/23/2023)
Direct medical costs of obesity in the United States and the most populous states (John Cawley et al; Journal of Managed Care and Specialty Pharmacy, 03/2021)
Jeff Levin-Scherz, MD, Population Health Leader at WTW
Sean Scanlon, Connecticut Comptroller
Michael Thompson, President of the National Alliance of Healthcare Purchaser Coalitions.
Olivia Quagliani, Connecticut employee
Josh Wojcik, Assistant Comptroller of the State of Connecticut
The Tradeoffs theme song was composed by Ty Citerman, with additional music this episode from Blue Dot Sessions and Epidemic Sound.
This episode was reported by Alex Olgin, edited by Dan Gorenstein and Cate Cahan, and mixed by Andrew Parrella and Cedric Wilson.
Additional thanks to: Adam Biener, Eric Finkelstein, Frank Lester, John Miller, Sloan Saunders, Bruce Sherman and Elissa Zylbershlag, the Tradeoffs Advisory Board and our stellar staff!