- Coverage reductions are increasing: Major insurers, such as Blue Cross Blue Shield of Michigan, Massachusetts, and North Carolina’s State Health Plan, have either dropped or significantly restricted coverage of GLP-1 for weight loss in 2024-2025.
- Rising costs: Employers report that GLP-1 drugs have moved from position 32 to the top spot in pharmacy spending within a single year, with some organizations experiencing annual cost increases from $500,000 to $1.2 million.
- Mixed evidence on return on investment: Although GLP-1s demonstrate clinical effectiveness for weight loss and cardiovascular benefits, recent studies indicate that they are not cost-effective at current prices and that only 1 in 12 patients remain on treatment after 3 years.
- Broader context: With 34 percent of non-elderly insured adults—approximately 36.2 million individuals—potentially qualifying for GLP-1s, the long-term financial implications are substantial.
- Conclusion: Employers encounter a genuine dilemma with no straightforward solution. Neither strict frugality nor shortsightedness fully encapsulates the complexity of this cost-benefit equation.
As more employers discontinue coverage for GLP-1 medications such as Wegovy, Ozempic, and Zepbound, a significant debate has emerged regarding whether these decisions reflect shortsightedness or responsible financial management in response to unsustainable costs.
The Argument for Shortsightedness: Significant Health Benefits
Clinical evidence for GLP-1 drugs is substantial. These medications not only facilitate weight loss, with studies demonstrating a reduction in body mass by seven to sixteen percent within a year, but also provide significant health improvements, including enhanced cardiovascular outcomes, reduced kidney disease complications, improved liver health, and treatment for sleep apnea in overweight adults.
Obesity-related complications cost employers more than 30 billion dollars annually in disability payments and over 80 billion dollars in health-related absenteeism. A 40-year-old worker who moves from obese to healthy weight could generate savings exceeding 28 thousand dollars over their lifetime in direct medical costs and productivity gains.
From this perspective, discontinuing coverage may be considered shortsighted. If these medications can prevent costly downstream health conditions such as diabetes, heart disease, and stroke, employers may be deferring high future costs. The rationale suggests that investing in preventive treatment could yield substantial returns by reducing medical claims, lowering absenteeism, and improving employee productivity.
The human element is also significant. Employees with weight-related health issues often view these drugs as transformative. Removing coverage after treatment initiation, as experienced by nearly 10,000 members of Blue Cross Blue Shield of Michigan, may be perceived as a breach of trust, potentially undermining morale and retention.
The Argument for Fiscal Responsibility: Unsustainable Financial Trends
But here’s where the financial reality becomes unavoidable: employers aren’t running charities. When GLP-1 drugs leap from position 32 to number one in pharmacy spending within a year, that’s not a sustainable trend—it’s a five-alarm fire in the benefits budget.
The associated costs are considerable.
At approximately $1,000 per month before rebates, and with projections indicating that 30 million Americans could be using these drugs by 2030, pharmaceutical spending may increase dramatically. North Carolina’s State Health Plan spent $100 million on GLP-1s for weight loss in 2023 alone and faces a projected $1.5 billion loss by 2030. Blue Cross Blue Shield of Massachusetts reported a $114 million operating loss in the first nine months of 2024, partly due to a 250 percent increase in GLP-1 claims.
The evidence on cost-effectiveness is sobering. Research from the University of Chicago found that even in optimistic scenarios with the best possible weight loss outcomes, GLP-1 drugs fall well short of standard cost-effectiveness thresholds at their current prices. The medications are clinically impressive but economically problematic.
Then there’s the adherence problem. Real-world data from Prime Therapeutics indicate that only 1 in 12 members remain on GLP-1 treatment after 3 years. When total healthcare costs for GLP-1 users rise from approximately 12,700 dollars before starting treatment to over 20,000 dollars in year one, and most patients don’t stick with the medication long enough to realize potential long-term benefits, the return on investment becomes questionable at best.
Employee turnover further complicates the situation. Even if employers invest substantially in GLP-1 coverage, there is no guarantee that employees will remain with the organization long enough for health benefits and cost savings to materialize. In a highly mobile workforce, employers may ultimately subsidize medications that benefit other organizations.
The Complex Middle Ground: Balancing Competing Priorities
Both perspectives present valid arguments, making this issue complex for human resources leaders and benefits managers.
Employers aren’t being callously frugal when they consider spending increases of 500 percent and realize that their entire benefits structure could become financially untenable. The survey data are precise: 44 percent of employers with 500 or more workers covered these medications in 2024, but 10 percent of those that offered coverage were considering dropping it. This isn’t ideological—it’s mathematical.
Simultaneously, obesity remains a significant public health crisis in the United States. When effective treatments exist but are financially inaccessible for most individuals without insurance coverage, this constitutes a market failure with substantial human consequences. Employees facing monthly out-of-pocket costs of $1,350 for medically recommended medication may reasonably perceive their employer’s health plan as inadequate.
Potential Solutions: Innovative Approaches to a Complex Challenge
Rather than wholesale coverage or complete denial, many employers are exploring middle-ground approaches including higher BMI thresholds for eligibility (such as 35 or 40 instead of 30), mandatory lifestyle modification programs combining medication with nutrition counseling and exercise, lifetime caps on coverage (like Mayo Clinic’s 20,000 dollar limit), time-limited prescribing with transition to lower-cost maintenance strategies, and tiered coverage that varies by employee tenure or health risk factors.
A sustainable solution may ultimately require action beyond the employer-employee relationship. For example, drug prices in Germany, where Ozempic costs one-fifteenth of its U.S. price, highlight significant international disparities. Generic alternatives remain more than five years away. Until pharmaceutical pricing becomes more rational or alternative treatments are developed that provide similar benefits at lower costs, employers will continue to face a difficult decision.
So are employers being shortsighted or frugal when they drop GLP-1 coverage? The uncomfortable answer is: it depends on your timeframe, workforce demographics, financial position, and your view of healthcare as a benefit or a business expense.
CompaOrganizations experiencing immediate budget constraints and unsustainable cost increases are responding pragmatically to financial realities. However, those that eliminate coverage without considering long-term health implications and talent market dynamics may achieve short-term savings at the expense of recruitment, retention, and workforce health. The real problem isn’t employer shortsightedness or excessive frugality. It’s a healthcare system where transformative medications carry price tags that make them economically irrational to cover broadly, yet morally complex to deny to those who need them. Until we solve that underlying problem—through better pricing, better alternatives, or both—employers will remain caught in an impossible dilemma, and employees will pay the price in higher premiums or gaps in coverage.
The central issue is not simply whether employers should cover these medications, but whether the healthcare system can evolve to a point at which this question is less challenging to resolve.
