There is a general truth in the health insurance sector: If Medicare and Medicaid are given the green light to cover a certain drug, insurers in the group health and individual health insurance market usually follow suit.
The Centers for Medicare and Medicaid Services (CMS) typically allows Medicare drug plans and Medicaid to cover a drug once the Food and Drug Administration approves it for specific conditions. However, despite the FDA’s approval of popular yet pricey GLP-1 drugs like Ozempic and Zepbound for weight loss, these programs do not cover them due to a long-standing rule to not cover so-called “cosmetic” drugs.
However, the comment period for a proposed CMS regulation that would allow Medicare and Medicaid to cover GLP-1s and other drugs specifically for weight loss recently ended, and the industry is waiting to see if the Trump administration will finalize the rule.
If the CMS finalizes the rule, will group health and individual health insurers follow suit?
Current Medicare GLP-1 coverage
Medicare, through Part D drug plans, and Medicaid already cover GLP-1s for certain conditions, including:
- Type 2 diabetes, and
- Cardiovascular disease.
After the government programs began covering the medications for the above conditions, private insurers have largely done the same.
The drugs approved for these conditions include:
- Ozempic,
- Mounjaro,
- Rybelsus, and
- Wegovy.
The fine print
Experts say that if the CMS approves GLP-1s for weight loss, private health insurers would likely do the same. However, this does not mean they would cover them outright. Each plan’s copays, deductibles and coinsurance would still apply, as they do for all other drugs.
The list price of these drugs is around $1,000 a month or more. Since GLP-1s are expensive specialty drugs, insurers would likely put them in their pharmaceutical fee schedule’s most expensive tier, meaning that enrollees would pay higher copays and/or coinsurance than for lower-tier drugs.
Additionally, health plans that decide to cover these drugs may require plan enrollees to first try less expensive treatments and/or lifestyle changes before approving a GLP-1 prescription.
Effect on costs
The rising cost of specialty drugs are contributing to overall premium inflation.
In 2023, health insurance outlays for prescription drugs increased by 10.8%, compared to 2.6% for all medical expenses, according to the U.S. Department of Health and Human Services. This increase was driven by brand name and specialty drugs, particularly those used to treat diabetes and weight loss, such as GLP-1 drugs. If more insurers start covering these popular drugs, it would likely affect premiums.
However, there could be offsetting cost benefits. Consider that:
- These drugs often result in a significant drop in blood-sugar levels, reducing the risk of diabetes-related complications.
- GLP-1s yield an average weight loss of 15 to 20%, and about one-third of users lose approximately 10% of their body weight, according to a study.
- Multiple studies have shown that they can reduce the risk of cardiovascular events, including heart attack, stroke and death.
- The drugs may help people cut back on drinking, according to a study published in JAMA.
A final word
It’s still unclear if the Trump administration will finalize this proposed rule. Much will depend on the new Robert F. Kennedy Jr., the new secretary of the HHS. He has stated his intention to “make America healthy again,” but he has also been critical of vaccines and other medications in in the past.
