New research from DBRS Morningstar finds insurers balancing high upfront cost against potential for long-term savings from GLP-1 drugs
The ongoing rollout of glucagon-like peptide 1 (GLP-1) drugs to treat diabetes and promote weight loss in individuals suffering from obesity has begun to yield data that Canadian plan sponsors might be able to use. In the US and other markets that are ‘further along’ in their uptake of these drugs, we are seeing overall cost metrics and potential long-term financial impacts being weighed by insurance and benefit providers. The decisions they are making now may help guide Canadian plan sponsors as they choose which of these drugs, if any, they are going to cover.
A newly published commentary from DBRS Morningstar discusses why these drugs have become such an area of focuses for insurers and benefits providers. One of the authors of the commentary — Patrick Douville, VP of North American Insurance Ratings at DBRS Morningstar — offered his insights into the choices insurers and benefits providers are making now.
“There’s really high interest from the public, so if your plan doesn’t cover it there might be a lot of questions, if not actual claims,” Douville says. “There’s high volume but they’re relatively pricey drugs, at around $1,000 per month. Any sort of significant volume of claims will be seen in your benefit plan expenses.”
The interest, Douville says, is stemming from three areas: diabetes treatment, obesity treatment, and more aesthetic weight loss. The first two are worth serious consideration by plan sponsors while the third category is one where plan sponsors and insurers may need to be careful to ensure these drugs aren’t abused.
In the US, and in Canada, there has been some broader consensus on these drugs as a diabetes treatment. Many US insurers are offering coverage now. What the commentary identifies, however, is the calculus insurers are making regarding coverage for obesity. As expensive as the drugs themselves are, obesity in the US has been found to increase annual medical costs by $2,505 more than a normal weight person. That aggregates out to $261 billion in additional costs. If these drugs can help manage those longer-term costs there may be an incentive for insurers to offer more obesity coverage.
Douville notes that life insurers are showing some interest around these drugs, given the correlation between BMI and life expectancy. Large life insurers are already investing a great deal into keeping their policyholders healthier, and these drugs could be another means for them to achieve that outcome, especially if the insurer integrates health benefits with their life coverage.
The commentary highlights that in Canada, life expectancy is still falling following the COVID-19 pandemic. That runs against the trend in the UK, US, and Western Europe where life expectancy dipped during the pandemic but has since begun to recover. While life expectancy is a relatively mild risk factor for insurers, it may be another factor driving them to consider these drugs more closely.
The price tag for plan sponsors may be steep. According to benefit consultancy Aon, GLP-1 drugs are set to increase the annual costs of health plans in the US by up to $500 (USD) per insured member by 2025. Benefit plan costs are rising overall, which may also give plan sponsors pause.
Douville notes that the longer we live with these drugs the clearer the decision will become for plan sponsors and insurers. If they are proven to help maintain a healthy weight long-term and that users don’t immediately regain their weight upon cessation of use, there may be a stronger case for uptake. If more pharmaceutical companies develop drugs of their own and competition drives prices down, that will also be a potential reason for greater uptake.
While the data is early as of now, and there are still decisions to make for many Canadian plan sponsors, Douville emphasizes the scale of the interest from members which might be driving a need for plan sponsors to decide. In that environment, he advises prudence and caution.
“I think, you can be very careful about this. Don't try to get ahead of the medical developments. Even though there's going to be a lot of pressure you need to be ready to deal with the questions and the high interest from your plan members or your policyholders,” Douville says.
