Why Your Employee Health Plans Are Getting More Expensive and Complicated

GLP-1 drugs, gene and cell therapies, the erosion of network discounts, and inflation are contributing to cost and coverage challenges

Educational organizations, including public and private schools and colleges and universities all across the country are faced with increasingly higher costs—including what it costs to fund employee health plans. Here are four major factors causing this to happen now.

1. Less ability to negotiate network discounts

After the COVID pandemic, employers have had difficulty negotiating discounts with providers that continue to experience financial pressures and high employee turnover. 1 In fact, some hospital and provider systems are negotiating more aggressively to make sure they are reimbursed fairly to cover increased costs. This leads to larger premium increases for you.

2. Inflation is still affecting costs

Inflationary forces have pushed prices up for medical services, supplies, and wages just as they have increased the overall costs for employers to hire and retain quality teachers and staff. But even if inflation is reduced, it doesn’t necessarily mean that healthcare costs will go down. There are simply too many forces at work that impact healthcare cost and trend.

3. GLP-1 drugs can be costly and are not always covered

GLP-1 drugs that are designed to treat diabetes (such as Ozempic and Mounjaro) are very effective at managing the disease. However, it is very important that the insurance company or Pharmacy Benefit Manager has proper clinical edits in place to ensure that these medications are not being used “off label” to treat obesity. “Off label” simply means that there are occasions when a provider will prescribe a GLP-1 drug for a different purpose than the one that has been approved by the FDA.

There is a growing number of conditions that GLP-1s may help treat, including heart disease, high cholesterol, high blood pressure, sleep apnea, and more. In each of these situations insurance carriers and self-insured employers will need to conduct a cost/benefit analysis.

No matter what condition GLP-1s are ultimately approved to cover under a fully insured plan or self-insured plan, it is imperative that insurance companies and Pharmacy Benefit Managers employ efficient and effective means of ensuring that these medications are not being used for off label use and that they are being used appropriately in accordance with guidelines established by the Federal Drug Administration (FDA). Examples of programs that are being used to manage utilization and cost include:

• Restricting coverage to plan members with higher Body Mass Indexes
• Requiring participation in lifestyle and obesity management programs before authorization
• Requiring members to try more affordable weight-loss medications before using GLP-1s
• Setting lifetime maximums on payments.2

This is a complex topic that can stir up very passionate feelings for a number of constituents. School Boards, Boards of Trustees, physicians, and plan members can all have very different perspectives and often are not aware of the immediate substantial financial impact that covering these medications has on a healthcare plan.

4. Gene or cell therapies could result in savings, both long-term and short-term

Another newer and potentially game-changing development in healthcare is the introduction of gene and cell therapies. These therapies are advanced medical treatments designed to replace or modify faulty genes or the transplantation of healthy cells into a patient to replace damaged cells. The FDA has approved more than a dozen of these therapies and the list could soon be growing, even by the end of 2025.

These therapies are designed to treat very rare and complex diseases, ones that are so rare they are often referred to as “lightning strikes.” Because of their rarity, large pharmaceutical companies often overlook them because the number of potential patients is simply too small for them to scale research and production. The cost of research for developing these therapies can be extremely high, which translates to incredibly expensive charges that currently range from $400,000 to more than $4,000,0003. However, these therapies may provide answers that ultimately save lives as well as helping people live substantially better ones. Insurance carriers are covering these therapies but each has their own set of prior authorizations and clinical requirements.

Self-insured employers have the option to cover each FDA-approved therapy, not cover any of them, or only cover certain therapies. But it is critical that they have adequate risk protection in place given the incredibly high price of these therapies. It is also important for self-insured employers to determine how their respective stop-loss carriers might choose to cover these therapies and also consider the public relations aspect that would result from not covering some of them. For example, a gene therapy called Zolgensma is a treatment for children under the age of two with a rare condition called Spinal Muscular Atrophy (SMA)4. It is an incredibly effective treatment that can significantly improve the lives of these infants and small children and even improves the survival rate.5

The question is do insurance companies intend to cover gene and cell therapies in their fully insured plans even as the number of FDA-approved therapies continues to proliferate?

How Marsh McLennan Agency can provide support

It is impossible to know precisely how more aggressive provider contract negotiations will impact employer costs along with overall healthcare trend. It will vary with each managed care network as these contracts are staggered over time. That said, Marsh McLennan Agency can help position your plan to maximize savings in a myriad of ways including, but not limited to, leveraging our market strength to negotiate renewals and marketing efforts with a focus on supporting your bottom line.

Covering GLP-1 medications for weight loss can be advantageous as a means of attracting and retaining teachers, professors and staff. With the support of Marsh McLennan Agency’s Rx Solutions’ team, we can help self-insured schools, colleges and universities determine whether the benefits associated with improved attraction and retention outweighs the continually increasing utilization and cost associated with covering weight loss GLP-1s. At some point in the future, increased competition along with market pressures will hopefully help make these medications more affordable and the decision easier.

When it comes to protecting self-insured plans from the substantial potential financial impact of gene and cell therapies, it is important to note that Marsh McLennan Agency’s Stop-Loss Center of Excellence proactively negotiates with its panel stop loss carriers to ensure that each carrier agrees to cover all gene and cell therapy treatments subject to the same individual stop loss deductible as any other condition with no new lasers and aggressive renewal rate caps.

It is critical for employers in education to know that their benefits consultant understands not only their unique challenges and opportunities but also has the tools, resources and experience to help them navigate and effectively manage these evolving areas of healthcare. That’s what Marsh McLennan Agency provides.

For additional information, please contact Scott James at Scott.James@MarshMMA.com

Resources:

1 American Hospital Association 2025 Environmental Scan

2 HR Executive. Amid a Changing Landscape for GLP-1 Drugs, 8 Employer Considerations. HR Executive, 2024 3 Optum for Business Drug Discovery and Development 4 https://www.mda.org/disease/spinal-muscular-atrophy 5The Effectiveness and Value of Treatments for Spinal Muscular Atrophy

A Summary from the Institute for Clinical and Economic Review’s New England Comparative Effectiveness Public