Key Employer Considerations for GLP-1 Coverage

GLP‑1 medications, originally for Type 2 diabetes, are now widely used for obesity. Their high cost, broad potential use, and long-term treatment needs are creating significant financial concerns for employers covering these drugs for weight management.

Many employers are weighing whether to expand GLP‑1 coverage to include weight loss and what limits to set. While federal law does not yet require coverage for obesity treatment, evolving nondiscrimination rules under the Americans with Disabilities Act (ADA), the Affordable Care Act (ACA), the Health Insurance Portability and Accountability Act (HIPAA), and the Mental Health Parity and Addiction Equity Act (MHPAEA) may affect how GLP‑1 exclusions are viewed.

Employers can also ease costs by funding tax‑advantaged accounts such as health flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs) that may reimburse GLP‑1 drugs when prescribed to treat a diagnosed condition such as obesity or heart disease. These accounts cannot be used when the goal is only to improve appearance, general health, or overall well‑being.

Action Items

Employers should ensure that their plan documents clearly spell out how GLP‑1 drugs are covered. Changes should be communicated through an updated summary plan description (SPD) or a summary of material modifications (SMM) and confirm that benefit guides and enrollment materials match. Plan operations should also be regularly reviewed to ensure they align with the written terms and are applied consistently to similar participants.

Health Plan Coverage

Currently, there is no federal requirement for employer health plans to cover GLP‑1 drugs for diabetes or obesity. Employers generally decide what to cover, within rules such as the ACA and MHPAEA. Those with fully insured plans may have less flexibility because their options must also meet state insurance mandates.

States are taking different approaches to GLP‑1 coverage for obesity, some require it under Medicaid or state employee plans, while others have cut it due to cost. North Dakota is the first to mandate GLP‑1 obesity coverage in its essential health benefits for 2025, but only for small, fully insured employer plans. So far, broader state mandates for private plans have not passed.

Limiting GLP‑1 coverage to diabetes (and not obesity or related conditions) can raise discrimination risks under evolving federal rules. Even though no federal law explicitly bans weight-based bias, employers should carefully evaluate these exclusions in light of their obligations under:

• ADA: Applies to employers with 15+ employees and bars discrimination based on disability. Most courts say obesity alone is not a disability unless tied to an underlying medical condition, but some courts view obesity itself as a disability, and the EEOC has brought ADA cases on behalf of employees with morbid obesity.
• ACA Section 1557 Nondiscrimination: Bars disability-based discrimination in certain health programs, where disability is a physical or mental impairment that substantially limits major life activities. In 2026, the 1st Circuit upheld dismissal of class actions challenging weight-loss drug exclusions under Section 1557 (e.g., Holland v. Elevance Health Inc.), but other courts could rule differently based on the facts.
• HIPAA: Prohibits group health plans from discriminating on eligibility, premiums, or coverage based on health status, medical condition, or disability. Plans may exclude specific diseases, treatments, or drugs only if the exclusion applies uniformly to all similarly situated individuals and does not target those with a particular condition.
• MHPAEA: Requires MH/SUD benefits to be covered on par with medical/surgical benefits. Plans may raise parity concerns if they cover GLP‑1 drugs only for medical conditions (like diabetes) but deny or more tightly manage them for MH/SUD‑related treatment with similar clinical support.

Employers that offer GLP‑1 coverage through a lifestyle or wellness program, should review it for compliance with HIPAA’s health‑contingent wellness rules and the ADA’s standards for programs involving medical questions or exams. A wellness program that collects family medical history must also comply with the Genetic Information Nondiscrimination Act.

Tax-advantage Health Accounts

If your health plan does not cover GLP‑1 drugs for weight loss, you may still help employees by contributing to tax‑advantaged accounts—such as a health FSA, HRA, or HSA—to offset their costs. Each account type follows different eligibility and contribution rules.

• Health FSA: Employees can contribute pre‑tax dollars and employers can choose to add employer dollars, up to $3,400 for plan years beginning in 2026. Only employees eligible for group health plan may participate. Unused funds are forfeited at year‑end unless the plan offers a grace period or allows carryovers up to 20% of the annual limit ($680 for 2026).
• HRAs: Funded only by the employer to reimburse eligible expenses not covered by the health plan. They must be paired with other group health coverage, so only employees (and enrolled spouses/dependents) in that coverage can use the HRA. Depending on the design, unused balances may roll over year to year.
• Excepted Benefit HRAs (EBHRAs): Employer-funded only, up to $2,200 for plan years beginning in 2026, to reimburse eligible expenses not covered by the health plan. Employees must be offered your group health plan (even if they do not enroll) to be eligible. Depending on your design, unused funds may roll over year to year.
• HSAs: Employees (and optionally employers) can contribute pre‑tax dollars to employee‑owned accounts for eligible expenses not covered by the health plan. For 2026, contributions are capped at $4,400 for self‑only HDHP coverage and $8,750 for family HDHP coverage. Participants must be enrolled in an HDHP, and unused funds roll over year to year.

These tax-advantaged accounts can only be used for out-of-pocket, qualified medical expenses, costs primarily incurred to diagnose, treat, or prevent a physical or mental condition. Weight loss drugs generally do not qualify if used only to improve appearance, general health, or well-being. However, if prescribed to treat a physician-diagnosed disease, GLP‑1 costs may be reimbursed tax-free through a health FSA, HRA, EBHRA, or HSA. Download the bulletin for more details.