Reinsurers must adapt strategies to align with risk introduced by GLP-1 therapies: Gallagher Re

Gallagher Re, a reinsurance brokerage and risk management services provider, has released a report on the impact of GLP-1 receptor agonists on medical trends and reinsurance.

According to the report, as these therapies continue to reshape medical trends and insurance structures, reinsurance providers will need to adapt their strategies to align with the evolving risk profile introduced by GLP-1 therapies.

Despite the promising potential of these therapies to improve health outcomes, the rapid adoption of GLP-1 medications has sparked concerns over escalating prescription costs and their effects on claims management, particularly in the long term.

While initial reports suggest improvements in obesity-related comorbidities, the broader financial impact on both high-excess claims and aggregate stop-loss coverage remains uncertain.

Recent data from various sources, including Brown & Brown’s 2024 Employee Benefits Market Trends Report, shows that GLP-1 utilisation is increasing rapidly and now makes up at least 9% of overall prescription spending in many employer-sponsored plans.

The non-specialty prescription trend has increased from 3.2% in 2023 to an estimated 10-12% in 2024, driven largely by the growing use of GLP-1 receptor agonists.

According to the report, the Business Group on Health anticipates a 7.8% increase in overall healthcare spending in 2025, with a portion of that increase being directly attributed to GLP-1 medications. Gallagher Re has projected that these drugs could contribute an additional 1-2% to overall medical trend costs, further highlighting the growing financial impact of GLP-1 therapy.

For example, a group of 150 employees and 150 dependents, with 20% of eligible members utilising GLP-1 therapies at a cost of $10,000 per year, could see an increase of up to $600,000 in aggregate spending exposure. This increase in prescription costs has prompted employers and reinsurers to recalibrate their underwriting models in response to these emerging financial pressures.

According to Gallagher Re’s research, while the immediate effect of GLP-1s on specific stop-loss coverage remains minimal, there are potential risks tied to complications associated with their use, such as pancreatitis, gallbladder disease, and severe gastrointestinal issues.

These conditions could potentially increase exposure to high-cost claims. However, insurers have not yet observed a dramatic rise in catastrophic claims directly linked to GLP-1 usage. It is important to note that future expansions of GLP-1 indications (e.g., heart failure, Alzheimer’s) may alter high-excess risk profiles, potentially reducing future risks.

While the impact on specific stop-loss rates remains low, Gallagher Re highlights a more significant effect on aggregate medical costs. Many employees and dependents are adopting GLP-1 therapies for weight loss or pre-diabetes, which goes beyond the original indications for type 2 diabetes.

This broader adoption is expected to drive up overall per-member-per-month (PMPM) costs. For example, a group with 150 employees and 150 dependents could experience an increase of $600,000 in aggregate spending if 20% of eligible members use GLP-1 therapies at $10,000 per year.

As the population utilising GLP-1 therapies grows, carriers are adjusting their underwriting manuals to account for this evolving risk.

While GLP-1 therapies offer the potential to significantly reduce the long-term burden of chronic conditions such as cardiovascular disease, type 2 diabetes, and possibly even Alzheimer’s, their short-term financial implications remain uncertain.

Studies from Prime Therapeutics indicate that up to 85% of patients discontinue GLP-1 therapies within two years, often due to side effects, cost, or insufficient weight-loss maintenance. Moreover, 46% of patients with type 2 diabetes and 65% of those without may discontinue treatment within a year, with many choosing to reinitiate therapy if they regain weight.

These discontinuation patterns complicate projections of potential long-term savings from GLP-1 therapies. While the medications have shown promise in mitigating conditions such as type 2 diabetes and reducing cardiovascular events, the net effect on overall claims costs remains to be determined.

Complications such as pancreatitis, gallbladder disease, and other gastrointestinal issues could offset any potential long-term savings by triggering short-term inpatient or surgical costs.

An emerging topic among medical risk experts, including Gallagher Re, is the potential impact of GLP-1-induced weight loss on elective surgeries. Some foresee a reduction in joint replacement surgeries if significant weight loss leads to less chronic stress on joints.

However, others expect a paradoxical surge in these surgeries once patients reach a lower BMI and become eligible for such procedures. Additionally, surgeries like skin reduction or hernia repair may become more common, further influencing overall cost trends.

From an underwriting perspective, Gallagher Re advises monitoring these potential cost drivers. As GLP-1 weight-loss prescriptions are covered inconsistently across third-party administrators (TPAs), it is essential to ensure that plan design aligns with underwriting assumptions to prevent unexpected exposures.

With uncertainties surrounding patient adherence and clinical outcomes, Gallagher Re notes that many stop-loss and reinsurance carriers are waiting for more robust claims data before implementing targeted surcharges or discounts for GLP-1 coverage.

While most carriers remain open to the possibility that GLP-1 therapies could lead to favourable long-term outcomes (e.g., reduced obesity complications), they are cautious about incorporating these benefits into their underwriting models without more concrete evidence.

Gallagher Re highlights the expanding pipeline for weight-management medications, including compounded GLP-1s and potential biosimilars. While these treatments may lower costs, they could raise new safety and efficacy concerns, requiring reinsurance providers to stay alert and update their aggregate trend assumptions.

According to Gallagher Re’s report, as GLP-1 therapies grow in use, trends such as expanded indications, improved formulations, and personalised medicine are expected to impact both medical treatment and insurance. With increasing diagnoses of obesity and diabetes, regulatory approvals will likely boost their use, requiring ongoing adjustments to underwriting and pricing models.

While the immediate impact on stop-loss claims is modest, aggregate costs are more vulnerable to fluctuations from higher utilisation, side effects, and elective surgeries. In the long term, these therapies could lead to significant cost savings if adherence improves and clinical benefits are realised.

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