Friday Shorts: Taxes on employer insurance, GLP-1s and dementia, small business health insurance
April 25, 2025
A. Tax deductibility of employer-sponsored health plans
The federal government forgoes $345 billion in tax revenue each year due to the tax deductibility of employer-sponsored health insurance. Economists on both sides of the political spectrum have supported capping or eliminating this deduction. Many conservative health care economists oppose tax deductibility because they believe this encourages overuse of health care. Many liberal health care economists oppose tax deductibility because it predominantly benefits those with high income. The Affordable Care Act sought to decrease this issue through what was called a “Cadillac Tax” on high-cost health plans, but this tax was delayed multiple times and eventually repealed in 2019.
Congressional leaders seeking a large source of revenue to offset tax cuts are reportedly looking into eliminating or capping the deductibility of employer-sponsored health plans. The Republican Study Committee and Project 2025 have both recommended limiting tax deductibility of employer-sponsored health plans. Such a move would increase the cost of health insurance for employers and could lead to more cost shifting to employees and an increase in the number of people who are uninsured.
B. Many small businesses discontinue paying health insurance each year
Source JP Morgan Chase April 10, 2025
JP Morgan Chase has used a dataset of small business bank accounts to identify what portion of small businesses (generally with under $20 million in account balances) stopped paying for health insurance from one year to the next. The data above is for small businesses which have employees and excludes businesses that purchase insurance for just the owner.
Most (93% in year 1 and 79% in year 5) continue to operate even after stopping payment for employees’ health insurance. Those companies that faced a 10% increase in their health insurance premiums were more likely to drop coverage. Some may have purchased insurance through an association or through a different account. Health insurance costs are a special challenge for small businesses.
C. GLP-1s associated with lower risk of dementia in people with diabetes
JAMA Neurology published a metaanalysis of 23 randomized trials with about 160,000 which showed a 45% lower risk of dementia in people with diabetes treated with GLP-1 medications. This analysis showed no statistically significant improvement through just better blood sugar control, and did not show a decrease in dementia from SGLT2s, another commonly used class of diabetes medicines. Another study published in the same issue using pooled data from 60,000 people with diabetes in Florida showed protective effects against dementia for both GLP-1 and SGLT-2 medications. The benefits of GLP-1s continue to become clearer, but the prices remain too high.
Interested in avoiding dementia? An unrelated study in the JAMA Neurology this week shows that people who had emergency department visits for cannabis were more likely to have a later diagnosis of dementia.
D. U.S. health care costs continue to be much higher than other developed countries
Source: Wager, et al Peterson-KFF, April 9, 2025
The Peterson-KFF Health System Tracker published 2023 data on global relative health care costs. No surprise: the U.S. remains number one. This data is adjusted for purchasing power.