Medical cannabis laws lower individual market health insurance premiums

ABSTRACT

Background: To evaluate the impact of medical cannabis laws (MCLs) on health insurance premiums. We study whether cannabis legalization significantly impacts aggregate health insurer premiums in the individual market. Increases in utilization could have spillover effects to patients in the form of higher health insurance premiums.

Methods: We use 2010–2021 state-level U.S. private health insurer financial data from the National Association of Insurance Commissioners. We examined changes to individual market health insurance premiums after the implementation of medical cannabis laws. We employed a robust difference-in-differences estimator that accounted for variation in policy timing to exploit temporal and geographic variation in state-level medical cannabis legalization.

Results: Seven years after the implementation of Medical Cannabis laws, we observe lower health insurer pre- miums in the individual market. Starting seven years post-MCL implementation, we find a reduction of $-1662.7 (95% confidence interval [CI − 2650.1, − 605.7]) for states which implemented MCLs compared to the control group, a reduction of -$1541.8 (95% confidence interval [CI 2602.1, − 481.4]) in year 8, and a reduction of $-1625.8, (95% confidence interval [CI − 2694.2, − 557.5]) in year 9. Due to the nature of insurance pooling and community rating, these savings are appreciated by cannabis users and non-users alike in states that have implemented MCLs.

Conclusions: The implementation of MCLs lowers individual-market health insurance premiums. Health insurance spending, including premiums, comprises between 16% and 34% of household budgets in the United States. As healthcare costs continue to rise, our findings suggest that households that obtain their health insurance on the individual (i.e., not employer sponsored) market in states with MCLs appreciate significantly lower premiums.