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Measuring the Impact of Medical Cannabis Law Adoption on Employer-Sponsored Health Insurance Costs: A Difference-in-Difference Analysis, 2003–2022

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Abstract

Introduction

Recent studies suggest that medical cannabis laws may contribute to a relative reduction in health insurance costs within the individual health insurance markets at the state level. We investigated the effects of adopting a medical cannabis law on the cost of employer-sponsored health insurance in the United States.

Methods

We analyzed state-level data from the Medical Expenditure Panel Survey–Insurance Component (MEPS-IC) Private Sector spanning from 2003 to 2022. The outcomes included log-transformed average total premium costs per employee for single, employee-plus-one, and family coverage plans. We utilized the Sun and Abraham (J Econometr 225(2):175–199, 2021) difference-in-difference (DiD) method, looking at the overall DiD and event-study DiD. Models were adjusted for various state-level demographics and dichotomous policy variables, including whether a state later adopted recreational cannabis, as well as time and unit fixed effects and population weights.

Results

For states that adopted a medical cannabis law, there was a significant decrease in the log average total premium per employee for single (−0.034, standard error [SE] 0.009 (−$238)) and employee-plus-one (−0.025, SE 0.009 (−$348)) coverage plans per year considering the first 10 years of policy change compared with states without such laws. Looking at the last 5 years of policy change, we saw increases in effect size and statistical significance. In-time placebo testing suggested model robustness. Under a hypothetical scenario where all 50 states adopted medical cannabis in 2022, we estimated that employers and employees could collectively save billions on healthcare coverage, potentially reducing healthcare expenditure's contribution to GDP by 0.65% in 2022.

Conclusion

Adoption of a medical cannabis law may contribute to decreases in healthcare costs. This phenomenon is likely a secondary effect and suggests positive externalities outside of medical cannabis patients.

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Authors and Affiliations

  1. Health Economics and Outcomes Research Division, Leafwell, Miami, FL, USA

    Mitchell L. Doucette, Dipak Hemraj, Emily Fisher & D. Luke Macfarlan

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  1. Mitchell L. Doucette
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Correspondence to Mitchell L. Doucette.

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Funding

No external funding was used in the creation of this work.

Conflict of Interest

Mitchell L. Doucette, Emily Fisher, D. Luke Macfarlan, and Dipak Hemraj are employees of Leafwell and hold stock or stock options in Leafwell. Leafwell is a telehealth company that connects patients to physicians and does not produce or sell medical cannabis products. No Leafwell data were used as part of this analysis; all outcome data are publicly available.

Data Availability

The outcome data used for this study are publicly available from the AHRQ and can be found on the following website: https://datatools.ahrq.gov/meps-ic/?type=tab&tab=mepsich3ps&_gl=1%2A1jfniqe%2A_ga%2AMTk3NDY5MzY5MS4xNzAxNzg1MzE0%2A_ga_1NPT56LE7J%2AMTcwMTg2NzY5Mi4yLjAuMTcwMTg2NzY5Mi4wLjAuMA.

Ethics Approval

Not applicable, all data are publicly available and non-identifiable.

Consent to Participate

Not applicable.

Consent for Publication

Not applicable.

Code Availability

Data related to the study’s outcome are publicly available. Code is available upon reasonable request.

Author’s contributions

MLD conceptualized the study design, led the data analysis, drafted the initial manuscript, and approved the final manuscript. MLD and DH participated in data collection and cleaning. DH, EF, and DLM provided substitutive feedback on the initial manuscript draft and study design, and approved the final submission.

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Doucette, M.L., Hemraj, D., Fisher, E. et al. Measuring the Impact of Medical Cannabis Law Adoption on Employer-Sponsored Health Insurance Costs: A Difference-in-Difference Analysis, 2003–2022. Appl Health Econ Health Policy (2024). https://doi.org/10.1007/s40258-024-00913-0

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