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

Abstract

AbstractIntroductionRecent studies suggest that medical cannabis laws might contribute to a 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.MethodsWe 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 premiums per employee for single, employee-plus-one, and family coverage plans. We utilized the Sun and Abraham (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.ResultsFor 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) and employee plus one (-0.025, SE = 0.009) coverage plans considering the first 10 years of policy change compared to states without such laws. Looking at the last five years of policy change, we saw increases in effect size and statistical significance. Sensitivity analyses suggest findings are robust to our model specifications.DiscussionAdoption 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.Key PointsStates that passed medical cannabis laws, compared to states that did not pass such laws, saw decreases in the average total costs for employer-sponsored health insurance premiums.The difference in average total costs for employer-sponsored health insurance premiums, comparing states with and without medical cannabis laws, grew over time.This paper contributes to the idea that medical cannabis laws may contain positive externalities.