Whether you realize it or not, there's a revolution going on in the healthcare sector -- or two, to be more precise.
Two wildly different healthcare forces at work
On one end of the spectrum we have the Affordable Care Act, known better as Obamacare, which is in the process of transforming the way we purchase health insurance and receive medical care.
Under Obamacare, health plans have beefier minimum essential benefit requirements, insurers can no longer turn down members for having a pre-existing condition, and provisions have been built in to help make the plans more affordable for individuals with income levels under 400% of the federal poverty level. Also, individuals and businesses have guidelines (known as the individual mandate and employer mandate) that establish what penalties may be imposed for either not purchasing insurance, or, in the case of businesses with 50 or more full-time employees, not offering health coverage options or subsidies to full-time employees who may need it (beginning in 2016).
On the other end we have marijuana, a drug that it still illegal under federal law, which the American public and nearly half of all U.S. states have rallied around to some extent. Since 1996, we've seen 23 states approve medical marijuana legislation, and residents in four states have even voted in recent years to allow the legal sale of recreational marijuana.
For the states, it's an added source of revenue that can fund everything from education to jobs. But for chronically ill and terminal patients, marijuana represents a chance to alleviate or potentially even cure symptoms. In prior clinical, studies we've observed findings that have suggested that marijuana could have a positive impact on certain cancer types, chronic diseases like type 2 diabetes, and even Alzheimer's disease and Parkinson's disease.
Could Obamacare lead to a medical marijuana revolution?
But the big question is whether these two mammoth forces in healthcare -- Obamacare and marijuana -- can ever meet in the middle. In other words, could Obamacare lead to a medical marijuana revolution?
The idea isn't completely unfathomable, although it's still highly unlikely.
As a whole, Obamacare has nearly 9.95 million paying enrollees as of June 30, 2015 per the Centers for Medicare and Medicaid Services. While only some members would potentially benefit from medical marijuana, if legalized or decriminalized by the federal government, it could be a boon for the insurance industry in the right cases.
For example, consider the rising costs to treat chronically or terminally ill patients. It's not entirely uncommon these days for targeted cancer therapies to cost in the upper five-digit or even six-digit range. Relatively new cancer immunotherapies that enhance a patient's immune system to better locate and fight cancer, such as Keytruda and Opdivo, sell for what amounts to $150,000 and $143,000 annually. However, if medical marijuana is shown in clinical studies to have a beneficial effect on cancer as well (specifically the cancers these two immunotherapies fight), insurers could opt for the much cheaper solution.
To be clear, this is a hypothetical scenario I'm mentioning here, but the potential uses for marijuana in terms of treatment options are enormous.
Additionally, imagine what sort of allure an insurer would gain if it announced that it would begin covering medical marijuana. I can't speak to any specific numbers, but with slightly more than half the nation having a favorable view of marijuana via national polls, and more than 80% of respondents in some states having a positive view of medical marijuana, it's likely that any insurer bold enough to take this step would attract a huge member base. And keep in mind that Obamacare has made the insured base larger than ever.
Lastly, the idea of covering marijuana for medicinal purposes could actually be construed as a positive for state lawmakers, and perhaps even Congress. If insurers were covering medical marijuana under their health plans, then consumers would presumably be more likely to visit legal marijuana shops (since they would be covered) and less likely to use black market sources. This could result in more tax revenue for states and tighter industry regulation.
An unlikely scenario
But as noted above, the combination of Obamacare and medical marijuana is highly unlikely for a couple of reasons.
Arguably one of the biggest obstacles is the federal government's stance on medical marijuana as a schedule 1 substance. If health-benefit providers can't prove that marijuana has medical benefits, then it can't knowingly begin covering the drug. The biggest challenge is that marijuana's safety and medical benefits profile won't be fully explored overnight. It's like a 50,000-piece puzzle that takes years to put together. Until researchers have more concrete data for insurers, the chances of them covering a substance with a medically unproven track record are likely very small.
Secondly, a lack of national cohesion on marijuana regulations could make insuring people difficult, if not impossible. Not only would insurers have to differentiate between the 23 states (and Washington D.C.) that have legalized marijuana from the 27 states that have not, but certain individual jurisdictions within legal states still ban marijuana. Within Colorado, only around a quarter of all jurisdictions can legally sell medical or recreational marijuana, which makes it practically impossible for an insurer to ensure it's offering coverage to someone who lives in a jurisdiction where it's OK to cover the drug. Without a uniform law across states, insurers could choose to keep their distance.
Finally, whereas price could be a benefit to insurers in certain cases, I have a suspicion that in a majority of instances the price of medical marijuana could wind up haunting, rather than helping, health-benefit providers. In the four states where marijuana has been legalized for recreational purposes, we've seen a drop in prices. But in Washington, for example, we also witnessed growers produce 3.5 tons of marijuana over the trailing first year of recreational legalization that didn't get sold. It's possible marijuana prices could fall as more states legalize and growers, processors, and retailers get a handle on what consumer demand is really like -- but we're probably talking about a multi-year process. In the meantime, medical marijuana costs are likely going to remain too high for insurers to even consider covering the drug.
I certainly wouldn't rule out the possibility of medical marijuana being covered one day. But at this point in time it doesn't appear that a medical marijuana revolution among insurers is on the horizon.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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