Life insurance challenges posed by marijuana and e-cigarettes

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THC levels in marijuana today often are 15 percent or higher, compared to 4 percent in the 1980s. This photo shows some of the marijuana available for sale at legal dispensary in Juneau, Alaska. (Photo: AP Images) THC levels in marijuana today often are 15 percent or higher, compared to 4 percent in the 1980s. This photo shows some of the marijuana available for sale at legal dispensary in Juneau, Alaska. (Photo: AP Images)

An increasingly discussed area in life insurance circles is the manner in which marijuana and e-cigarettes are addressed by life insurance carriers.

There are ramifications for both relative to medical underwriting, and there are financial underwriting issues surrounding marijuana.

First, some background

E-cigarettes are plastic and metal devices that heat a liquid nicotine solution in a disposable cartridge creating vapor that the user inhales.  Surprisingly, the first e-cigarette was patented as early as 1963, but it only became popular after a 2003 patent, according to a March 2014 presentation at the Risk Appraisal Forum.

Related: Marijuana from an underwriting perspective

Tobacco use remains high. Although it has dropped significantly in the US since the 1964 Surgeon’s General Report (a drop among adults from 43 percent in 1965 to 19 percent in 2014) usage remains high. Nearly 50 million Americans still use some form of tobacco with 443,000 smoking attributed deaths each year. Ten percent of those are attributed to secondhand smoke. Worldwide there is an estimated 1.2 billion tobacco users with 6 million tobacco-related deaths annually. E-cigarette usage is only a small fraction of sales compared to traditional cigarettes. Roughly 20 percent of traditional cigarette smokers have tried e-cigarettes.

There are significant differences between traditional tobacco and e-cigarettes. Over 7,000 known toxins and carcinogens are in tobacco. By contrast, the toxic substances in e-cigarettes are lower. An analysis of 12 different types of e-cigarettes shows toxic substances at levels 9 to 450 times lower, with the highest concentrations approaching the same toxicity as a nicotine patch.

Still, there is no long term analysis of the effects of e-cigarettes. There also is a dearth of regulation or oversight of their manufacture, and no guidelines relative to sterile manufacturing.

There are currently more than 200 e-cigarette manufacturers, each using widely different standards. The only e-cigarettes currently marketed for therapeutic purposes are regulated by the Food & Drug Administration (FDA).  

Marijuana is the most common illicit drug used in the United States, and accounts for roughly 75 percent of all current illicit drug use. About 5 million Americans use it frequently (at least 51 days per year).

The federal government considers marijuana a Schedule I substance that has no (recognized) medicinal uses and high risk for abuse. Nonetheless, nearly 30 states have approved marijuana for medical use and another handful have legalized marijuana for recreational use. Among the possible medical benefits are treatment of autoimmune diseases (inflammation and pain), seizures and substance abuse. These continue to be tested in National Institute for Health (NIH) studies.

The article was excerpted from the "2017 Field Guide Estate & Retirement Planning, Business Planning & Employee Benefits" (National Underwriter Company)Related: 4 misconceptions about marijuana and life insurance

Editor's Note: The article was excerpted from the "2017 Field Guide: Estate & Retirement Planning, Business Planning & Employee Benefits" (National Underwriter Company)

Although the federal government still considers marijuana to be a Schedule I narcotic, in states where the substance has been legalized for medicinal use, patients are turning cannabis products to treat seizure disorders, inflammation, chronic pain and a myriad of other conditions. (Photo: iStock)Although the federal government still considers marijuana to be a Schedule I narcotic, in states where the substance has been legalized for medicinal use, patients are turning cannabis products to treat seizure disorders, inflammation, chronic pain and a myriad of other conditions. (Photo: iStock)

Medical underwriting considerations

From a medical perspective, e-cigarettes have not been fully studied, so consumers and insurers currently don’t know the potential risks of e-cigarettes when used as intended, or how much nicotine or other potentially harmful chemicals are being inhaled during use. Although the harmful effects of traditional cigarette smoking lies in the tobacco leaf and other chemicals, most carriers have limits on both cigarette smoking and tobacco in any other form, such as chew.

Related: The increased insurability of regular marijuana users

For many carriers, e-cigarette use falls into the “other form of tobacco product.” Typically nicotine is detected through tests of a proposed insured’s urine. If the nicotine content in urine is negative, then a no-tobacco rating is often available. However, if the nicotine is present in one’s urine, then some form of life insurance using tobacco rates will usually be offered.

It will be difficult for an underwriter to determine if an individual is using e-cigarettes or traditional tobacco products. As such, from a medical underwriting perspective, there is little advantage to use e-cigarettes.

There is some speculation that in the future carriers may be able to offer rates for e-cigarette use that would be better than tobacco use rates, but higher than no-tobacco use rates.  However, that is likely to be some years away, requiring long-term controlled studies of e-cigarette users compared to control populations.

Unlike e-cigarettes, for marijuana there is a wide understanding of its medical underwriting implications. Marijuana contains a number of Tetrahydrocannabinol (THC) -like intoxicants that are immediately taken up by fat cells, stored and then released slowly over time. THC may be detectable anywhere from 3 days to a month later. By contrast, alcohol contains only one intoxicant, ethanol, which is not stored in the body and is metabolized in a linear, predictable, fashion. As a result, there is no reliable method to quantify marijuana impairment. It’s worth noting that THC levels in marijuana today often are 15 percent or higher, compared to 4 percent in the 1980s.   

From a medical underwriting standpoint, it is difficult to distinguish between inhaled and ingested forms. As a result, both forms are generally treated the same for underwriting purposes.

Among the concerns associated with marijuana use:

        • Altered perceptions and mood;
        • Difficulty with thinking and problem solving;
        • Addiction;
        • Impaired motor skills; and
        • When used heavily by young people, its effects on cognitive skills and memory may be long-term or permanent.

Impaired mental capacity, motor coordination and judgment all increase the risk of injury and death while driving. Chronic marijuana use is also linked to mental illness.

Additionally, marijuana users have an increased risk of heart attack in the first hour after taking the drug. In its inhaled form, marijuana remains an irritant to the lungs, and can have many of the same respiratory effects as experienced by tobacco smokers. Use in pregnancy can trigger issues in fetal neurological development as well as post-partum neurological issues. 

In regard to underwriting, most carriers will treat marijuana the same for both illicit and prescription use. Most will treat users at some form of smoker rate, because of the inability to distinguish between ingested and inhaled forms. For many carriers, a marijuana user who consumes less than once per month should be able to obtain a smoker rate, possibly preferred. As use increases to 2 joints per week, the underwriting category may be reduced to standard smoker. At more than 2 per week that rate may slide to a mild substandard rate.

In this December 2013 photo, partygoers smoke marijuana during a Prohibition-era themed New Year's Eve party in Denver to celebrate the start of retail pot sales there. Financial underwriting where marijuana is involved can be problematic. (Photo: AP Images)In this December 2013 photo, partygoers smoke marijuana during a Prohibition-era themed New Year's Eve party in Denver to celebrate the start of retail pot sales there. Financial underwriting where marijuana is involved can be problematic. (Photo: AP Images)

Financial underwriting considerations

Because marijuana remains a controlled substance under federal law, transacting business involving marijuana is considered illegal. 

In June 2011, the U.S. Department of Justice issued a memo conveying the consequences of those individuals caught cultivating, selling or distributing marijuana, and those who engage in transactions involving the proceeds of such activity may also be in violation of federal money laundering statutes and other federal financial laws. Subsequently, most financial institutions have chosen to deny access to financial services for marijuana dispensaries. As a result, legal marijuana dispensaries are often conducted as cash-based business, as they have difficulty opening and/or maintaining bank and investment accounts.  Similarly, American Express, MasterCard and Visa have all opted not to accept credit cards for the payment of marijuana purchases. 

This presents a current dilemma relative to the financial underwriting of any business or individuals involved in transacting marijuana related businesses. It becomes difficult to determine what assets an entity or individual in these activities hold, even if legal at the state level.

See also:

How to insure clients who use marijuanaEditor's Note: The article was excerpted from the "2017 Field Guide Estate & Retirement Planning, Business Planning & Employee Benefits" (National Underwriter Company)

The effects of marijuana use on life insurance rates

Marijuana use of growing concern to life insurers

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Editor's Note: The article was excerpted from the "2017 Field Guide: Estate & Retirement Planning, Business Planning & Employee Benefits" (National Underwriter Company)

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