By Ron Mazariegos, JD, VP Claims and Vendor Management, Arrowood Indemnity Company
Currently 38 states, 3 territories and the District of Columbia allow the medical use of cannabis products. 23 states allow adult recreational use of cannabis with Minnesota being the latest state.
With 76% of the U.S. allowing some form medical marijuana, it’s no surprise that cannabis in workers’ compensation claims continues to present challenges for employers and carriers.
Courts in multiple jurisdictions remain split as to whether an injured worker should be reimbursed for the cost of medical marijuana.
In two recent Pennsylvania decisions, the appellate court ruled that employers and their insurance carriers must reimburse an injured worker for the out-of-pocket cost of medical marijuana.
Pennsylvania joins five other states in which the courts have mandated reimbursement of medical marijuana, namely: New York, New Jersey, New Mexico, New Hampshire, and Connecticut.
However, the issues surrounding cannabis and workers’ compensation are diverse and challenging to navigate. Another six states (ME, MA, FL, ND, OH, WA) expressly prohibit workers’ compensation reimbursement for an injured worker’s medical marijuana use, while 14 states (AZ, AR, CA, CO, DE, IL, LA, MI, MO, NV, OR, PA, UT, VT) provide, either through statute, court decision, or administrative ruling, that insurance carriers cannot be required to reimburse for an injured worker’s medical marijuana.
Cannabis in Claims
In Fegley v. Firestone Tire & Rubber, the Pennsylvania Commonwealth Court issued a decision holding that the employer’s failure to reimburse the injured worker’s out-of-pocket expenses for medical marijuana was a violation of the Workers’ Compensation Act and could subject an employer/carrier to penalties under the Workers’ Compensation Act. The Court clarified that while Pennsylvania’s Medical Marijuana Act does not require coverage for medical marijuana by workers’ compensation insurers, nothing in the Medical Marijuana Act or the Pennsylvania Workers’ Compensation Act precludes reimbursement directly to a Claimant, as opposed to direct payment to a medical marijuana provider.
In subsequent second decision, Appel v. GWC Warranty Corporation, the Pennsylvania Commonwealth Court cited the Fegley decision in ordering the employer/carrier to reimburse the injured workers for the out-of-pocket costs of medical marijuana. Interestingly, the court relied on the humanitarian purpose of Pennsylvania’s Medical Marijuana Act of “mitigating suffering in some patients and also enhance quality of life” combined with the intention of the workers’ compensation act to require employers pay for work-related medical expenses.
The legal reasoning behind these two Pennsylvania decisions is similar to the courts’ reasoning in the Hager decision (NJ) and in the Quigley decision (NY).
Is This a Sign of the New Norm?
Other states appear poised to fully incorporate cannabis into its workers’ compensation system. The New York Workers’ Compensation Board issued an advisory last year stating that all claimant requests for medical marijuana should be submitted via a medication PAR (“Prior Authorization Request”) using the Board’s new OnBoard web portal. Essentially, medical marijuana approvals are treated similarly to any prescription.
New York legislators have also approved a bill that would require public health insurance carriers to include medical marijuana as a covered prescription drug and authorize private insurance carriers to do the same. Included in the definition of a public health insurance is workers’ compensation. The bill is currently pending before the state senate.
The view of cannabis in claims appears to be changing in the insurance industry as well. A recent insurance industry poll conducted by Insurance Journal revealed that 76% of participants viewed reimbursement for medical marijuana favorably.
On the federal level, the Secure and Fair Enforcement (SAFE) Banking Act is currently pending before Congress. The SAFE Banking Act would allow state legal cannabis businesses access to financial institutions products and services. Another bill, the Clarifying Law Around Insurance of Marijuana (CLAIM) Act was introduced in the Senate in 2021, where it is currently pending. The CLAIM Act would allow insurers to provide coverage to cannabis businesses.
On October 6, 2022, President Biden announced that he was asking the Secretary of Health and Human Services and the Attorney General to initiate the administrative process to review how marijuana is scheduled under federal law.
The Reimbursement Challenges Faced by Payors
Reimbursement of out-of-pocket costs for medical marijuana remains a challenge for payors as cannabis remains a Schedule I drug under the Controlled Substances Act (“CSA”). Therefore, the argument could be made that reimbursement violates the CSA and is considered aiding and abetting of a crime.
Some of the other issues that exists with cannabis in claims include:
- Lack of medically accepted dosing guidelines or standards.
- Lack of medical research, clinical trials or testing to determine efficacy.
- Little to no familiarity with the products being sold at the dispensaries. With reimbursement directly to the injured workers, the carrier is only receiving is a receipt with abbreviated codes and terminology sold by the individual dispensary. Unfortunately, each dispensary uses its own product codes and descriptions as there is no standard description for cannabis products. This could cause confusion for the carrier because there is no further description or insight into the products being sold to the injured worker.
- Lack of fee schedule or usual and customary pricing. While 38 states have approved medical marijuana, New Mexico is the only state with a fee schedule for cannabis. Prices vary significantly from state to state, dispensary to dispensary
- There is no Average Wholesale Price (AWP) or National Drug Code (NDC). There is no way to track the ingredients in each cannabis product nor the cost of each ingredient.
- Lack of prior authorization. For the most part, the reimbursement of the out-of-pocket costs for medical marijuana occurs after purchase, without any prior authorization, utilization review, drug review, IME or Prescription Drug Monitoring Program (“PDMP”) check. Essentially the provider and injured worker control the entire fill process without statutory oversight or control.
- There is potential for drug diversion because there is a significant black-market demand for the more potent clinically grown, high THC cannabis sold at commercial dispensaries. Without the proper controls to prevent diversion, the potential for fraud and abuse is significant under the current reimbursement system.
Unfortunately, the courts that have ordered carriers to reimburse injured workers for medical marijuana have provided very little guidance as to how exactly the reimbursement should take place. The reimbursement process itself remains vague and confusing.
The New York Workers’ Compensation Board has issued the following guidance:
“As marijuana remains a controlled substance under federal law, carriers cannot implicate the federal banking system when paying for Medical Marijuana.
Two options for Medical Marijuana payment: (1) Reimbursement to the claimant, or (2) Permit payment to the dispensary when carrier/SIE does not have funds in/or associated with the federal banking system.
Payment for Medical Marijuana should be made by reimbursement to the claimant as a medical and travel (M&T) reimbursement form.”
While hurdles remain surrounding the legality and practicality of dealing with cannabis in claims, it is likely that the number of states that will reimburse for medical marijuana will increase as more states legalize cannabis and injured workers petition the courts for reimbursement. Until the federal government issues clearer cannabis guidelines for carriers or marijuana is rescheduled, reimbursement will need to be carefully considered on a claim-by-claim basis.
About Ron Mazariegos
Ron is a claim executive and vendor manager for Arrowood Indemnity Company where he manages a major casualty claim unit handling primary and excess workers’ compensation, auto negligence and professional lines, including architects’ and engineers’ errors and omissions and lawyer malpractice claims in the U.S. and Canada.
Ron is a specialist in handling and managing high-severity, complex claims, coordinating settlement initiatives and creating innovative resolution strategies. His unique approach to managing and settling claims has resulted in significant mitigation of risk and claim exposure for his organization.
In addition to his claim responsibilities, Ron is the vendor manager for the workers’ compensation claims unit. He is responsible for the procurement of contracts with companies that supply goods and services to Arrowood. He is responsible for managing vendor-client relationships and ensuring that each vendor meets or exceeds contractual expectations.
Ron has extensive experience representing the insurance industry on both the claims and defense side. Prior to joining Arrowood Indemnity, Ron was an insurance defense attorney with a large law firm in New York. His practice focused on litigation, with an emphasis on automobile negligence, labor law, general liability defense, insurance coverage matters, subrogation, premises liability, and negligent security lawsuits. Ron represented major insurance carriers, self-insureds, third-party administrators, reinsurers and municipalities in civil lawsuits throughout New York.
Ron was also a civil-trial attorney for the New York City Law Department, Office of the Corporation Counsel. As an Assistant Corporation Counsel, Ron successfully defended and resolved hundreds of lawsuits filed against the NYPD, FDNY, DOT, Board of Education and Department of Sanitation. Ron also tried several cases to verdict before juries in New York, Kings and Queens County.
Ron is admitted to practice both in New York and North Carolina. He is also a licensed North Carolina claims adjuster.