As the legalization of medical marijuana becomes more prevalent both in New Jersey and nationwide, group health insurance plan administrators face the daunting task of keeping up with an ever-evolving legal landscape. One question, however, is likely familiar to all such individuals: “Can our group health insurance plan provide coverage for medical marijuana claims?”
Currently, the answer is no. Despite legalization in several states, the federal Controlled Substances Act (CSA) continues to categorize marijuana as a Schedule I drug. As such, marijuana (including cannabis and Tetrahydrocannabinol (THC)) has not been approved for medical use by the Food and Drug Administration (FDA). As FDA approval is the benchmark for drug coverage under all group health insurance plans in the U.S., it is unlikely that any fully insured group health insurance plan will provide medical marijuana coverage until there is a change in the CSA.
What about potential coverage under self-insured group health plans? While self-insured group health plans afford a plan administrator with a degree of discretion otherwise unavailable under a group health insurance policy, the administrator of any such a plan must consider several factors, including the income tax consequences of such coverage.
Under current Internal Revenue Service (IRS) guidance, “qualified medical expenses” cannot include medical care through the use illegal drugs, even if used for valid medical treatments. As such, any payment for such drugs under a group health insurance plan (including payment through a flexible spending arrangement (FSA), health savings account (HSA) or health reimbursement account (HRA)) would be taxable to the recipient. While some plan administrators may be tempted to use state legalization of medical marijuana as a basis to provide coverage under a group health insurance plan, IRS Publication 502 effectively ends such a pipe-dream:
“You can’t include in medical expenses amounts you pay for controlled substances (such as marijuana…etc.) that aren’t legal under federal law, even if such substances are legalized by state law.”
In addition, it is possible for the IRS to disqualify a group health insurance plan that provides impermissible benefits to its participants. While such occurrences are rare, disqualification results in all benefits paid under the plan becoming taxable to the participants.
Potentially significant coverage changes, however, may be forthcoming. This past June, the FDA approved Epidiolex, a cannabidiol (CBD)-based medication that treats seizures. As a result, the DEA removed Epidiolex from Schedule I of the CSA, thereby permitting its coverage under group health insurance plans. With continuing advancement, it is likely that more CBD-based drugs will find approval with the FDA, thereby opening the door for health insurance coverage.
Similarly, the recently-enacted Agriculture Improvement Act of 2018 (the 2018 Farm Bill) legalized the manufacture and production of certain hemp-derived products, which likely will fuel advances in CBD-based medication. However, the availability of such medications is probably several years away, as federal and state regulatory hurdles (including FDA approval) remain before such drugs are available for public use.
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