Pharmacy Trends

Attitudes Shift on Medical Marijuana

A growing number of industry stakeholders are keeping an open mind about reimbursing claims for the medical use of cannabis.
By: | May 24, 2016 • 7 min read

The tide is turning towards paying workers’ compensation claims involving medical marijuana, but many payers remain reticent.

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Industry professionals would prefer that the federal government stop classifying the drug as an illegal controlled substance before paying such claims.

Four states — Connecticut, Maine, Minnesota and New Mexico — approved workers’ comp reimbursement for the use of medical marijuana, at least publicly, according to Mark Pew, senior vice president at PRIUM in Duluth, Ga.

Courts in New Mexico ruled that carriers must pay for marijuana if a doctor in that state recommends it as part of a claimant’s treatment.

However, some carriers are defying the state court’s order, arguing that it’s illegal under federal law. Still, there seems to be an ongoing shift in risk management and insurance toward paying claims that involve marijuana use.

Mark Pew, senior vice president, PRIUM

Mark Pew, senior vice president, PRIUM

“I think increasingly, more people with whom I’ve spoken are open to the possibility — that includes physicians, nurses, claims adjusters, and those that influence decisions,” he said.

“They will review based on the clinical efficacy for that particular patient.”

However, not everyone is convinced, as the studies conducted on marijuana are not as definitive as those for FDA-approved drugs, Pew said.

Moreover, professionals still point to the fact that marijuana is classified as illegal by the federal government.

Paying claims for its use could create a legal quandary.

“I think those that not convinced are still the majority of the workers’ comp industry,” Pew said.

“It is a loaded question, because marijuana is a divisive and partisan issue, and personal biases of individuals within the workers’ comp system influence their perceptions on it.”

On top of this, payment decisions based on utilization reviews (UR) are problematic because there are no medical guidelines for medical marijuana, Pew said. In some states UR is the arbiter, in other states UR is but an opinion, and in still others, UR is not supported.

Within workers’ compensation, the two treatment guidelines most used by states are Official Disability Guidelines and ACOEM, although some states have created their own. None currently recommend the medical use of marijuana, regardless of condition.

As such, if UR decisions rely on those guidelines, “the answer would be ‘no’ ” on payment for the drug use, Pew said.

But when reimbursement decisions are made outside of UR, individual biases on the subject of marijuana could have an impact, he said.

“Some will absolutely not consider marijuana as medicine and refuse reimbursement,” Pew said.

“Others may have personal experience or know someone that cannabis helped and be willing to consider it.”

“At no time in our history has a state government required the reimbursement for use of a substance that is illegal under in the eyes of the federal government.” — Nichole Wilson, director, pharmacy product development, Coventry Workers’ Comp Services

When it comes to evaluating the clinical efficacy of medical marijuana, practitioners should look at whether benefits exceed the risks, level of function and activity, quality of life, and whether the addition of medical marijuana could help discontinue the use of such dangerous drugs such as OxyContin, Alprazolam, Xanax and Soma, he said.

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“In other words, evaluate the appropriateness of cannabis as you would any other drug or treatment — does it work or not for that specific patient? That has been the case in the four states where reimbursement is being done, and the way in which the tide seems to be turning,” Pew said.

The use of medical marijuana for chronic pain is growing more and more popular — as of February 2016, 26 percent of all registered medical cannabis patients in New Mexico usde it for chronic pain, Pew said.

Moreover, 46 percent of registered patients use it for PTSD.

These numbers include all registered patients, not just injured workers, but those conditions are obviously applicable to workers’ comp.

Chronic pain is typically included as a qualifying condition for medical cannabis programs around the country, with Minnesota adding a very narrowly defined “intractable pain” to its list of approved uses as of Aug. 1.

“All of this means that medical cannabis is a burgeoning issue, with evolving science and opinions, and is absolutely pertinent to workers’ comp both now and into the future,” Pew said.

“And if marijuana is ever made legal and/or rescheduled at the federal level, the conversation changes dramatically.”

Lisa Anne Forsythe, senior consultant, regulatory business consulting and analysis, at Coventry Workers’ Comp Services in Sacramento, Calif., said “the tide is definitely turning.”

She has been working on the issue from a regulatory, legal and financial/billing perspective.

There were no medical marijuana claims whatsoever until after the recent appellate rulings in New Mexico, the first state in the country to allow medical marijuana as a compensable benefit.

“It simply wasn’t an issue from a legal, regulatory and financial standpoint until then,” Forsythe said.

Paucity of Evidence

Don Lipsy, Coventry’s manager, pharmacy regulatory communications in Tucson Ariz., said there are “burgeoning pockets” of utilization of medical marijuana related to workers’ comp injuries. While Coventry has not had claims, they’ve heard secondhand of claims being paid by others.

“We’re seeing an expansion of use as an alternative to opioids, and my concern is that we might be trying so hard to address the opioid epidemic that we are treating medical marijuana as a silver bullet,” Lipsy said.

“I’m not so sure we aren’t trading one issue for another.”

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From a clinical perspective, there are still a lot of people on the fence on whether or not marijuana is useful, said Nichole Wilson, Coventry’s director of pharmacy product development in Omaha, Neb.

“The evaluation of benefits versus risks are on most clinicians’ minds,” Wilson said.

“Since it’s still classified by the federal government as an illegal Schedule 1 controlled substance, there is not a preponderance of clinical evidence evaluating the drug, and that is a challenge to the medical community.”

“The tide is turning towards public acceptance of medical marijuana, with 169 million people living in the jurisdictions that have legalized it.” — Gregory McKenna, vice president and counsel for governmental affairs, Gallagher Bassett Services

Moreover, there’s a lot of concern about possible interactions of medical marijuana might have with other treatments as well as its potential benefits, Forsythe said.

“But there is also comparatively little discussion on the practical, legal and financial implications associated with the adoption of medical marijuana as a compensable benefit at this time, and that is something that really needs to be talked about,” she said.

“That was definitely one of the larger topics within the New Mexico bill. When we tell an insurance company that medical marijuana is a mandated covered benefit, this is precedent-setting — at no time in our history has a state government required the reimbursement for use of a substance that is illegal under in the eyes of the federal government.”

The Federal Conundrum

The liability implications of paying for an illegal substance need to be more thoroughly examined, experts said.

For example, the use of the federal banking system to pay for the illegal drug could that trigger federal criminal action under the Racketeer Influenced and Corrupt Organizations Act (RICO), Forsythe said.

“Financial institutions are loathe to potentially run afoul of RICO and have avoided doing business with dispensaries, etc., due to liability concerns,” she said. “Insurance companies face a similar exposure.”

Gregory McKenna, vice president and counsel for governmental affairs, Gallagher Bassett Services

Gregory McKenna, vice president and counsel for governmental affairs, Gallagher Bassett Services

Gregory McKenna, vice president and counsel for governmental affairs for Gallagher Bassett Services in Itasca, Ill., said the TPA’s workers’ comp resolution managers “are on the front line,” since they decide whether medical marijuana is a compensable treatment.

First, since federal banking restrictions make it illegal for providers of medical marijuana to use FDIC-approved banks, payment to them has to be made in cash, McKenna said. As such, the claimant needs to pay the provider in cash, and then the claimant has to be reimbursed by check.

“Payors have to make decisions to proceed with a reimbursement to the claimant, which is further complicated by a series of federal criminal statutes related to marijuana transactions,” he said.

“This is out of the realm of what we do normally, so it is a new frontier.”

Another significant challenge lies in the fact that the industry has few decision-support tools for medical marijuana, such as clinical intervention to alert workers’ comp decision-makers to potential interactions between medical marijuana and other medications or medical bill review processes to ensure proper dosage or utilization.

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“However, the tide is turning towards public acceptance of medical marijuana, with 169 million people living in the jurisdictions that have legalized it,” McKenna said.

“Because of that volume of people, now the DEA and other federal agencies are taking a very careful look at reclassifying medical marijuana to make it legal.”

The agencies are also looking at naming very specific components of marijuana, to determine whether there may be some additional benefits to those components. That could open up additional research to take a clinical look at the efficacy of medical marijuana.

“This and decriminalization could lead to more workers’ comp payments within the industry,” he said.

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Insurtech

Kiss Your Annual Renewal Goodbye; On-Demand Insurance Challenges the Traditional Policy

Gig workers' unique insurance needs drive delivery of on-demand coverage.
By: | September 14, 2018 • 6 min read

The gig economy is growing. Nearly six million Americans, or 3.8 percent of the U.S. workforce, now have “contingent” work arrangements, with a further 10.6 million in categories such as independent contractors, on-call workers or temporary help agency staff and for-contract firms, often with well-known names such as Uber, Lyft and Airbnb.

Scott Walchek, founding chairman and CEO, Trōv

The number of Americans owning a drone is also increasing — one recent survey suggested as much as one in 12 of the population — sparking vigorous debate on how regulation should apply to where and when the devices operate.

Add to this other 21st century societal changes, such as consumers’ appetite for other electronic gadgets and the advent of autonomous vehicles. It’s clear that the cover offered by the annually renewable traditional insurance policy is often not fit for purpose. Helped by the sophistication of insurance technology, the response has been an expanding range of ‘on-demand’ covers.

The term ‘on-demand’ is open to various interpretations. For Scott Walchek, founding chairman and CEO of pioneering on-demand insurance platform Trōv, it’s about “giving people agency over the items they own and enabling them to turn on insurance cover whenever they want for whatever they want — often for just a single item.”

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“On-demand represents a whole new behavior and attitude towards insurance, which for years has very much been a case of ‘get it and forget it,’ ” said Walchek.

Trōv’s mobile app enables users to insure just a single item, such as a laptop, whenever they wish and to also select the period of cover required. When ready to buy insurance, they then snap a picture of the sales receipt or product code of the item they want covered.

Welcoming Trōv: A New On-Demand Arrival

While Walchek, who set up Trōv in 2012, stressed it’s a technology company and not an insurance company, it has attracted industry giants such as AXA and Munich Re as partners. Trōv began the U.S. roll-out of its on-demand personal property products this summer by launching in Arizona, having already established itself in Australia and the United Kingdom.

“Australia and the UK were great testing grounds, thanks to their single regulatory authorities,” said Walchek. “Trōv is already approved in 45 states, and we expect to complete the process in all by November.

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group.” – Scott Walchek, founding chairman and CEO, Trōv

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group,” he added.

“But a mass of tectonic societal shifts is also impacting older generations — on-demand cover fits the new ways in which they work, particularly the ‘untethered’ who aren’t always in the same workplace or using the same device. So we see on-demand going into societal lifestyle changes.”

Wooing Baby Boomers

In addition to its backing for Trōv, across the Atlantic, AXA has partnered with Insurtech start-up By Miles, launching a pay-as-you-go car insurance policy in the UK. The product is promoted as low-cost car insurance for drivers who travel no more than 140 miles per week, or 7,000 miles annually.

“Due to the growing need for these products, companies such as Marmalade — cover for learner drivers — and Cuvva — cover for part-time drivers — have also increased in popularity, and we expect to see more enter the market in the near future,” said AXA UK’s head of telematics, Katy Simpson.

Simpson confirmed that the new products’ initial appeal is to younger motorists, who are more regular users of new technology, while older drivers are warier about sharing too much personal information. However, she expects this to change as on-demand products become more prevalent.

“Looking at mileage-based insurance, such as By Miles specifically, it’s actually older generations who are most likely to save money, as the use of their vehicles tends to decline. Our job is therefore to not only create more customer-centric products but also highlight their benefits to everyone.”

Another Insurtech ready to partner with long-established names is New York-based Slice Labs, which in the UK is working with Legal & General to enter the homeshare insurance market, recently announcing that XL Catlin will use its insurance cloud services platform to create the world’s first on-demand cyber insurance solution.

“For our cyber product, we were looking for a partner on the fintech side, which dovetailed perfectly with what Slice was trying to do,” said John Coletti, head of XL Catlin’s cyber insurance team.

“The premise of selling cyber insurance to small businesses needs a platform such as that provided by Slice — we can get to customers in a discrete, seamless manner, and the partnership offers potential to open up other products.”

Slice Labs’ CEO Tim Attia added: “You can roll up on-demand cover in many different areas, ranging from contract workers to vacation rentals.

“The next leap forward will be provided by the new economy, which will create a range of new risks for on-demand insurance to respond to. McKinsey forecasts that by 2025, ecosystems will account for 30 percent of global premium revenue.

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“When you’re a start-up, you can innovate and question long-held assumptions, but you don’t have the scale that an insurer can provide,” said Attia. “Our platform works well in getting new products out to the market and is scalable.”

Slice Labs is now reviewing the emerging markets, which aren’t hampered by “old, outdated infrastructures,” and plans to test the water via a hackathon in southeast Asia.

Collaboration Vs Competition

Insurtech-insurer collaborations suggest that the industry noted the banking sector’s experience, which names the tech disruptors before deciding partnerships, made greater sense commercially.

“It’s an interesting correlation,” said Slice’s managing director for marketing, Emily Kosick.

“I believe the trend worth calling out is that the window for insurers to innovate is much shorter, thanks to the banking sector’s efforts to offer omni-channel banking, incorporating mobile devices and, more recently, intelligent assistants like Alexa for personal banking.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.”

As with fintechs in banking, Insurtechs initially focused on the retail segment, with 75 percent of business in personal lines and the remainder in the commercial segment.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.” — Emily Kosick, managing director, marketing, Slice

Those proportions may be set to change, with innovations such as digital commercial insurance brokerage Embroker’s recent launch of the first digital D&O liability insurance policy, designed for venture capital-backed tech start-ups and reinsured by Munich Re.

Embroker said coverage that formerly took weeks to obtain is now available instantly.

“We focus on three main issues in developing new digital business — what is the customer’s pain point, what is the expense ratio and does it lend itself to algorithmic underwriting?” said CEO Matt Miller. “Workers’ compensation is another obvious class of insurance that can benefit from this approach.”

Jason Griswold, co-founder and chief operating officer of Insurtech REIN, highlighted further opportunities: “I’d add a third category to personal and business lines and that’s business-to-business-to-consumer. It’s there we see the biggest opportunities for partnering with major ecosystems generating large numbers of insureds and also big volumes of data.”

For now, insurers are accommodating Insurtech disruption. Will that change?

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“Insurtechs have focused on products that regulators can understand easily and for which there is clear existing legislation, with consumer protection and insurer solvency the two issues of paramount importance,” noted Shawn Hanson, litigation partner at law firm Akin Gump.

“In time, we could see the disruptors partner with reinsurers rather than primary carriers. Another possibility is the likes of Amazon, Alphabet, Facebook and Apple, with their massive balance sheets, deciding to link up with a reinsurer,” he said.

“You can imagine one of them finding a good Insurtech and buying it, much as Amazon’s purchase of Whole Foods gave it entry into the retail sector.” &

Graham Buck is a UK-based writer and has contributed to Risk & Insurance® since 1998. He can be reached at riskletters.com.