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April 29, 2024 Feature

Medical Marijuana Reimbursement in Workers’ Compensation Claims: An Exercise in States’ Rights

Jenifer Dana Kaufman
When seeking reimbursement of medical marijuana expenses for an injured worker, the state’s medical marijuana statute is a key determinant of success.

When seeking reimbursement of medical marijuana expenses for an injured worker, the state’s medical marijuana statute is a key determinant of success.

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It is common knowledge that marijuana, including “medical marijuana,” is federally illegal. Today, marijuana remains classified as a Schedule I controlled substance by the U.S. federal government. Marijuana has been Schedule I since the enactment of the Controlled Substances Act (CSA) in 1970. This scheduling was based upon a determination that marijuana “has no currently accepted medical use” and a high potential for abuse. Marijuana remains a Schedule I drug despite the fact that 36 states have medical marijuana programs and 24 states and the District of Columbia have legalized marijuana for adult use. In addition, many states and cities have decriminalized marijuana use and do not prosecute recreational users of marijuana.

At the federal level, controlled substances such as marijuana could be rescheduled or de-scheduled by either the legislative branch (U.S. Congress) or the executive branch (Drug Enforcement Administration (DEA)), as provided in the CSA and 21 C.F.R. § 1308.44. To reschedule, Congress would need to pass a law amending the CSA. Alternatively, the DEA could follow the procedure found in 21 C.F.R. § 1308.44 to reschedule marijuana. The CSA grants the attorney general rulemaking authority to reschedule a substance to another schedule. To transfer/reschedule a drug between schedules, the attorney general must make findings that the drug or other substance fits into the criteria of a given schedule. In September 2023, the U.S. Department of Health and Human Services (HHS) took the first step in the executive administrative process to reschedule by recommending rescheduling marijuana to a Schedule III controlled substance. Of course, this does not guarantee that it will be rescheduled.

This federal-state paradox is confounding, yet there is a simple explanation why medical marijuana can be legally sold in 36 states while at the same time be federally illegal—the existence of the Rohrabacher-Blumenauer (formerly Rohrabacher-Farr) Amendment (Rohrabacher), which has been included in every federal omnibus appropriations bill passed by Congress and signed into law by every U.S. president since 2014. This amendment states that the U.S. Department of Justice (DOJ), which is in charge of prosecuting violations of the CSA, is prohibited from using federal funds to interfere with the ability of states with medical marijuana programs to implement laws that authorize the use, distribution, possession, or cultivation of medical marijuana. In a nutshell, Rohrabacher is predicated on states’ rights, with the U.S. Congress specifically giving power to the individual states to decide how to manage their medical marijuana laws and programs. The DOJ cannot prosecute any entity or person for violation of the CSA as long as their actions are consistent with the applicable state’s medical marijuana laws. The DOJ is not powerless, however, and can still prosecute under the CSA if the marijuana at issue was not procured through a state-run program; for example, drug dealers can still be prosecuted.

Against this backdrop, the question is posed: Can the costs associated with an injured worker’s use of medical marijuana be reimbursed by a workers’ compensation insurance carrier? It should not be surprising to hear that the answer is one that lawyers love: it depends. It depends on which state we are talking about and the language of that individual state’s medical marijuana statute and regulations. At present, due to litigated cases, six states explicitly allow reimbursement and four do not. A significant number of states (around 12) have written language into their medical marijuana statutes expressly stating that workers’ compensation carriers do not need to cover or reimburse medical marijuana expenses. The remainder of the states with medical marijuana programs have statutes that are vague or do not delve into this issue. Some of these states have allowed reimbursement on a case-by-case basis, but there is no precedential decision one way or the other.

U.S. Supreme Court Declines to Review Reimbursement Issue

In 2022, the U.S. Supreme Court had the opportunity to weigh in on this issue and determine once and for all if injured workers can be reimbursed for medical marijuana costs. At issue was whether an insurance carrier’s reimbursement of costs incurred by a legal patient of the state’s medical marijuana program would place the carrier at risk of prosecution by the DOJ for violation of the CSA. This seemed to be a textbook case for the Court, given the 6–4 split among the states as to whether such a reimbursement could be made in compliance with both state and federal laws—secondarily implicating the supremacy clause, which states that if there is a true conflict between state and federal law, federal law must prevail. Petitions for writs of certiorari were filed in two companion workers’ compensation cases out of Minnesota. In both cases, the Court denied the petitions for certiorari.

It is worth noting that the U.S. Supreme Court did request and review an amicus brief from the U.S. solicitor general seeking the opinion of the federal government as to whether the two Minnesota appeals should be accepted and heard. The solicitor general recommended denying certiorari based upon her legal position that the federal CSA preempts state medical marijuana laws. She stated that the Minnesota cases were decided correctly. She further argued that the “Legislative and Executive Branches of the federal government are best situated to consider any potential tailored measures to address specific instances of interaction between federal and state marijuana laws.” Finally, she noted pending legislative action to amend the CSA.

It may be that the U.S. Supreme Court simply deferred to the wishes of the solicitor general that the judiciary not delve into the quagmire and instead wait for future executive and legislative action. However, the failure of the Court to accept the Minnesota appeals could reasonably lead a legal observer to conclude that the Court has determined that the federal law is settled in this matter due to Rohrabacher and that, therefore, every state is free to handle its medical marijuana program as it chooses and free to interpret the CSA to either allow or bar reimbursement. Certainly, the Court would seem to be in a better position to address differing interpretations of this conflict than the executive and legislative branches of the federal government. Ignoring the split among the states does not necessarily make it go away or provide meaningful guidance to other states weighing the issue in the future.

Another reasonable conclusion is that the Court did not feel that it was the judiciary’s place to accept the appeals because, at the moment, Rohrabacher is good law—and, as a result, the legislative and executive branches agree that the CSA won’t be enforced relative to state medical marijuana programs.

Regardless of the reasons for the Court’s denial of certiorari, states can choose, without fear of federal repercussions, to have medical marijuana programs and to require workers’ compensation carriers to reimburse injured workers’ reasonable and necessary expenses for using state-sanctioned medical marijuana to treat work injuries. This is the essence of states’ rights. Of course, should Rohrabacher lapse, or the DOJ change its position on prosecution, a future appeal to the U.S. Supreme Court might receive different treatment.

States Finding Medical Marijuana Not Reimbursable

Minnesota. An analysis of the Minnesota experience with this issue is worth reviewing. By way of background, Minnesota had been one of the few states that allowed injured workers to be reimbursed for their out-of-pocket medical marijuana costs. It did this by redefining “illegal substance” in its 2014 medical marijuana statute. Minnesota law stated that an illegal substance “does not include a patient’s use of medical cannabis permitted under Minnesota Statutes Sections 152.22 to 152.37.” As a result, injured workers using medical marijuana to treat their injuries could be reimbursed if the treatment was found to be reasonable and necessary. Reimbursements commenced without issue.

In 2021, two cases were heard by the Minnesota Supreme Court, Musta v. Mendota Heights Dental Center and Bierbach v. Digger’s Polaris. Both cases were factually similar in that workers’ compensation judges (WCJs) had determined that the injured workers had serious medical conditions for which the use of medical marijuana was reasonable and necessary. The carriers were directed to reimburse the workers’ out-of-pocket expenses. The cases were then appealed to the Minnesota Workers’ Compensation Court of Appeals. That appeals court stated that it lacked jurisdiction to decide if the federal prohibition of marijuana in the CSA preempted the Minnesota medical cannabis statute because the appeals court is not versed in federal-state conflict of laws. Both cases proceeded to the Minnesota Supreme Court.

In Musta, the Minnesota Supreme Court ruled that it was impossible for an insurance carrier to comply with both federal and state law as the ordered reimbursements would “expose the [carrier] to criminal liability under federal law for aiding and abetting Musta’s unlawful possession of cannabis.” A strong dissent was authored by one justice that the act of reimbursing would not constitute a violation of the CSA because the alleged crime, the injured worker’s purchase of medical marijuana, was already complete at the time of reimbursement. In disagreeing with the majority, the dissent concluded that one cannot aid and abet a crime after the fact. The dissent also concluded that the carrier lacked the requisite intent to be charged with aiding and abetting a crime if it complied with the judge’s order to reimburse. Because the U.S. Supreme Court declined to hear the appeal, it is now the law in Minnesota that carrier reimbursement of injured workers’ medical marijuana will not be court ordered.

Minnesota’s decision is in keeping with those of the supreme courts of Maine and Massachusetts as well as Vermont’s appeals board.

Maine. The first decision among those states was issued by the Maine Supreme Judicial Court in Bourgoin v. Twin Rivers Paper Co., LLC. In that case of first impression, the WCJ found Bourgoin’s use of medical marijuana reasonable and necessary under Maine’s workers’ compensation statute and directed the carrier to reimburse him. The Workers’ Compensation Board Appellate Division affirmed. The Maine Supreme Judicial Court reversed, concluding that the federal CSA preempts Maine’s medical marijuana laws and that the court would not put carriers in a position where prosecution by the DOJ for violation of the CSA—for aiding and abetting an employee’s federally illegal purchase, possession, and use of medical marijuana—was a real possibility. Two justices dissented.

Vermont. Shortly after Bourgoin was decided, Vermont’s appeals board followed suit in Hall v. Safelite Group, Inc. and declined to award reimbursement based upon the possibility of the carrier being prosecuted for violation of the CSA. That court noted the five-year statute of limitations in the CSA and was concerned that the law could change or be repealed in the future. The court was rather sympathetic to the injured worker but felt constrained to rule as it did. It mentioned that the carrier could voluntarily reimburse if it wanted, but the reimbursement could not be compelled. It also noted that it hoped further federal guidance would be forthcoming. No further appeals were taken.

Massachusetts. Finally, in Massachusetts, the Supreme Judicial Court declined to permit reimbursement, not based on the CSA or federal law but due to the language of Massachusetts’s medical marijuana statute. In Wright’s Case, the court declined to award reimbursement based upon the language of Massachusetts’s medical marijuana statute, which stated: “Nothing in this law requires any health insurance provider, or any government agency or authority, to reimburse any person for the expenses of the medical use of marijuana.” The court deemed workers’ compensation carriers to be covered by this provision even though workers’ compensation insurers are not specifically mentioned in the provision.

This decision is not surprising given the statute’s clear language precluding “reimbursement.” This type of language is part of the medical marijuana statutes of several states, including Alabama, Alaska, Arizona, Arkansas, Florida, Illinois, Michigan, North Dakota, Ohio, Oklahoma, Utah, and Washington. If a state’s medical cannabis statute specifically bars insurance reimbursement of medical marijuana, this will preclude the ability of the injured worker to seek this reimbursement, regardless of Rohrabacher or the reasonableness of the treatment.

Interestingly, Massachusetts has since fully legalized adult use of marijuana, as have Maine, Minnesota, and Vermont, even though the protections afforded by Rohrabacher only apply to medical marijuana and not adult-use programs. Of course, it is questionable whether the real rationale or motivation of employers and insurers not reimbursing medical marijuana is tied to legitimate concern about carriers being prosecuted for federal CSA violations; the ultimate motivation seems more rooted in a desire to protect workers’ compensation and other insurance carriers from this expense.

States Finding Medical Marijuana Reimbursable

There is a growing trend of states that permit reimbursement of medical marijuana in workers’ compensation. These states include Pennsylvania, New Mexico, Connecticut, New Hampshire, New Jersey, and New York. The courts in these states have espoused similar and different rationales for ordering carriers to reimburse medical marijuana expenses.

Pennsylvania. In March 2023, the Pennsylvania Commonwealth Court directed reimbursement in Fegley ex rel. Estate of Sheetz v. Firestone Tire & Rubber (Workers’ Compensation Appeal Board). The factual background of the case is typical of the medical marijuana reimbursement cases that have been adjudicated across the United States. The claimant, Paul Sheetz, injured his back at work in 1977 at age 25 and underwent three surgeries, leaving him totally disabled and in severe pain from his back down to his toes. He also developed tremors in his body from the nerve damage. For over 30 years, he was prescribed various narcotics of ever-increasing strength and dosage, culminating with him being placed on OxyContin in 2002. By the beginning of 2019, he was taking 30 mg/day, which was triple the dosage that the makers of OxyContin initially recommended when it was brought to market. The ability of OxyContin to mollify his pain decreased over time, and he suffered severe side effects that included depression and anger, which led to social isolation and feelings of hopelessness.

Sheetz began the process of weaning off OxyContin in the beginning of 2019 with the use of medical marijuana and the assistance of his pain doctor, who supervised the detox process. Sheetz received a Pennsylvania medical marijuana card and procured medical marijuana at dispensaries. He used Rick Simpson Oil (RSO), a concentrated extract derived from marijuana flower. Within a year, he was able to completely wean himself off OxyContin and was able to discontinue a long-standing prescription for Valium as the RSO improved his mood and depression significantly.

In the process of weaning himself off OxyContin, Sheetz desired to have the workers’ compensation carrier reimburse him for out-of-pocket expenses for his use of medical marijuana and sought legal representation. The workers’ compensation carrier denied the request for reimbursement, stating that medical marijuana “is not FDA approved.” The carrier also submitted a request for a utilization review (UR). This is a process in Pennsylvania workers’ compensation cases where an outside medical reviewer determines if medical care is reasonable and necessary. If it is found reasonable and necessary, the bill for the treatment is paid. The reviewer found Sheetz’s treatment with medical marijuana to be reasonable and necessary. The carrier did not appeal the UR determination to a WCJ, so the determination became final. The law in Pennsylvania regarding treatment subject to a final UR determination is crystal clear. If the treatment is reasonable and necessary, the carrier “shall” make payment (or, in this case, reimbursement). However, despite the favorable UR determination, the carrier refused to reimburse. Therefore, a penalty petition for violation of the Workers’ Compensation Act was filed and litigated before a WCJ.

The WCJ declined to direct the carrier to reimburse. The judge relied on the CSA and federal illegality of marijuana in his decision. The judge felt that he would be requiring the insurer to violate federal law and risk prosecution if he directed reimbursement.

An appeal was taken to the Workers’ Compensation Appeal Board (WCAB). Like the Minnesota board in Musta, the WCAB declined to comment on the federal/state conflict-of-law issue, stating that as a state agency it was not equipped to do so. However, the WCAB concluded that section 2102 of the Pennsylvania Medical Marijuana Act prevented an order compelling reimbursement. Section 2102 provides that “[n]othing in this act shall be construed to require an insurer or health plan, whether paid for by Commonwealth or private funds, to provide coverage for medical marijuana.”

An appeal was then taken to the Pennsylvania Commonwealth Court. In an en banc decision, the court agreed with the claimant’s arguments, concluding that the reimbursement would not violate the CSA as the carrier would not be required to “manufacture, distribute, or dispense, or possess with intent to manufacture, distribute, or dispense, a controlled substance.” The carrier’s act of reimbursement would therefore not place it at risk of federal prosecution.

The other important and interesting aspect of the appeal involved the court’s interpretation of Pennsylvania’s Medical Marijuana Act, specifically section 2102’s ban on insurer “coverage” of medical marijuana. The carrier argued that the language of section 2102 prohibited the requested reimbursement because “reimbursement” and “coverage” are synonymous terms. Unfortunately, the term “coverage” is not defined in Pennsylvania’s medical marijuana statute. The claimant argued that “coverage” and “reimbursement” are two separate legal concepts. “Coverage” is payment by an insurer to a medical point-of-service—for example, a pharmacy that a carrier can negotiate with and pay directly. This is what section 2102 sought to avoid—that is, the need for workers’ compensation and other insurers to pay dispensaries for their services as they would pay pharmacies. On the other hand, “reimbursement” is understood to be repayment to the injured worker for out-of-pocket expenses. The court agreed with the claimant’s argument that “coverage” and “reimbursement” are not the same thing and cited to Justice Felix Frankfurter in support of its conclusion that nontechnical terms in legislation should be given the meaning and definition that common and ordinary people understand those terms to have. Therefore, while the plain language of section 2102 bars coverage of medical marijuana, it does not bar reimbursement, which is what Sheetz requested.

A common theme in interpreting workers’ compensation statutes in almost all jurisdictions is the concept that the statute is remedial and should be interpreted liberally to effectuate its humanitarian and remedial purpose. The Commonwealth Court went on to note that the Medical Marijuana Act is humanitarian in nature and that it was not the intent of the Pennsylvania legislature to limit the protections of the Pennsylvania Workers’ Compensation Act. Specifically, section 2103 guarantees that no individual shall be denied any right or privilege regarding lawful use of medical marijuana. Therefore, because the Pennsylvania Workers’ Compensation Act mandates that reimbursement shall be made when a UR finds treatment reasonable and necessary, the court ruled that Sheetz’s right to reimbursement is mandatory and protected by the Workers’ Compensation Act and section 2103 of the Medical Marijuana Act. Lastly, the court noted that if the Pennsylvania legislature intended to bar reimbursement as well as coverage, it would have added “and reimbursement” to section 2102 of the Medical Marijuana Act—a court cannot be permitted to add language to a statute and is required to accept the plain language as written. The court cited several medical marijuana laws from other states that prohibit both coverage and reimbursement, most of which were enacted before Pennsylvania’s medical marijuana statute.

New Mexico. The first state to direct a workers’ compensation carrier to reimburse was New Mexico in the 2014 case Vialpando v. Ben’s Automotive Services. In that case, the court dismissed the employer’s argument that it would be compelled to violate the CSA if it reimbursed the injured worker for state-legal medical marijuana expenses. The court reasoned that the carrier did not cite to which section of the CSA it would be forced to violate; given this critical omission, the New Mexico court would “not search for such a statute.” Since the decision, New Mexico has taken the extra step of adding “medical cannabis” to its workers’ compensation fee schedule. One unit of medical marijuana is the equivalent of 1 gram of dry weight cannabis, which is reimbursable at the maximum rate of $12.02 per unit. Many dispensaries sell flower in containers called eighths, which are 3.5 grams by dry weight. These would be reimbursed at the rate of $42.07 for a standard eighth, which is in line with the actual cost of medical marijuana in New Mexico. The schedule permits a maximum of 230 units to be reimbursed per calendar quarter, which would be 65 eighths, or 5 eighths a week—an ample quantity for most people.

Connecticut. Connecticut’s Workers’ Compensation Review Board (CRB) followed suit and directed reimbursement in Petrini v. Marcus Dairy, Inc. and again in Caye v. Thyssenkrupp Elevator. The CRB concluded that the carriers would not face a material risk of prosecution by the DOJ for violation of the CSA as the reimbursement after the purchase is complete does not constitute aiding and abetting an illegal transaction. The CRB further noted that the carrier’s fear of prosecution by the DOJ is speculative and would not occur given the prohibition against such a prosecution provided for in the Rohrabacher-Blumenauer Amendment—and added that there is no reason to believe that Rohrabacher will lapse or cease to be the law of the land.

New Hampshire. The New Hampshire Supreme Court was the first state supreme court to direct reimbursement of medical marijuana costs to an injured worker in Appeal of Panaggio (Panaggio I). In this case, the lower court found the claimant’s use of medical marijuana to be reasonable and necessary but declined to direct reimbursement because “possession of marijuana is still a federal crime.” The New Hampshire Supreme Court reversed and remanded because no legal authority was cited by the carrier that would support a finding that the requested reimbursement “would expose the insurance carrier to criminal prosecution.”

On remand, the New Hampshire Compensation Appeals Board unanimously concluded that if the insurer were to reimburse, it would be committing a federal crime by aiding and abetting the claimant’s federally illicit purchase and possession of marijuana. The board cited the rationale given in the then recently decided Bourgoin Maine Supreme Judicial Court case.

Panaggio appealed back to the New Hampshire Supreme Court, which issued a second decision on March 2, 2021, Appeal of Panaggio (Panaggio II), this time directing reimbursement for his medical marijuana expenses. The court first concluded that it is possible for the carrier to comply with both New Hampshire’s medical marijuana statute and the CSA. It reasoned that the act of a carrier reimbursing an injured worker, based upon a court order, would lack the criminal intent necessary to be prosecuted for aiding and abetting a crime.

New Jersey. The 2020 New Jersey Superior Court case Hager v. M & K Construction was built on the reasoning of the court in Panaggio I. The Hager court specifically and thoughtfully looked at the alleged conflict between the CSA and New Jersey’s medical marijuana statute. The Hager court explained that state law is preempted by federal law in three circumstances, with “conflict preemption” being the relevant one in the case. Conflict preemption applies when it is impossible for a private party to comply with both state and federal objectives, or when state law is an obstacle to the accomplishment and execution of the full purpose and objective of the U.S. Congress. However, in Hager, the court concluded that it is possible for an employer (or carrier) to comply with both the New Jersey medical marijuana law and the CSA.

In the Hager decision, the court explained that if the carrier were to reimburse Hager for his out-of-pocket medical marijuana costs, the carrier would not be required to perform any act forbidden by the CSA. Reimbursing the claimant would not require the carrier to possess, manufacture, or distribute marijuana—the actions specifically prohibited by the CSA and subject to potential federal penalty. The Hager court concluded that the carrier could not be convicted for aiding and abetting a crime, the possession of marijuana, if it reimbursed the claimant for his purchases. The employer would not be an active participant or collaborator in aiding and abetting a crime as there would be a lack of the requisite intent to commit the alleged crime. Furthermore, one cannot aid and abet a completed crime, and there was no crime to “abet” as the claimant’s participation in the New Jersey medical marijuana program was legal.

New York. New York also permits limited reimbursement of medical marijuana costs in the workers’ compensation setting. The reimbursement process begins with submission of a “variance from treatment” form. In 2018 and 2019, the New York Workers’ Compensation Board issued a number of decisions directing carriers to reimburse medical marijuana expenses following the submission of the variance form by the treating doctor to establish that treatment with medical marijuana is appropriate and medically necessary.

The New York Supreme Court, Appellate Division, affirmed these holdings in Quigley v. Village of East Aurora. The court found no conflict between New York’s Compassionate Care Act and the federal CSA as the act of reimbursement does not violate the CSA. The carrier does not aid and abet any crime as no conspiracy is created by the court’s order to reimburse. The court cited the Hager decision from New Jersey.

Paths Forward

Where does that leave the rest of the states? If there is the support of the populace partnered with receptive politicians, reimbursement could come to other states’ workers’ compensation systems that have not been discussed here. The easiest and most effective way to do this is through state legislation providing a right to reimbursement. Several states, including Hawaii, have attempted to do this. In western states that permit referendums, a referendum would likely be the path to change. Another option is court challenges, especially in states where the medical marijuana statute is silent or vague as to reimbursement. Finally, there is the growing possibility that marijuana will be reclassified from Schedule I status at the federal level. This was recently recommended by the current secretary of the HHS, who formerly served as Pennsylvania’s secretary of health. The effect of any such federal reclassification would still depend on how each state would interpret the change. Even if reclassified, marijuana would still be considered a controlled substance.

Many questions still remain to be answered. What we do know is that we have reached a point in the United States where medical marijuana is part of the everyday lives of the citizens of a great majority of states—and relative to purchases made through state-run medical marijuana programs, the federal CSA has become one of those antiquated laws that is still on the books but not enforced because there is neither the teeth nor the will to do so. As we have seen Congress at the federal level become more and more polarized, changes related to the legalization of marijuana at the federal level through legislation seem unlikely anytime soon. But because of the concept of states’ rights in the United States, states’ views on the use of marijuana have changed often, reflecting public opinion.

As many states have legalized, decriminalized, or allowed the use of marijuana in medicine, states are now grappling with issues such as requiring the reimbursement of medical marijuana in workers’ compensation claims. As each state has its own workers’ compensation statute, different decisions on the issue are emerging. However, there is a growing trend of states now permitting reimbursement of medical marijuana in workers’ compensation—a trend that is expected to continue. This shift makes sense given the acceptance of medical marijuana as a reasonable medical treatment for many injuries, coupled with the central tenet that workers’ compensation statutes should be interpreted liberally to effect their remedial and humanitarian purpose. Importantly, this trend will give injured workers the choice and ability to determine with their doctor the best method to treat pain and debilitating symptoms.

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    Jenifer Dana Kaufman

    Kaufman Workers’ Compensation Law, LLC

    Jenifer Dana Kaufman is the founder and principal of Kaufman Workers’ Compensation Law, LLC. She represents claimants throughout the Philadelphia region and has a special interest in ensuring access to medical marijuana by injured workers. Kaufman represented the petitioner in Fegley ex rel. Sheetz v. Firestone Tire & Rubber, 291 A.3d 940 (Pa. Commw. Ct. 2023), discussed in this article.