January 25, 2018
Insurers have generally been leery of coverage for medical cannabis in both the health benefit claims and in cost of care claims in the personal injury context. But with the legalization of recreational cannabis looming, Canadians are seeing cannabis shift from a marginal drug, spoken of in hushed tones, to a mainstream product. And although cannabis for medical purposes has been legal for some time, and the legal regimes governing medical and recreational cannabis are separate, relaxing attitudes around cannabis consumption will likely lead more people to view medical cannabis as an acceptable treatment – and more claims for medical cannabis coverage under health benefit plans.
Health benefits providers need to be ready. Developing an overall medical cannabis strategy is key to their ability to process claims prudently and fairly, including any justified benefits coverage denials. Here’s a review of the legal evolution of medical cannabis, the aspects of the regime key to assessing health benefits claims, and considerations to help answer the big strategic question: managing medical cannabis coverage whether through various cost control mechanisms or exclusion.
MEDICAL CANNABIS: FROM BANNING TO BRANDING
The social and legal landscape of cannabis has evolved significantly in the last century. In 1923, cannabis was highly stigmatized and effectively legally banned in Canada; on April 13, 2017, Canada introduced legislation that, if passed into law, will legalize recreational cannabis in Canada – and shortly thereafter, CBC News reported that iconic Canadian band the Tragically Hip announced a partnership with a publicly traded medical cannabis producer Newstrike. Here’s a timeline:
1923. Canada criminalizes cannabis.
1999. The federal government permits legal access to dried cannabis for medical purposes via exemptions under the federal Controlled Drugs and Substances Act (CDSA).
2001. In response to a legal decision that individuals with a medical need have the right to possess cannabis for medical purposes, Canada implements the Marihuana Medical Access Regulations (MMAR). The MMAR enables individuals to obtain authorization from their doctors to access dried cannabis by growing their own, designating someone to grow it for them or purchasing it from a Health Canada supply.
2013. Canada implements the Marihuana for Medical Purposes Regulations (MMPR) permitting the establishment of a commercial industry to grow and distribute dried cannabis for medical purposes, but stops granting new authorizations for individuals to grow cannabis for their own medical purposes.
2015. In response to a legal decision that restricting medical access to dried cannabis breaches the Canadian Charter of Rights and Freedoms, Canada issues new class exemptions under the CDSA allowing licensed producers to also produce and sell cannabis oil and fresh cannabis buds and leaves, and authorized users to possess and alter different forms of cannabis.
2016. In response to a legal decision that requiring individuals to obtain cannabis only from licensed producers denies “reasonable access” to individuals requiring medical cannabis and breaches the Charter , Canada implements the Access to Cannabis for Medical Purposes Regulations (ACMPR). Part 1 of the ACMPR creates a framework for commercial production by licensed producers similar to that under the MMPR; Part 2 permits individuals to produce a limited amount of cannabis for their own medical purposes or designate someone else to produce it for them, similar to the former MMAR regime.
2017. Canada’s federal government introduces the draft “Cannabis Act” (Bill C-45) that, if passed into law, will legalize and regulate access to recreational (or “non-medical”) cannabis in Canada on July 1, 2018.
MEDICAL CANNABIS HEALTH BENEFITS CLAIMS
Legal changes both reflect and contribute to changing social attitudes about cannabis. Recreational cannabis isn’t legal yet, but much of the stigma is gone as attitudes around both recreational and medical cannabis consumption continue to relax. Employers, already coping with medical cannabis, are feeling and dealing with the workplace effects of the pending legalization of recreational cannabis now. Insurers, too, have been dealing with medical cannabis claims in both the contexts of medical cannabis as a future cost of care (personal injury) and health benefit plans. In the current climate, it’s reasonable to expect more people to see medical cannabis as an acceptable treatment, more requests for medical cannabis “prescriptions”, more “prescriptions” written – and more claims for medical cannabis coverage under health benefit plans. Benefit providers need to be prepared to respond.
Benefits plan administrators are also obliged to process claims prudently and fairly. Denials of benefits coverage must be objectively justifiable. And although benefits plan administrators aren’t gate-keepers for prescriptions, nor do they oversee the work of health care providers, they are the custodian of the benefits plans. In that capacity, they have an obligation to ensure benefits are paid only where the plan covers the claim. A good grasp on the medical cannabis prescription process, the terms of the coverage plan and the medical evidence in the particular circumstances is key to ensuring that benefits plans provide only the intended health benefits.
Medical Cannabis Prescription Process
It’s reasonable, fair and justifiable for benefits providers to require that insureds incur the costs for which they seek coverage legally: in a manner that complies with the medical cannabis regulatory regime (the ACMPR). Court, arbitral and tribunal decisions indicate that an insured’s failure to follow the regulatory process justified denial of a claim for casualty insurance coverage of medical cannabis, and similar principles would operate to find that a denial of a health benefits claim is justified. Understanding the rules governing the legal medical cannabis prescription process helps benefits providers extend coverage only to medical cannabis that is legally acquired and legally possessed. The ACMPR authorizes four key activities: production, sale and distribution, possession and self-production. Here are some of the key aspects to consider in the context of the insured’s compliance with the current regulatory regime.
The Insured. Not everyone is “eligible” to purchase medical cannabis from licensed producers and to possess medical cannabis; only persons who ordinarily reside in Canada are eligible to be clients of a “licensed producer”. And to be eligible to possess medical cannabis, the cannabis must have been provided or produced pursuant to a “Medical Document” by a healthcare practitioner who is treating the person, but a patient is prohibited from seeking or obtaining cannabis from multiple sources at a time. To prevent efforts to fill a single prescription more than once, the ACMPR has extensive regulations about the filing of Medical Documents and the registration of individuals as clients of licensed producers.
The Source. Similarly, not everyone is eligible to produce, sell or distribute medical cannabis, so denial of a claim because the insured did not obtain the medical cannabis legally seems similarly justifiable.
The Form. And not every form of medical cannabis can be produced, sold, distributed or possessed under the ACMPR: only fresh and dried cannabis, cannabis oil and cannabis seeds and plants.
The “Medical Document”. Strictly speaking, cannabis isn’t “prescribed” because it’s not a pharmaceutical agent. Instead, under the ACMPR, healthcare practitioners may “authorize” the use of medical cannabis by issuing a “Medical Document”:
The Prescriber. Only a “healthcare practitioner” is authorized to prescribe medical cannabis:
Provincial regulators, such as Colleges of Physicians and Surgeons, often impose additional stipulations for prescribing medical cannabis, such as direct in-person contact with the patient before authorizing use of cannabis, that the physician be treating the patient for the very condition in relation to which the cannabis is prescribed, assessment of addiction risk and monitoring.
The Dosage. The ACMPR doesn’t restrict the daily amount a healthcare practitioner can prescribe, but the practical effect of the ACMPR’s cap on the amount an individual can possess limits an individual to a daily dose of prescribed medical cannabis of a maximum of the equivalent of five grams of dried cannabis daily. And in its bulletin “Information for Medical Practitioners”, Health Canada advises that various surveys published in peer-reviewed scientific and medical literature suggest the majority of people smoking or orally ingesting cannabis for therapeutic purposes reported using one to three grams of dried cannabis daily.
The Coverage Plan
Benefits plans may exclude cannabis coverage, and some efforts by insurers to deny coverage have succeeded on this basis. But the limiting language in many current plans is an awkward fit for medical cannabis; as a result, many efforts to deny coverage have often failed.
It’s not a “drug”. Some decision-makers have accepted the insurers’ argument that, since cannabis has (at least currently) no Drug Identification Number (DIN) under the federal Food and Drugs Act, it doesn’t meet the definition of “drug”. But to exclude coverage of medical cannabis on the basis it’s not a “drug”, the policy must explicitly define a drug as excluding cannabis or as having a DIN under the Food and Drugs Act. For example, in Corporation of the City Hamilton v. Hamilton Professional Fire Fighters’ Association (a 2016 Ontario labour arbitration case), the arbitrator denied a grievance arising from the insurer’s refusal of coverage for prescribed medical cannabis under the firefighters’ benefits plan; the plan explicitly limited drug coverage to drugs with a DIN and since cannabis didn’t have a DIN and wasn’t included in provincial formularies, it wasn’t an eligible expense under the plan. In contrast, in Skinner v. Board of Trustees of the Canadian Elevator Industry Welfare Trust Fund, a human rights complaint against the administrators of a health benefits plan, the plan didn’t expressly limit coverage to drugs with a DIN, define a “drug” or limit coverage to Health Canada-approved drugs or any other category. It’s probably not enough to define a drug as a “prescription drug” either, without specifically excluding an ACMPR “Medical Document”. Although the ACMPR requires a “Medical Document” rather than a “prescription” for medical cannabis, the Ontario College of Physicians and Surgeons, for example, takes the position that an ACMPR Medical Document is a “prescription”. And decision-makers might take the same view regardless: for example, in Skinner, the plan described the types of drugs and medications excluded from coverage, stating over-the-counter medications or drugs for which a prescription wasn’t required by law (federal or provincial) were excluded from coverage – but the Human Rights adjudicator’s view was that medical cannabis effectively requires a “prescription”, removing it from that exclusion.
It’s not “medicine”. Since Health Canada hasn’t approved cannabis as a medicine, insurers are less inclined to offer coverage. But if a policy includes “medicines” as eligible expenses without a narrow definition, a court or other decision-maker will likely interpret the term more broadly than “drugs” and may include medical cannabis if it’s prescribed for a medical purpose, such as pain management. For example, in University of Western Ontario v. University of Western Ontario Faculty Association (a 2008 Ontario labour arbitration case), the “medicine” wasn’t cannabis, but a food supplement prescribed for a child with a catastrophic brain injury and consumed through a surgically inserted G-tube. The arbitrator concluded that drugs and medicines were both eligible expenses under the policy, so the two terms couldn’t have been intended to be synonymous; if “drug” could be defined narrowly as a regulated drug under the Food and Drugs Act, the term “medicine” must have been intended to have a broader meaning. On the facts, the arbitrator decided the food supplement was a medicine because it was prescribed by a physician to relieve the physical effects of an injury. Medical cannabis may be similarly prescribed by a healthcare practitioner to relieve the physical effects of an injury or illness. For example, in Skinner, the plan included coverage for both drugs and medicines; the adjudicator confirmed that, for the reasons outlined in University of Western Ontario v. University of Western Ontario Faculty Association, one could reasonably conclude that medical cannabis is medicine – even if it’s not a drug.
It’s not “medically necessary”. Insurers have also argued medical cannabis isn’t an eligible expense because the policy only covers “medically necessary” drugs or medicines. But to be successful, the policy may have to define “medically necessary” in a manner that excludes medical cannabis. For example, in Skinner, the plan only covered “medically necessary” drugs or medicines, but didn’t explicitly define “medically necessary”; it did, however, implicitly define it in the “Prescription Drug Exclusions” section, which excluded “[d]rugs which are not considered medically necessary, e.g. cosmetic or weight loss/lifestyle …”. The adjudicator reasoned that the definition focused on the purpose for the prescription, not medical consensus, concluding that if medical cannabis is prescribed for pain management (as it was in that case), it’s prima facie medically necessary because conventional prescription pain management drugs are normally eligible for coverage.
Exclusion isn’t “discriminatory”. Even if the benefits plan language excludes medical cannabis coverage, there’s some risk – at least for now – that exclusion could amount to discrimination on the basis of disability under human rights law. This was the outcome in the N.S. Human Rights Board of Inquiry’s 2017 decision in Skinner v. Canadian Elevator Industry Welfare Trust Fund. A healthcare practitioner prescribed the insured medical cannabis that, unlike conventional medications, had a positive impact on the insured’s functionality. The benefits provider declined the insured’s application for coverage for the medical cannabis on the basis it was excluded. The insured filed a human rights complaint on the basis of discrimination based on physical disability contrary to the N.S. Human Rights Act (which only exempts benefits plans from age-based discrimination). The N.S. Human Rights Board of Inquiry agreed. Acknowledging its role was not to interpret the plan language and whether it covered medical cannabis, the Board nevertheless concluded it did. It continued to decide the denial amounted to adverse effect discrimination: the insurer’s denial of the insured’s request for special coverage of a medically-necessary drug, prescribed by his physician, had a severely negative impact on him; the Trustees’ subsequent denial of the insured’s accommodation request and decision to deny coverage on a case-by-case basis or amend the plan was “based on” the insurer’s disability. The benefits provider offered no justification and no evidence of reasonable accommodation. The N.S. Court of Appeal heard the benefits provider’s appeal of the Board’s decision on October 2, 2017 (and notably, a medical cannabis producer said it would fund the insured’s defence of that appeal). The Appeal Court hasn’t yet issued its decision. There are certainly areas of the Board’s decision where the Court of Appeal might choose to intervene. If the Board’s decision stands, it could provide guidance, albeit likely limited to discrimination rather than the interpretation of plan language, for insureds seeking benefit plan coverage in other provinces with human rights laws that, similar to N.S., do not exempt bona fide benefit plans from the prohibition against discrimination for distinctions based on disability (physical or mental): New Brunswick, Newfoundland and Labrador, Quebec, Ontario (Ontario human rights laws exempts certain plans for a distinction based on pre-existing disability), Manitoba, Alberta, N.W.T. and Nunavut, and possibly Yukon. [Note: On April 12, 2018 the N.S. Court of Appeal issued its decision in Canadian Elevator Industry Welfare Trust Fund v. Skinner, concluding the benefits provider’s denial of coverage of the insured’s medical marijuana prescription wasn’t discriminatory.]
Medical Evidence. The additional requirement that treatment be “reasonable” offers casualty insurers the opportunity to look “behind” a prescription in assessing a compensation claim. The scope for benefits providers, however, to go behind a prescription is likely limited to cases where the policy language limits coverage to “medically necessary” (or words to that effect) treatments, and where short-term or long-term disability insurers are denying or challenging a claim. Where there is such an opportunity, however, the experiences of casualty insurers challenging medical cannabis as a component of future cost of care claims provides two key areas of inquiry:
A MEDICAL CANNABIS CLAIMS STRATEGY
For health benefits providers, developing an overall medical cannabis strategy is key to their ability to process claims prudently and fairly, and justify benefits coverage denials. The big strategic question: will you (try to) exclude coverage of medical cannabis altogether – or cover it, but focus on cost control?
Exclude Medical Cannabis Coverage
Benefits providers that choose this strategy must go to great pains to express any exclusions of coverage for medical cannabis clearly and justifiably and in relation to the language of the plan coverage as a whole, including the following – but beware that even if the policy language is crystal clear that it excludes coverage of medical cannabis, that might not avoid a successful human rights complaint that doing so is discriminatory (a la Skinner):
Control Medical Cannabis Costs
Other benefits providers might, however, choose a different strategy: cover medical cannabis, but control the costs. Ironically, there could be potential advantages to medical cannabis down the road:
Mitigation? At least one casualty insurer has argued that a plaintiff’s refusal to take medical cannabis as recommended by one of her physicians amounted to a failure to mitigate. Although it doesn’t appear any insurers have been successful yet, this argument could succeed as the medical community moves toward a consensus about cannabis as an accepted medical treatment.
A better option? Medical cannabis is currently more costly than prescribed opioids in Canada, but that could change as the more licensed producers enter the market and if doctors reach consensus about cannabis’s efficacy as a pain treatment. In April 2017, CBC reported in “How high will the price of legal pot be?” that the average black market price of cannabis was $9.32/gram, in illicit dispensaries $10.00/gram and, as of March 12, 2017, from Health Canada-licensed growers $9.12/gram. Based on Health Canada’s maximum daily dosage of five grams/day at the average licensed producer’s price of $9.12/gram and 30 days/month, this amounts to a cost of about $1,368/month; the cost of 80mg (.08grams)/day of hydromorphone in N.S. is about $130 a month.
While the costs of medical cannabis can be significant, benefits providers still have ample opportunity to control the coverage costs. For example:
Caps on coverage. Benefits plans employ a variety of different caps often employ caps to control costs that can also apply to medical cannabis specifically. For example:
Acquisition Control. Claims can be assessed based on the cost of acquiring product from a licensed producer or on the insured’s own production costs, both of which offer opportunities to limit coverage. The average cost per gram of medical cannabis from a licensed producer is readily available online; see, for example, Mettrum (an Ontario licensed medical cannabis producer).
Strain. The cost of medical cannabis depends not just on the source but also on the strain the physician prescribed and the licensed producer provides; each strain is priced separately. For example, at Mettrum, prices range from $3.60 to $9.60 per gram. Limitations around the covered strains, or a maximum per gram, also offer a cost control opportunity.
Substitutes. Alternatively, limit compensation to the medically equivalent amount of synthetic substitutes, like Cesamet.
“Accessories”. An insured who grows their own cannabis will probably also seek to claim the cost of purchasing plants and setting up and maintaining the ACMPR-mandated production and storage sites, in addition to the cost of accessories (for example, rolling papers, a vaporizer or the ingredients and equipment necessary to make ointment).
Future improvement. There is, of course, the possibility that future improvement could end the need for medical cannabis. Limitations that allow for this possibility can be incorporated. For example, benefits policies often require regular review and/or reapplication for designated medications, often due to their cost; adding cannabis as one such drug allows for this cost control measure.
Prior Cannabis Consumption. In the casualty insurance context, courts often limit claims for medical cannabis based on the plaintiff’s prior use of cannabis, to the extent that is known. One option may be to require limit coverage based on prior use, though this could raise the risk of a human right discrimination claim.
Please contact your McInnes Cooper lawyer or any member of the Pensions & Benefits Team @ McInnes Cooper to discuss this topic or any other legal issue.
McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.
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