[co-authors: Meeghan Dooley, Summer Associate and Hanna Barker Mullin, Paralegal III]

Cannabis: In Focus

• New Mexico class action calls for insurance coverage for medical cannabis
• Bicameral attempt to legislate bipartisan cannabis omnibus package
• Oregon ban on “artificially derived cannabinoids” in cannabis products set to take effect July 1, 2022

New Class Action in New Mexico Calls for Insurance Coverage for Medical Cannabis

Earlier this month, a class action case was filed against seven of New Mexico’s health insurance companies, seeking a declaration that medical cannabis treats behavioral health conditions and therefore should be entitled to full health insurance coverage under state law.

Background and Relief Sought

Since 2007, medical cannabis has been legal in New Mexico for the treatment of debilitating medical conditions.  A variety of behavioral health conditions qualify as debilitating conditions, including post-traumatic stress disorder (PTSD).  The proposed class representatives suffer from PTSD and claim their conditions have improved with the use of medical cannabis.  However, they continue to pay the full cost of their medical cannabis without the ability to seek coverage by their health insurer.

On January 1, 2022, New Mexico’s S.B. 317 went into effect.  The Bill eliminated cost-sharing by health insurers for “behavioral health services,” defined as “professional and ancillary services for the treatment, habilitation, prevention and identification of mental illnesses, substance abuse disorders and trauma spectrum disorders, including . . . all medications.”  Because S.B. 317 is limited to behavioral health services, plaintiffs seek a declaration establishing that medical cannabis is a behavioral health service or, alternatively, a medication, under S.B. 317.  If successful, the cost of medical cannabis in certain circumstances may be fully covered under health insurance policies sold in New Mexico.

Implications

This case may have far-reaching implications, as it presents a novel question.  Namely, many states have enacted medical cannabis programs to enable qualified consumers to obtain cannabis for health purposes.  Should qualified consumers be able to seek insurance coverage for such cannabis purchases?

According to plaintiffs in this New Mexico case, there is already foundation in state law for the coverage of medical cannabis.  The state already requires workers’ compensation coverage of medical cannabis if patients receive the “functional equivalent” of a prescription.

Coverage of medical cannabis under workers’ compensation programs is under challenge elsewhere.  In Minnesota, for example, the state’s supreme court recently held in two cases that Minnesota’s mandate requiring its state’s workers’ compensation insurers to reimburse employees for medical cannabis, violated federal law.  The state supreme court highlighted that (1) possession of cannabis remained illegal under federal law, and (2) the federal Controlled Substances Act preempted state workers’ compensation law allowing for such reimbursement.  These cases reasoned that reimbursement under workers’ compensation insurance “would expose the employer to criminal liability under federal law for aiding and abetting [an employee]’s unlawful possession.”  This was appealed up to the U.S. Supreme Court, but certiorari was denied, so it will not pose a barrier to plaintiffs in this New Mexico case.

In other states, such as New Hampshire and New Jersey, state supreme courts have allowed workers compensation coverage to reimburse for medical cannabis.  At least two states, Florida and North Dakota, have enacted legislation that would prohibit such reimbursements in their states’ workers’ compensation programs.  In New York, a bill to permit coverage of medical cannabis in public and private insurance programs recently passed in the state senate. 

While cannabis remains illegal at the federal level, this New Mexico class action case may provide important insights into the possibility of health insurers covering medical cannabis in states with such programs.

Bicameral Attempt to Legislate Bipartisan Cannabis Omnibus Package

Rumors continue to swirl out of Congress as it continues to debate potential cannabis legalization.  In recent weeks lawmakers have finally confirmed that new proposals, including a bipartisan omnibus package, are being discussed in both the House and Senate.  

Senate Majority Leader Chuck Schumer (D-NY), who is sponsoring the Cannabis Administration and Opportunity Act (CAOA), recently met with representatives Ed Perlmutter (D-CO) and Dave Joyce (R-OH) regarding more limited cannabis reform.  Both representatives have their own bills that touch on cannabis reform:

• Perlmutter’s Secure and Fair Enforcement (SAFE) Banking Act, which would provide safeguards for financial institutions that do business with cannabis entities, and
• Joyce’s Harnessing Opportunities by Pursuing Expungement (HOPE) Act, which would provide incentives to state and local governments in return for expunging prior cannabis records as well as provide opportunities to expand cannabis research and access to medical cannabis for veterans.

Majority Leader Schumer’s meetings with House lawmakers have raised the prospect that a bi-partisan omnibus bill could emerge, taking pieces of standalone bills to present a more comprehensive reform package to Congress, short of full de-scheduling.  The introduction of the CAOA and/or an omnibus package is expected in the coming months, with the cannabis industry closely watching the language of any proposed reform package.

Oregon Ban on “Artificially Derived Cannabinoids” in Cannabis Products Set to Take Effect July 1, 2022

Oregon’s controversial ban on “artificially derived cannabinoids,” and products containing them, is set to take effect on July 1, 2022.  As of that date, the Oregon Liquor and Cannabis Commission (OLCC) will prohibit the transfer, sale, transportation, or purchase of such cannabinoids and products outside the OLCC-regulated cannabis marketplace.  The OLCC noted that companies can continue to produce and sell such cannabinoids and products for export outside of Oregon, to the extent permissible by law.

OLCC defines “artificially derived cannabinoid” as referring to “semi-synthetic cannabinoids created from chemical reactions with cannabis-extracted substances.  Common examples include Delta-8-THC or CBN made from CBD.  This does not include decarboxylation of cannabinoids with heat.” During rulemaking, state regulators claimed that the safety profile of CBN had not been established, notwithstanding the fact that CBN has been readily available in multiple marketplaces without indicia of danger.

Within the OLCC-regulated marketplace, July 1st also marks the end of sales of “intoxicating artificially derived cannabinoids, including Delta-8 THC,” and the start of new labeling requirements for products containing “artificially derived cannabinoids.”

Further details concerning OLCC’s regulation can be found here.

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