By Cory Jorbin
Talk about a prescription for confusion.
Under existing federal law in the U.S., marijuana is classified as a Schedule I drug under the Controlled Substances Act (CSA). That makes it illegal for any purpose, even if your doctors say it will ease a lot of whatever it is that ails you. Yet 34 of our states (at the current count) don’t care about Uncle Sam’s strictures, and have decriminalized it for medical and/or recreational use.
While some employers might like to respond to the changed circumstances in their states and cover medical marijuana prescription costs under their group health plans, there are too many conflicts for that to happen. Among them:
Prescriptions are required, yet the FDA has not approved marijuana for medical use
Let’s start with the fact that since marijuana remains in the Schedule I drug class, the Food and Drug Administration (FDA) hasn’t approved it for medical use. Further, prescriptions aren’t typically written for non-FDA-approved drugs. Group health plans can only cover FDA-approved medications – which leaves medical marijuana coverage out of the picture. In another twist, in states where medical marijuana is legalized, the proviso is that prescriptions are required. Even without those complications, insurers and third-party administrators can’t cover medical marijuana without violating federal law. So don’t expect a sweeping movement among fully-insured or self-funded plans to cover medical marijuana anytime soon.
The taxing question of medical expenses
Another issue is the definition of medical care for tax purposes as “for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.”
It takes further digging to reveal the kind of tax issues for a plan and its participants that would arise by covering it. The Internal Revenue Service states in Publication 502: “You can't include in medical expenses amounts you pay for controlled substances (such as marijuana, laetrile, etc.) that aren't legal under federal law, even if such substances are legalized by state law.” In other words, marijuana isn’t a covered medical expense. Any payments made by a health plan for marijuana-related treatments would be taxable under federal law. Nor, incidentally, could payments be reimbursed by a health flexible spending account (FSA), health reimbursement arrangement (HRA) or a health savings account (HSA).
And then there’s ERISA
ERISA, of course, governs almost all private sector health and welfare benefit plans, including employer group health plans. It lives by fiduciary standards that require compliance with other applicable federal laws. To comply with ERISA, then, means plans can’t violate federal laws, including the CSA’s classification of marijuana. To cover medical marijuana under most group health plans would be a breach of fiduciary duty, subject to Department of Labor investigations, penalties and lawsuits. Even if your plan isn’t subject to ERISA (e.g. associated with a government entity or religious group) legal issues under the CSA and federal tax consequences would remain.
The growing acceptance – and legality – of marijuana at the state level may make the idea of adding medical marijuana to your group health plan an interesting one to think about. But federal laws (which no one’s yet willing to challenge on this front) still holds precedence, making it a dream for now.
Contact an employee benefits specialist to help you build a plan that meets your organization's needs.
