A Joint Venture: Medical Cannabis and Workers’ Compensation

Patrick Lucas

Associate Editor

Loyola University Chicago School of Law, JD 2022

In the long standing and highly regulated field of workers’ compensation, a look into the recent landscape of laws, regulations, and court decisions in New Mexico could provide a snapshot into the rapidly accelerating trajectory of medical cannabis regulation within a state’s workers’ compensation system.

A brief history lesson

Normally, statutory interpretation and court decisions aren’t the first places to look in the world of compliance. However, when viewed in the larger context of New Mexico’s medical cannabis field, various legal actions over the last 15 years have signaled a shift in their approach to a challenging issue in many states: how to handle, or at least begin addressing the regulation of legalized medical cannabis use within workers’ compensation.

New Mexico’s Workers’ Compensation Act (“WC Act”) was enacted in 1929 as NMSA 1978, §§ 52–1–1 to –70. It created and spelled out the authority of the state’s Workers’ Compensation Administration, as well as duties placed upon employers to provide their employees with coverage and reimbursement for workplace injuries. Key operative language in the WC Act states that employers “shall…provide the worker in a timely manner reasonable and necessary health care services from a health care provider.”

By contrast, medical cannabis was legalized in New Mexico much later, in 2007, under what is commonly referred to as the Lynn and Erin Compassionate Use Act (“the Compassionate Use Act”). Originally enacted for the treatment of chronic pain and severe conditions such as epilepsy, MS, and cancer, the Compassionate Use Act left authority in the New Mexico Department of Health to expand as they saw fit.

New era

The Compassionate Use Act would have a ripple effect on the state’s approach toward cannabis, and the underlying regulations that dictated its use. Workers’ compensation, specifically, took to the forefront of this arena. In the 2014 case Vialpando v. Ben’s Automotive Services, an employer appealed a judge’s decision forcing them to reimburse an injured employee for medical cannabis prescribed under authority of the Compassionate Use Act. The appeal was denied by the Court of Appeals of New Mexico, and the employer was required to reimburse for the cost of treatment. Cannabis was deemed a reasonable and necessary health care service in that instance.

Questions raised

Vialpando v. Ben’s Automotive Services was a milestone case for medical cannabis within workers’ compensation cases. However, a bigger question coming out of this decision was how, and by what standards should medical cannabis be reimbursed? Nothing was in place to address these concerns—statutes, regulations and other legal authorities were silent on the issue.

New Mexico, like many states, controls critical aspects of workers’ compensation claims processing and reimbursement guidelines through various regulations and administrative actions. These guidelines instruct employers, insurers, pharmacies, physicians, hospitals, and most importantly, injured employees, on how costs are to be covered or reimbursed when a medication is prescribed to treat a workplace injury.

Most often, a fee schedule is adopted. Fee schedules spell out reimbursement rates that may be used, or in some cases must be followed. These rates are calculated by various complex methodologies involving average wholesale prices of medications, usual and customary costs based on previous business, and several other factors unique to the particular service provided. New Mexico’s Health Care Provider Fee Schedule is promulgated by the New Mexico Workers’ Compensation Administration, under authority of New Mexico Administrative Code Title 11, and does exactly this.

Regulating change

At the time of the Vialpando decision in 2014, however, the state had no mention of medical cannabis in their Administrative Code or Fee Schedules regarding workers’ compensation. Fast forward just one year, and the State had taken two crucial regulatory steps: Step one was passing 26 N.M. Reg. 850, amending Title 11 and spelling out procedures for the reimbursement of medical cannabis.

Step two happened weeks later, when the Workers’ Compensation Administration issued an order spelling out the 2016 Health Care Provider Fee Schedule. For the first time, it included a maximum reimbursement amount and a precise methodology for calculating reimbursement rates for medical cannabis.

The methodology was:

Maximum quantity subject to reimbursement is 230 units (1 unit is approximately 1-gram dry weight equivalent) per calendar quarter (January-March, April-June, July-September, and October-December of the relevant year).

Reimbursement shall be made using the following conversion: 1 unit ≈ 200 mg THC (≈ 1-gram dry weight equivalent)

Maximum Reimbursable Amount = $12.02 per unit (i.e., per 1-gram dry weight equivalent)

2016 Health Care Provider Fee Schedule, pg. 11

This answered the “how” question, as well as addressed employer and insurer concerns by placing a cap on the way costs were calculated and reimbursement was determined.

The law authorized it, a dispute ensued, the courts interpreted it, and then regulations implemented it—all within a span of about ten years. This may not seem like a big deal, but New Mexico has been on the forefront of normalizing cannabis use within the workers’ compensation system, using regulation to remove roadblocks and clear up confusion. Today, when opioids are still widely prescribed and widely abused, many look to cannabis as a safer alternative.

As other states continue to balk on if, when, and how they would implement medical cannabis use within their workers’ compensation systems through regulatory and administrative action, states like New Mexico stand out on the forefront of the issue.

The New Mexico state motto is, “Crescit Eundo,” translated in English to “it grows as it goes.” Fitting, no?