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Cannabis Coverage is Here

Analysis  |  By Laura Beerman  
   December 12, 2022

Novus Cannabis MedPlan CEO Frank Labrozzi speaks with HealthLeaders in an exclusive interview.

Cannabis. Marijuana. Weed. While we're long way from the "reefer madness" messages of prior decades, we are an equally long way from the federal legalization of cannabis—and having it paid for, in part, by health insurance companies.

Frank Labrozzi wants to change that.

Labrozzi is CEO of Novus Cannabis MedPlan, which the company reports is "the first nationwide, supplemental plan that includes THC plans, and/or CBD plans in your health plan." The plan is a product of Novus Acquisition and Development, Corp. and its wholly owned subsidiary WCIG Insurance Services, Inc.

Labrozzi has been working for six years on a go-to-market strategy that will bring cannabis benefits to employer-sponsored health plans offered by major carriers, with an added focus on veterans and those with opioid addiction. In an exclusive interview with HealthLeaders, Labrozzi details the multiple legal, workforce, and specialized health tailwinds that are getting payers' attention.

Supply and demand

Visual Capitalist reports that approximately 12% of Americans use cannabis, adding that new consumers (nearly 20 million from 2009-2019) "come from all walks of life" and represent a "new cannabis consumer [who] is diverse, rather than just one persona."

Where there are new customers, there are new stakeholders to serve them and traditional healthcare has a host of them, from providers to brokers to health plans. The result? Health plans that offer cannabis benefits—in states where the substance is legal and following specific plan designs that Novus is working to expand.

How it works

Novus offers health plans with cannabis benefits, including THC plans in 38 states and CBD plans in all 50. Per GoodRx, THC (tetrahydrocannabinol) is the cannabis compound that causes marijuana's "high" while CBD (cannabidiol) does not and is known for lowering anxiety, pain, and inflammation among other benefits.

In states where THC and/or CBD are legal, Novus offers either cannabis coverage as either a standalone product or as an embedded benefit in supplemental plans. Labrozzi reports to HealthLeaders that the latter include Careington, VSP vision plans, and Amptify hearing plans. Collectively, the cost of Novus coverage ranges from $19.95 to $38 per month.

Labrozzi also reports that Novus has partnered with PRAM, a pharmacy consulting and underwriting firm. "They have consortia of carriers that include Novus in their plans with 1,200 agents selling nationwide," says Labrozzi.

The tailwinds driving growth

As part of the 2022 midterm elections, Maryland and Missouri became the latest states to legalize recreational marijuana use. Arkansas and the Dakotas voted against. And while there is still a difference between states that permit medical-only versus adult recreational use, some form of cannabis is now legal in more states than not.

Other state actions are moving beyond legalization to discrimination protections. In April 2021, the New Jersey Supreme Court ruled that medical cannabis prescriptions are allowable under New Jersey's state law (the Compassion Use Act) and not preempted by the federal Controlled Substances Act. JS Supra reports that the ruling was "significant because the New Jersey Supreme Court found a way to reconcile the federal illegality of cannabis with New Jersey's medical marijuana law."

The New Jersey case draws attention to the next frontier of cannabis coverage: its inclusion in employer-sponsored, commercial carrier plans. Citing evolving workplace trends, Labrozzi believes that "HR policies regarding cannabis will be the newest metric that companies use to recruit and maintain quality employees."

But even bigger court actions are opening employers' and payers' eyes: the multi-state opioid settlements against manufacturers and pharmacies.

The role of opioid settlements and actions to help veterans

The U.S. opioid crisis has resulted in what will likely total more than $50 billion in settlements paid by the manufacturers and pharmacies that fueled the epidemic. CVS, Walgreens, and Walmart were the latest to settle their claims with government prosecutors. Settlements include multiple ways that governments can use the associated funds to prevent and treat opioid addiction.

One of these is diversion programs. Labrozzi states that Novus Cannabis MedPlans "can put companies compliant with State Attorney Generals," with cannabis serving as an alternative to opioid-based pain management

With respect to veterans and cannabis use, Labrozzi notes Veterans Affairs (VA) that signal a more favorable environment. On its public health website, the VA notes: "Veteran participation in state marijuana programs does not affect eligibility for VA care and services. VA providers can and do discuss marijuana use with Veterans as part of comprehensive care planning, and adjust treatment plans as necessary."

Bleeding-heart capitalism

Restrictions remain that a flurry of new House bills are designed to address, but none have yet passed. Still, Labrozzi is optimistic. A self-described "bleeding-heart capitalist," the CEO tells HealthLeaders: "We want to help the American worker and veterans. When patients learn cannabis can be part of their health plan, some of them start crying."

Labrozzi also notes the attractiveness of the opioid settlements to insurers and their value as Novus pitches its cannabis plans.

"Payers' eyes light up like saucers when we talk about opioid diversion," he says. While Novus' discussions so far have focused on regional and mid-tier carriers, Labrozzi states they are now working with a Fortune 500 company, "starting conservative with CBD given that these products are now sold at places like CVS and Walgreens."

Speaking the language of healthcare reimbursement

You might think that that there is no intersection point between the vertical integrations of the cannabis industry and those of healthcare. But you'd be wrong.

Vertical integration is very much a part of how the cannabis market operates but differs by state. Where cannabis is legal, some states allow vertical—or "seed to sale"—integration while others don't.

Labrozzi reports that Novus includes 300 cannabis verticals, with the legalization of recreational and medical marijuana collectively adding healthcare providers, insurance brokers, and payers to the integration chain.

In pitching its plans to payers, Labrozzi notes that Novus' "receivable-based business model creates limited overhead, and once the policyholder is procured, they continuously contribute directly to the company's Net Asset Value."

Federal pros and cons

Value proposition and business model in hand, Labrozzi doesn't ignore the elephant in the room.

"Trying to succeed in biz is hard enough, much less when a product is not federally legal."

It might be 5:00 somewhere in all 50 states, but it's not yet 4:20 in all of them. Virtual Capitalist notes that while the roughly $60 billion in cannabis sales from 2020-201 were mostly illicit, it forecasts that "the legal industry's footprint will come to represent the majority of the market."

The federal government will play a big role in turning all that TAM (total addressable market) into legal SAM and SOM (serviceable addressable and obtainable markets). But that level of legalization could be both a blessing and curse to the still-growing cannabis market.

"Once the federal government gets its hands on the industry, the associated tax added to the state tax will collectively be more than the actual cost of product."

This is where innovations like Novus come in, making the rising costs of alternative healthcare treatments like cannabis more affordable.

“We want to help the American worker and veterans. When patients learn cannabis can be part of their health plan, some of them start crying.”

Laura Beerman is a contributing writer for HealthLeaders.


Increased legalization of marijuana and recognition of its health benefits is growing across the U.S.

This and a confluence of other developments is helping Novus Cannabis MedPlan pioneer coverage for both recreational and medical cannabis use.

The result? The business of cannabis is now speaking the language of healthcare and using traditional industry strategies to attract members, brokers, and payers.

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