Federal Court Ruling on Medical Cannabis Coverage by New Mexico Insurers

In a significant legal development, a federal court has ruled that health insurers operating within New Mexico are not required to cover the costs of medical marijuana, despite arguments citing state laws that support such coverage. This decision, as reported by AM Best, highlights the ongoing conflict between state legislative directives and federal regulations, which currently impose restrictions on insurers’ ability to reimburse for medical cannabis. At the heart of the matter was a case initiated by a licensed marijuana dispensary along with individuals insured through Medicaid and private insurance plans, who sought financial recompense for cannabis used to address various behavioral health issues. They contended that according to New Mexico state laws, specifically under the Behavioral Health Services Act, the insurance code, and unfair practices regulations, insurers should be obligated to cover medical marijuana. However, the court concluded otherwise, in favor of the defendant insurers, including prominent entities such as Blue Cross and Blue Shield of New Mexico, Presbyterian Health Plan Inc., and Western Sky Community Care Inc.

The core of the court’s decision rested on the structure of New Mexico’s Benchmark Plan, which essentially outlines what insurance coverage should include within the state. The plan explicitly omits coverage for cannabis, particularly since it excludes reimbursement for any substance that has not obtained approval from the U.S. Food and Drug Administration (FDA). Given that cannabis remains unsanctioned by the FDA for medical purposes, the court found that there is no obligation for insurers to bear the costs associated with medical marijuana. Additionally, the ruling made references to federal statutes, specifically the Medicaid Act, which allows insurance coverage exclusively for FDA-approved drugs. Since cannabis has not received such approval, insurers operating under Medicaid are not authorized to reimburse for its medical use.

In their legal submissions, the plaintiffs also highlighted a New Mexico statute that eliminates cost-sharing for covered behavioral health services, suggesting that it should mandate coverage for medical cannabis. However, the court found that this provision was inapplicable given the absence of a requirement for insurers to include medical marijuana as a covered benefit. The plaintiffs expressed hope that impending changes to federal marijuana regulations could potentially override the current state of federal preemption over state mandates. Nevertheless, the court underscored that despite potential shifts in policy, no substantive changes to federal marijuana laws had occurred, placing insurers at risk of legal consequences should they opt to cover medical cannabis under the existing legal parameters.

Despite the court's decision, the issue remains contentious and may evolve in the future. In March 2025, New Mexico legislators introduced a bill aimed at compelling insurers to cover medical marijuana expenses. This proposed legislation seeks to harmonize state prescription policies and could substantially alter the insurance landscape by mandating coverage for medical cannabis if enacted. Should this bill pass, it could force insurers to adapt by including medical cannabis within their coverage offerings, potentially marking a new chapter in aligning state mandates with federal oversight. Meanwhile, responses from the insurers involved—Blue Cross and Blue Shield of New Mexico and others—were notably absent following the ruling. However, the evolving legal and legislative environment suggests that discussions around insurance coverage for medical cannabis are likely to persist as stakeholders navigate the intersection of state innovation and federal regulation.