Health insurance providers could be forced to cover medical cannabis costs in New Mexico under legislation that is advancing through the committee process.

New Mexico House Bill 527, sponsored by Rep. Cristina Parajón, D-Bernalillo, would amend the state’s Health Care Purchasing Act, the Public Assistance Act, and the state’s insurance code to require medical cannabis to be covered by public and private insurers, including individual and group health plans, Medicaid, and state coverage offered to state and local government employees, educators and retirees.

House lawmakers voted, 5-2, on March 5 to advance the legislation out of the Health and Human Services Committee. The bill now needs approval from the Appropriations and Finance Committee before a possible floor vote in the lower chamber.

Under the legislation, the state’s health insurance providers would be required to cover an “adequate” three-month supply of medical cannabis—determined by the state’s Department of Health—that’s obtained by a qualified patient from a licensed New Mexico dispensary approved by the insurer. The insurance provider would have to provide a direct payment to the retailer or a reimbursement to the qualified patient.

New Mexico’s medical cannabis program had roughly 79,400 active patients enrolled as of July 2024, including nearly 40,000 who listed post-traumatic stress disorder (PTSD) as their primary qualifying condition among 30 conditions listed, according to the Department of Health.

That active patient count had been dwindling since New Mexico launched adult-use cannabis sales in April 2022, as is the case with most state medical programs after expanding legalization to those 21 years and older. New Mexico’s patient count peaked at roughly 135,000 in May 2022, according to KRQE News.

As a result, New Mexico’s medical cannabis sales, which made up 40% of the retail market in 2022, shrank to 29% of the market in 2023 and 24% of the market in 2024. In comparison, in Washington, a state that launched adult-use cannabis sales in 2014, medical cannabis sales made up roughly 1% of the marketplace in 2024.

However, insurance coverage would likely revive New Mexico’s medical cannabis patient count—and sales figures—should H.B. 527 become law. And other states could follow.

According to a fiscal impact report on H.B. 527, the estimated median monthly cost of medical cannabis for cancer patients was $80. The report assumes that half of New Mexico’s roughly 80,000 medical cannabis enrollees are Medicaid members and another approximately 2,250 enrollees are in the State Health Benefits program.

Based on these implications, H.B. 527 would siphon more than $40 million annually from the state’s general fund.

In 2024, however, New Mexico’s licensed dispensaries sold more than $143.6 million in medical cannabis, according to the state’s Regulation and Licensing Department. This means New Mexico’s average medical cannabis patient likely spent closer to $150 per month.

The report’s Medicaid projection for H.B. 527’s impact on New Mexico’s general fund considers that there would be no federal Medicaid match for medical cannabis because cannabis remains a Schedule I drug under the Controlled Substances Act, meaning it currently has no accepted medical use in the U.S. This federal status is why doctors “recommend” medical cannabis rather than “prescribe” it.

In addition, the New Mexico Public School Insurance Authority notes in the report that cannabis is not a federally recognized medication and therefore lacks a national drug code.

“It cannot be processed through standard pharmacy claims systems,” according to the report. “Insurers would need to develop alternative payment mechanisms and create a separate reimbursement system for medical cannabis, which could delay claims processing and increase administrative overhead. The inability to classify medical cannabis as a tax-deductible medical expense could further complicate reimbursement structures for insurers and patients.”

Although New Mexico’s insurance companies may need to segregate federal funds from the funding they would use for medical cannabis costs under H.B. 527, the state’s track-and-trace system for medical cannabis would help ensure that the amount of cannabis sold to patients is accurately reported.

While the idea of health insurers paying for medical cannabis may seem novel under federal prohibition, the idea was floated more than three years ago by one of New Mexico’s largest licensed cannabis operators.

In February 2022, Ultra Health, which now has 37 dispensary licenses in New Mexico, sent a letter to several of the state’s prominent health insurance companies, asking them to affirm they’d be making payments for medical cannabis and requesting how they intended to pay.

The letter was sent to Presbyterian Healthcare Services, Blue Cross Blue Shield of New Mexico, Western Sky Community Care, Molina Healthcare of New Mexico, the Office of the Superintendent of Insurance, the New Mexico Federation of Labor, and the New Mexico State Personnel Office.

At the time, Ultra Health claimed to have the law on its side via Senate Bill 317, legislation that intended to make mental and behavioral health services more affordable for New Mexicans by eliminating all cost-sharing and any out-of-pocket costs for those services and accompanying medications.

PTSD, opioid use disorder, severe anorexia and Parkinson’s disease—all qualifying conditions for medical cannabis—are considered behavioral health disorders under the Lynn and Erin Compassionate Use Act. Although S.B. 317 doesn’t specifically mention medical cannabis, the law includes the language “all medications.”

“The fact that health insurers should—and will—pay for medical cannabis is not revolutionary at this point,” Ultra Health’s Chief Legal Officer Kristina Caffrey wrote in the 2022 letter. “It is the next logical step, and it is a small step, not a giant leap.”

While H.B. 527 could make its way through the House this legislative session, the bill would face a tight window in the Senate with the New Mexico Legislature scheduled to adjourn on March 22.

H.B. 527 is New Mexico’s first bill that specifically addresses health insurance coverage for medical cannabis costs.