A federal court has determined that health insurers in New Mexico are not obligated to cover medical marijuana expenses, despite state law arguments to the contrary, according to a report from AM Best.

The ruling addresses the tension between state mandates and federal regulations, which currently restrict insurers from reimbursing medical cannabis costs.

The case was brought by a licensed marijuana dispensary and individuals using Medicaid and private insurance, who sought reimbursement for cannabis used in treating behavioral health conditions. They argued that New Mexico state law, particularly the Behavioral Health Services Act, insurance code, and unfair practices regulations, required insurers to provide coverage for medical marijuana.

However, the court sided with the defendants, namely Blue Cross and Blue Shield of New Mexico, Presbyterian Health Plan Inc., and Western Sky Community Care Inc., based on the structure of New Mexico’s Benchmark Plan. This plan, which guides insurer coverage in the state, does not explicitly cover cannabis and excludes reimbursement for substances that are not FDA-approved. As cannabis has not been sanctioned by the FDA, the court ruled that insurers were under no obligation to cover the costs of medical marijuana.

The ruling also referenced federal law, specifically the Medicaid Act, which allows for coverage of only FDA-approved drugs. Because cannabis has not been approved for medical use by the FDA, the court concluded that insurers, including Medicaid, cannot reimburse for medical marijuana.

The plaintiffs had also pointed to a New Mexico law prohibiting cost-sharing for covered behavioral health services. However, the court found that since insurers are not required to cover medical cannabis, this provision did not apply.

In their arguments, the plaintiffs noted that federal marijuana laws could soon change, potentially lifting the federal restrictions that preempt state mandates for coverage. However, the court emphasized that despite proposed rule changes, federal marijuana laws had not undergone significant revisions, meaning insurers could face legal repercussions if they chose to cover medical marijuana under the current legal framework.

Blue Cross and Blue Shield of New Mexico declined to comment on the ruling, and attempts to reach the other insurers named in the case, as well as the trade group America’s Health Insurance Plans, were unsuccessful, according to the report.

While the court’s decision limits insurers’ obligations, the issue may evolve. In March 2025, New Mexico lawmakers introduced a bill to mandate insurance coverage for medical marijuana, aiming to align state prescription rules and provide consistency in coverage. If passed, the bill could change the current insurance landscape and require insurers to cover medical cannabis costs in the future.