Federal Court Dismisses Cannabis Insurance Lawsuit in New Mexico

Federal Court Dismisses Landmark Cannabis Insurance Lawsuit in New Mexico

In a decision that highlights the lingering tension between state and federal cannabis policy, a federal judge has dismissed a high-profile lawsuit that aimed to compel insurance providers in New Mexico to cover the cost of medical cannabis. The outcome has disappointed many within the medical cannabis community, who hoped the case would advance broader access and affordability for patients using cannabis as medicine. However, the result is not entirely surprising, given the current status of federal law.

The Lawsuit and Legal Arguments

The case, New Mexico Top Organics - Ultra Health, Inc. et al. v. Blue Cross and Blue Shield of New Mexico et al., was filed in 2022 in the U.S. District Court for the District of New Mexico. The plaintiffs included Ultra Health—New Mexico's largest vertically integrated cannabis company—and several patients seeking insurance reimbursement for cannabis prescribed to treat behavioral and mental health conditions.

Plaintiffs argued that under New Mexico's 2021 law SB 317, which expanded behavioral health parity and coverage mandates, insurers should be required to cover medical cannabis when recommended by licensed healthcare professionals. They emphasized that cannabis, when used under medical supervision, should be treated similarly to other medications prescribed for behavioral health treatment.

Federal Law Preempts State Protections

U.S. District Judge Martha Vázquez ruled that federal law overrides state statutes in this case. Despite cannabis being legal for medical use in New Mexico, it remains classified as a Schedule I substance under the federal Controlled Substances Act. As such, insurance companies cannot be compelled by a federal court to cover a substance still federally prohibited.

The ruling reflects a persistent issue in cannabis policy: states are advancing legislation to support cannabis use while federal law remains unchanged, creating gaps that ultimately disadvantage patients and providers.

Why It Matters

The outcome of this case reinforces a major barrier in the push to normalize cannabis as part of the American healthcare system. While patients may be legally allowed to use cannabis in states like here in New Mexico, the cost of doing so falls entirely on them. Without insurance support, cannabis becomes an out-of-pocket expense that is not affordable for many.

The disconnect also reveals how uneven and fragile the legal landscape remains. This case is not just about cannabis—it is about who gets access to care and under what conditions. Behavioral and mental health patients, including veterans and individuals with PTSD or chronic pain, are often prescribed cannabis when conventional pharmaceuticals have failed. The inability to obtain insurance reimbursement limits their treatment options.

Larger Implications for State Programs

This ruling also sends a cautionary signal to states that may consider similar mandates. Even as public support for cannabis legalization grows and medical programs expand, federal policy continues to restrict progress. Until cannabis is rescheduled or descheduled federally, insurers remain under no legal obligation to cover it, regardless of what state law mandates.

New Mexico has taken significant steps to integrate cannabis into mainstream care, including allowing reimbursement through workers' compensation and eliminating taxes on medical cannabis. A bill was also introduced during the 2025 legislative session that would have required insurance companies to reimburse patients for medical cannabis. Unfortunately, the bill did not advance before the session ended.

No other states are currently pursuing similar private insurance mandates through legislation or lawsuits to the extent New Mexico’s attempt. This underscores the importance of federal reform if meaningful and widespread insurance coverage is to become a reality.

The community's response also highlights the concern that relying on court rulings alone to advance cannabis rights may not be sustainable. Legislative change—both at the state and federal levels—remains the most direct route to long-term solutions.

Looking Forward

Although this lawsuit was dismissed, the conversation is far from over. This ruling is likely to galvanize further advocacy, potentially prompting new bills in future New Mexico legislative sessions. It may also reignite calls for federal cannabis reform, particularly around healthcare equity.

Until there is meaningful federal reform, patients will continue to bear the cost of legal medicine themselves, even in states where cannabis is recognized as essential healthcare.

Below are the documents from the judge dismissing the lawsuit.