Federal Court Rejects Lawsuit Seeking Insurance Coverage for Medical Cannabis in New Mexico

A significant legal battle over the medical marijuana industry in New Mexico has come to an end—at least for now—after a federal judge dismissed a high-profile lawsuit seeking to compel health insurers to cover the cost of medical cannabis for tens of thousands of patients.

Federal Judge Rules Against Cannabis Provider Ultra Health in Case Over Health Insurance Reimbursements

On April 23, U.S. District Court Judge Martha Vazquez ruled in favor of the defendants—major health insurers operating in New Mexico—by dismissing the lawsuit filed in 2022 by Ultra Health, the state’s largest medical marijuana operator. The company had been pushing for insurance reimbursements covering medical cannabis purchases for approximately 74,000 patients across the state.

Lawsuit Centered Around 2021 New Mexico Law Mandating Coverage for Behavioral Health Care

The legal argument presented by Ultra Health hinged on a 2021 law passed by the New Mexico Legislature. This law requires that health insurance providers reimburse 100% of patient costs related to mental or behavioral health services. Ultra Health and its legal team argued that because many patients use medical cannabis to manage behavioral health conditions such as PTSD, anxiety, and chronic stress, cannabis should be eligible for reimbursement under this statute.

The case gained extra visibility when former Democratic state senator Jacob Candelaria joined as a plaintiff, adding political clout to the argument.

Judge Cites Federal Law and FDA Drug Approval Standards in Decision to Dismiss

However, in her decision, Judge Vazquez made it clear that federal law ultimately overrides any interpretation of state law when it comes to drug classifications and insurance coverage.

“New Mexico state law does not compel health insurance coverage of medical cannabis,” Judge Vazquez wrote in her opinion. “Even if it did, such a requirement would be preempted by federal law.”

The judge further referenced the Medicaid Act, which stipulates that health insurance programs—especially those under federal oversight—may only reimburse patients for FDA-approved drugs. Since cannabis is still classified as a Schedule I drug under the Controlled Substances Act and has not been approved by the U.S. Food and Drug Administration (FDA), it does not qualify under current federal definitions.

Legal Outcome Highlights Federal-State Conflict Over Cannabis Policy in the United States

The ruling reflects a persistent tension in U.S. cannabis policy. While states like New Mexico have legalized both medical and adult-use cannabis, federal law continues to treat marijuana as an illegal substance, creating conflicts in areas such as banking, insurance, and medical regulation.

Medical marijuana advocates argue that the law needs to evolve in step with scientific research and public opinion. However, until cannabis is rescheduled or legalized federally, federal statutes will continue to block efforts to integrate cannabis into mainstream healthcare systems.

Ultra Health’s Lawsuit Dismissal Is a Major Setback for Cannabis Insurance Reform

For Ultra Health and its supporters, the dismissal represents a serious setback in the push to normalize medical marijuana treatment within the broader healthcare infrastructure. The company had hoped the case would set a legal precedent for mandatory insurance coverage of cannabis treatments, something advocates say is long overdue for patients who rely on medical cannabis for legitimate health concerns.

Ultra Health executives have not yet publicly stated whether they intend to appeal the court’s ruling or pursue further legal avenues. However, legal analysts note that any future success will likely require action at the federal level—either through FDA regulation of cannabis-based medicines or congressional legislation clarifying the rights of patients and responsibilities of insurers.

Insurance Companies Avoid New Obligations Amid Legal Uncertainty Around Cannabis

The defendants in the case, which included some of New Mexico’s largest health insurers, had argued that forcing them to reimburse medical cannabis costs would place them in legal jeopardy and regulatory confusion. Their legal team pointed out that providing insurance coverage for a federally illegal substance could lead to federal penalties or compliance issues under existing healthcare laws.

Judge Vazquez’s decision effectively validated those concerns, stating that insurers cannot be forced to cover treatments that federal law still classifies as illicit and medically unapproved.

Why Medical Marijuana Patients Are Still Paying Out of Pocket for Essential Treatment

Despite widespread legalization, many medical cannabis patients across the U.S. continue to pay for their medicine entirely out of pocket. This adds to the economic burden for individuals who are often dealing with serious physical or psychological health issues.

In New Mexico alone, tens of thousands of patients rely on medical cannabis to manage conditions like PTSD, epilepsy, chronic pain, and cancer-related symptoms. While state law has made cannabis accessible, the lack of insurance coverage keeps the cost barrier high for many users.

Advocates argue that the situation is not only unfair but counterproductive to public health goals, as it may push patients toward less effective or more dangerous pharmaceutical alternatives that are covered by insurance.

Federal Cannabis Reform May Be the Only Path Forward for Insurance Coverage

The dismissal of Ultra Health’s lawsuit underscores the urgent need for federal cannabis reform, especially if cannabis is to be treated as a legitimate form of medicine with the same legal and regulatory privileges as traditional pharmaceuticals.

Multiple pieces of legislation, including the SAFE Banking Act and the MORE Act, have been introduced in Congress to address these issues. However, until such bills are passed and cannabis is either de-scheduled or reclassified, courts will likely continue to side with federal law in cases involving insurance, banking, and medical regulation.

A Landmark Ruling That Could Stall Cannabis Insurance Efforts Nationwide

While this New Mexico court case may seem like a localized legal issue, its implications could be felt across the United States. For other cannabis businesses and legal teams looking to push insurance reform, this ruling sets a precedent that reinforces the limitations imposed by federal law, even in states where marijuana is fully legal.

Until Congress or the FDA acts to resolve the growing gap between state-level legalization and federal prohibition, medical marijuana patients may have no choice but to continue covering their own costs regardless of the legality or necessity of their treatment.