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- 38 U.S. states allow medical marijuana, yet health insurers almost universally decline to cover it.
- Federal law classifies cannabis as a Schedule I drug, blocking insurance support despite state legality.
- Most medical marijuana users pay out-of-pocket, with no distinction between Medicaid and private plans.
- Rescheduling cannabis to Schedule III may open doors but won’t guarantee insurance coverage without FDA approval.
- Despite evidence of benefit for PTSD and chronic pain, cannabis health coverage remains legally restricted.
Thirty-eight states have legalized medical marijuana use for conditions ranging from chronic pain to epilepsy, PTSD, and cancer—but getting your health insurer to cover it is almost impossible. That’s because insurance operates where law, regulation, and public policy meet, and while individual states have allowed medical cannabis, federal marijuana laws still treat it as an illicit substance. This contradiction keeps cannabis health coverage out of reach, leaving many patients to pay out-of-pocket for medicine they legally use and professionally need.
New Mexico’s Case: A Fight for Coverage
New Mexico has long been considered one of the more progressive states when it comes to supporting medical cannabis. With over 73,000 registered medical marijuana patients, its legislature attempted to connect mental and behavioral health coverage with cannabis access. In 2022, New Mexico Top Organics—also known as Ultra Health—joined forces with medical cannabis patients and filed a lawsuit against Blue Cross & Blue Shield of New Mexico.
The reason for the lawsuit came from a 2021 state law meant to get rid of out-of-pocket costs for behavioral health services for those with Medicaid and state-regulated private insurance plans. Plaintiffs argued that if New Mexico’s law exempted behavioral healthcare treatments from copays and other expenses, then cannabis—when prescribed for such conditions—should be included as a reimbursable treatment. With conditions like PTSD and substance use disorder explicitly covered under the state’s medical marijuana program, it seemed like a logical leap.
What made the case especially important was New Mexico's long-standing medical marijuana program, dating back to 2007. Advocates emphasized that access to effective treatment shouldn't depend entirely on a patient's financial ability to pay for it directly from their pocket.
The lawsuit tried to set a new precedent: that cannabis, when prescribed under legal state laws for real health problems, should get the same treatment as traditional drugs for insurance coverage.
The Ruling: Federal Law Blocks the Way
Unfortunately for cannabis advocates, the ruling from U.S. District Judge Martha Vazquéz was a clear denial. This was not just because of how state laws were read, but mostly because of federal law that is firmly in place.
Cannabis remains classified as a Schedule I drug under the Controlled Substances Act (CSA). This classification means that, according to Congress and the Drug Enforcement Administration (DEA), marijuana has "no currently accepted medical use" and a "high potential for abuse." Other drugs in this category include heroin and LSD—substances far removed, in medical benefit, from medical cannabis.
The ruling depended on what’s known as federal preemption. According to this principle, when state and federal laws conflict—especially with controlled substances—federal law is stronger. As Judge Vazquéz noted, this court ruling doesn’t stop states from keeping their own medical marijuana programs. But it does make it very hard to make those programs part of regular systems like insurance that are regulated by the federal government.
As long as cannabis remains in Schedule I, insurers who reimburse for it could potentially be accused of aiding and abetting the distribution of an illegal substance under federal law—even if such actions are 100% legal under state law. The small difference doesn’t matter. What matters is the continuing presence of federal prohibition.
Federal Preemption: The Legal Deal-Breaker for Health Coverage
The legal rule of federal preemption is the biggest problem standing in the way of medical marijuana insurance. Despite state-level approval, insurance is largely controlled by national rules—especially for Medicaid, Medicare, and the policies set by big health insurance companies that operate in many states.
What this means is that no matter how much a state like New Mexico, California, or Michigan allows and regulates cannabis for medical use, insurers must still put federal laws first when deciding what treatments to cover. Covering a federally illegal substance, even with state protections, could lead to legal trouble, like fines or criminal charges.
What's more, banks, payment systems, and even pharmacies are often slow to deal with medical marijuana programs due to this same concern. The classification of cannabis as a controlled substance forces companies to think about the risk and, often, walk away. For patients, that means medicine they can legally use—yet no way to get it without spending a lot through regular healthcare.
Why Insurance Plans Leave Cannabis Behind
Most health insurance plans rely on a list of drugs set ahead of time, known as a “formulary.” This list says which medications are covered—and when. A plan’s formulary is often based on the state’s benchmark essential health benefits plan.
In New Mexico’s case, cannabis is clearly not there in its own benchmark health insurance plan. A drug doesn't need to be specifically left out to be non-covered. Just not being on the list often means it is not covered. Without official OK, cannabis does not appear on regular formularies—and is therefore not paid for.
This leaves medical marijuana in a legal and medical gray zone, even compared to other controversial therapies. For instance, certain opiates, ketamine therapies, or even medically necessary abortion services in some states may still receive insurance support depending on the plan or medical need. Yet medical marijuana is rarely, if ever, covered.
Medicaid vs. Private Insurance: An Even Playing Field of Exclusion
People often assume that government insurance may be easier to get for treatments like medical cannabis, especially for low-income or disabled individuals. But, Medicaid and Medicare are federally funded programs. This means they must follow federal law.
So, despite how easy state policies seem, Medicaid cannot support cannabis-related costs. And while private insurers don’t get federal money the same way, many of them work across states and follow federal legal requirements when deciding what’s safe—and legal—to cover.
This means both government-backed and private plans generally refuse to provide cannabis health coverage. This happens even when a qualified doctor prescribes it for a serious condition.
Rescheduling: A Possible Path Forward
The excitement around cannabis potentially being rescheduled from Schedule I to Schedule III is high—and for good reason. Schedule III substances include medications like ketamine, testosterone, and certain painkillers. Drugs under this category are considered to have accepted medical use and can be prescribed by doctors.
If cannabis were reclassified, it would greatly lower the legal barriers stopping insurance companies from considering coverage. But here’s the catch: insurance still depends on FDA approval. The FDA generally requires strict clinical trials and set amounts before approving a medication.
The cannabis available in dispensaries varies widely in what's in it—different strains, THC/CBD ratios, ways to take it, and strength levels. This makes setting standards and doing clinical trials hard. So even with a Schedule III reclassification, insurers wouldn’t necessarily quickly add it to their formularies unless specific cannabis-based drugs (like Epidiolex or Marinol) were fully approved.
In other words, legalization or rescheduling can help. But they don’t guarantee insurance coverage without products ready for medical use and approved by the FDA.
Workers’ Compensation and Medical Marijuana: A Grey Area Loophole?
Interestingly, New Mexico and other states have seen success in courts telling workers’ compensation insurers to pay for medical marijuana costs in specific injury-related claims. Courts have said that if a treatment is prescribed under state law and clearly helps patients, workers’ comp plans should pay their share.
But this way of reading the law is far from a done deal. Federal courts don’t have to follow state-level rulings, and insurers keep pushing back, saying it’s still illegal under federal law. The different ways of reading the law continue to cause unclear rules and uneven insurance coverage.
Some state courts, including in New Mexico, Maine, and New Jersey, have agreed with injured workers trying to get cannabis paid for. But appeals continue. And so does the general unwillingness of insurers to make a national example.
Real-World Impact: Legal Weed, Out-of-Pocket Costs
For a patient managing chronic pain, anxiety, or PTSD, medical cannabis can be the difference between functionality and disability. But without cannabis health coverage, this important treatment comes with $300–$600 monthly costs out of pocket. This is often too much to handle for people living on Social Security, public assistance, or low wages.
This leaves many patients in a difficult spot. One part of the government lets them use it. But another part doesn't give them the money to get it. Meanwhile, families must choose between groceries, gas, and medicine. You shouldn't have to choose between these things in healthcare.
DOJ Guidance: Safe Harbor, but No Insurance Support
Congress has included "budget riders" every year since 2014. These riders stop the Department of Justice (DOJ) from using money to go after state-legal medical marijuana programs. But this "non-interference" language doesn’t apply to insurance companies.
In other words, the DOJ can’t shut down a state’s medical marijuana program. But it also isn’t saying it’s okay for private companies to deal with cannabis either. It’s a neutral stance, not an OK from regulators. For insurers, this unclear situation leads to legal caution. It can even lead to stopping completely.
The Psilocybin Paradox
Ironically, while cannabis remains sidelined, New Mexico has taken steps to look into psilocybin therapy. In 2024, the state passed first laws meant to set up therapeutic psilocybin programs for mental health. This shows the legislature’s willingness to try new treatments. But it doesn't necessarily solve the old insurance problems with getting cannabis.
If psilocybin therapy starts in the coming years, it will almost certainly face the same insurance exclusion. This will last until rescheduling happens and federal approval is gotten. These newer psychedelic therapies are often called breakthroughs. But coverage and access will still follow the same slow government path that makes it hard for cannabis.
Public Demand vs. Government Inaction
Poll after poll shows strong public support for medical marijuana. It is frequently above 80% nationally. Many scientific studies also support using it for conditions like epilepsy, chronic pain, PTSD, multiple sclerosis, and cancer-related symptoms.
Yet despite this strong agreement, insurance policy remains stuck because of politics. Until the federal prohibition ends, insurance companies won't cover it. This is true no matter the medical evidence or patient success stories.
What Has to Change?
For real, dependable cannabis health coverage, several changes must happen together:
- Federal rescheduling of cannabis, ideally to Schedule II or III.
- FDA approval of medical marijuana products through clinical trials.
- Adding those products to national and state formularies.
- CMS rules letting Medicaid and Medicare pay for it.
- Market demand and clear legal rules that make insurers start covering it.
This many-sided approach would create the basis for a lasting cannabis healthcare system available to all.
Empowering Yourself Until Then
Patients aren’t entirely helpless. People speaking up locally, voting with knowledge, and putting pressure on state officials can push for changes faster than federal actions. Organizations like NORML and Americans for Safe Access continue pushing the conversation forward.
Supporting employers who are okay with cannabis, insurers offering products related to well-being, or dispensaries that set up lower prices for people with low income can also help reduce out-of-pocket costs for patients.
Health is a right—not a luxury. Access shouldn’t be this hard.
The Path Ahead: Cannabis Health Coverage Is Coming—Slowly
Incremental wins continue. Bernalillo County’s new employment protections for marijuana users is just one sign that how society feels is changing fast. This is true even if formal systems are slow to catch up.
Insurance for medical marijuana may be one of the last dominoes to fall in America’s cannabis conversation, but it will fall. And when it does, patients across the country will finally receive the medical, financial, and social acknowledgment they’ve long deserved.
