Impact of Federal Policy Changes to Medicaid and Marketplace Insurance in New Mexico

The One Big Beautiful Bill Act (OBBBA) threatens access to affordable health care by imposing burdensome work requirements, raising out-of-pocket costs, and stripping health insurance from New Mexicans with “lawfully-present” immigration status–many of whom are survivors of violence and trauma. Medicaid is a lifeline in New Mexico, and provides low-cost health coverage to approximately 42% of all New Mexicans–the highest per capita enrollment in the country. In a state where one in five children live in poverty,¹ Medicaid and affordable health coverage are essential for keeping families and children healthy.

Red Tape from the OBBBA Threatens Medicaid Coverage for Thousands of New Mexicans

Enrollment

Previous Medicaid eligibility and enrollment policies only required states to conduct redetermination every 12 months. The OBBBA doubles this by requiring states to redetermine participant eligibility every 6 months, starting December 31, 2026. This policy change will increase bureaucratic barriers to care and put thousands of eligible New Mexicans at risk of losing coverage, especially older adults, people with disabilities, children, and pregnant people.² By increasing the amount of paperwork and documentation needed to maintain coverage, the OBBBA will increase the likelihood of disenrollment for people who would otherwise be eligible, if not for missed deadlines, system errors, and additional bureaucratic hurdles.

Work Requirements

The OBBBA mandates new work requirements for enrollees ages 19-64 in the Affordable Care Act (ACA) Medicaid expansion group, starting December 31, 2026. In order to apply and maintain eligibility for Medicaid, these individuals must prove they are working, enrolled part-time in school, or participating in community service or job training for at least 80 hours per month.

The 2014 ACA Medicaid expansion gave states the option to provide coverage to individuals making 100-138% of the federal poverty level (FPL), without using other factors to determine eligibility. As a result, the population that may now lose their health care coverage includes adults without dependents, and individuals with disabilities or chronic conditions who are not receiving supplemental security income (SSI).³

While this provision aims to limit health care coverage unless able-bodied adult enrollees are employed, federal data shows that most adult Medicaid enrollees who are able to work already do.⁴ Instead, these burdensome work requirements will put nearly 90,000 New Mexicans at risk of permanently losing their health care coverage in 2027.⁵ Access to affordable and dependable health care is essential because it promotes the use of preventative care, which in turn leads to healthier communities and lower health costs for everyone.

Although exemptions for these work requirements exist, qualifying for or accessing them can be difficult because of inconsistent policy implementation, lack of guidance from the United States Department of Health and Human Services (HHS), and disparate staff training from individual state agencies. In addition, there are both mandatory exemptions, which apply uniformly across all states, and optional exemptions, which states may choose to opt-in to for individuals facing specific hardships. One optional exemption covers counties with unemployment rates above 8%, pending approval from the HHS Secretary. Of the 158 eligible counties nationwide, only Sierra County and Luna County in New Mexico qualify.⁶

OBBBA Requires All States to Shift Some Costs to Medicaid Expansion Enrollees

Starting October 2028, states will be required to impose cost sharing (in the form of copayments) for health care services provided to the Medicaid expansion population.⁷ These enrollees will be required to pay up to $35 on all medical services, except for primary care, mental health, and substance use disorder services.⁸ The non-exempt medical services can include, but are not limited to, urgent care visits, rehabilitation services, outpatient physician visits (e.g. specialty care), therapy services, inpatient hospitalization, diagnostic labs, imaging, and non-emergency care in the emergency department.

The total out-of-pocket costs for each household are capped at 5% of a family’s income, and states are required to stop cost sharing once they reach this limit.⁹ While states are required to enact copays for non-exempt services, the provision only requires the copay to be between $0 and $35. This flexibility gives states the ability to charge the smallest amount possible to meet the requirement.¹⁰ The change to the existing rule will also give states the option to allow providers to deny care or services to people who fail to pay cost sharing, but does not require it. Although this is harmful, the rule also permits providers to reduce or waive costs if they choose.¹¹

Although the $35 copay may seem like a nominal amount, any additional financial burden for medical services can strain families’ household budgets, especially in low-income families. It is also estimated that individuals with chronic illnesses and other conditions that require frequent use of medical services (such as substance use disorder, mental health conditions, and intellectual and physical disabilities) will be the most impacted by these costs because they need to see their providers more often.¹²

This extra financial burden can cause a domino effect, where these families no longer see their primary care providers for something as simple as their child’s asthma management, which could lead to a sudden asthmatic event and an expensive hospital bill. Decreased utilization of necessary medical services will impact low-income households negatively, and likely result in worsening health outcomes.¹³

Impact of Changes on the Administration of Medicaid in New Mexico

In order to comply with more frequent redeterminations and new work reporting requirements, states are now forced to prepare for significant disruptions and large scale protocol changes in Medicaid administration. The New Mexico Health Care Authority (HCA) estimates that the necessary systems changes, such as building administrative, staffing, and IT capacity, will cost millions in state funds¹⁴–revenue that could otherwise go towards providing direct care to New Mexico’s families and children. Ultimately, the OBBBA doesn’t just add red tape and increase state costs, it will systematically push thousands of New Mexicans out of affordable health care coverage.¹⁵

Significant changes to Medicaid administration in New Mexico are also likely to have downstream effects on patients. The state’s current Medicaid application process can take longer than 30 days to process,¹⁶ despite the HCA’s efforts to manage complex workloads and ensure accurate determinations. According to the Georgetown Center for Children and Families, New Mexico is one of the states that is most at risk of poor implementation of OBBBA policy changes due to pre-existing long call wait times, low rates of automated renewal, and long processing times.¹⁷ Additional administrative burdens will only further discourage families from applying for or maintaining the support they need to maintain a healthy life.¹⁸

Rising Out-of-Pocket Costs and Eliminating ACA Tax Credits Endanger Coverage

The OBBBA failed to extend Enhanced Premium Tax Credits (EPTCs) for ACA Marketplace plans–driving up out-of-pocket costs and putting health care coverage out of reach for thousands of New Mexicans. As of January 2026, the U.S. House of Representatives passed a 3-year extension of the EPTCs, but the bill awaits a vote in the Senate. 

The federal decision to not extend EPTCs in 2026 has already impacted Marketplace insurers’ projected premium costs for that year, and will, on average, more than double monthly premiums for households that are set to lose the credit.¹⁹ Currently, approximately 7582,000 New Mexicans purchase health insurance through BeWellNM, the state’s ACA marketplace.²⁰ Of these, 88% receive federal and state premium assistance, and more than half pay less than $10 per month for coverage.²¹

While most of the country was at risk of increased premiums when EPTCs expired at the end of 2025, New Mexicans were safeguarded as a result of legislation passed during the 1st Special Session in October 2025.²² HB 2 provided $17 million in funding to keep premium costs down for New Mexico households (see “What New Mexico Can Do” below).²³ The actions of the state dampened the impacts of the OBBBA, which could have left hard-working New Mexican families choosing between basic necessities like rent and health care coverage.

Thousands of New Mexicans with “lawfully present” immigration status will lose access to affordable health care

Preexisting federal law limited immigrants’ access to health care and coverage, such as a rule that makes many immigrants with newly granted “lawfully present” immigration status wait five years before being eligible to access federal assistance and public benefit programs.²⁴ The OBBBA exacerbates this disparity in access by imposing new eligibility restrictions that severely narrow which immigrant groups are eligible for affordable health care coverage and can access the ACA Marketplace and subsidies. 

The OBBBA codifies eligibility restrictions—previously set through agency rules—and limits Medicaid, Medicare, and CHIP eligibility and access to the Marketplace and subsidies, beginning October 1, 2026, to:

• Lawful Permanent Residents (LPRs),
• Certain Cuban and Haitian Entrants, and
• Individuals residing in the U.S. under a Compact of Free Association (COFA) with Palau, Micronesia, or the Marshall Islands. 

This change will strip health care coverage from many New Mexicans with “lawfully present” immigration status, including refugees, asylees, survivors of domestic violence or trafficking, and Temporary Protected Status (TPS) holders, and in the case of ACA premium tax credits, people who hold valid visas. In total, 9,680 New Mexicans, who have long been recognized by the federal government as “qualified immigrants” for federal public benefits due to their granted immigration relief on humanitarian grounds, are projected to lose Medicaid and be locked out of accessing care.²⁵

Affordable health care coverage is essential for all families in New Mexico, and enables them to live a healthy life. Without health care coverage, refugees and asylees in New Mexico will likely experience negative health outcomes and long-term financial strain. 

The Impact to New Mexico Providers and Hospitals

The OBBBA will negatively impact health care providers and hospitals in New Mexico, during a time when the state is already struggling to address health care provider and hospital shortages. The OBBBA slashes $8.5 million dollars in federal funding to the state due to changes to provider payments over a 10 year period.²⁶ This means a loss in critical funding for safety-net providers, which includes hospitals and emergency rooms. Moreover, these changes could mean the closure of six to eight rural hospitals over the next two years.²⁷ Rural communities already experience limited access to care, long wait times, and long travel times due to provider shortages in these areas. Hospital closures will leave communities without essential health care services, such as emergency care and labor and delivery services, resulting in worsening health outcomes.