By Mónica Rae Otero, LMSW
Policy Analyst
September 30, 2026
Boosting New Mexico’s healthcare fund is essential to keeping coverage affordable and helping families rise out of poverty.
At the end of 2025, Congress failed to extend the enhanced premium tax credits that had helped millions of Americans afford health insurance through the Affordable Care Act (ACA). Their expiration threatened steep premium increases for tens of thousands of New Mexicans who rely on the ACA marketplace for coverage.
While families across the country faced higher healthcare costs, New Mexico chose a different path. State leaders took bold action to protect affordable coverage through House Bill 4, which increased distributions into the Health Care Affordability Fund (HCAF) to replace the federal assistance that expired and shield New Mexicans from dramatic premium increases.
With this move, New Mexicans who qualify for coverage through the ACA’s BeWell Marketplace did not face the large premium increases seen in other states. As a result, New Mexico was the only state in the country that saw an increase in marketplace enrollment, extending affordable healthcare coverage for low- to middle- income individuals and families in New Mexico.
In a recent progress report, the state’s Legislative Finance Committee (LFC) documents the benefits of this subsidy while also noting the financial impact of continued state-funded subsidy coverage. New Mexico provides both premium assistance and out-of-pocket assistance, reducing deductibles and copayments for enrollees. Combining these programs allows enrollees to pick a plan that suits them, requiring less out-of-pocket payments without necessarily increasing their premiums. This is useful in reducing costs for enrollees who might otherwise be uninsured or underinsured.
This bold funding move, while helpful to approximately 80,000 New Mexicans, is increasing annual program costs from $19.2 million to $147.6 million. This is due to a combination of increased premiums nationally (a 21% increase in 2026) and the beneficial decision to fully cover the lost federal subsidies. The HCAF may not be able to sustain this funding increase, and the LFC estimates that it will run out of money in 2028.
This presents state lawmakers with a choice: do they end distributions for ACA subsidies or do they add more money to the HCAF to keep health care costs affordable?
The LFC recommends cutting funding for the ACA subsidies which would result in some BeWell enrollees experiencing an increase in their premiums or out-of-pocket costs. These recommendations could impact individuals and families earning above 400% of the federal poverty level (FPL), $132,000 per year for a family of 4. Such families could see costs rise by approximately a thousand dollars a month without the current support. The cost-containment strategies have the potential to impact families hardest because they have to pay higher premiums than individuals.
Research shows that families with children benefit from reduced financial burden experienced when participating in the ACA Marketplace. When families do not have to worry about the cost of coverage they can make financial decisions that can benefit their family as a whole. Coverage affordability is vital in a world where people are having to balance the costs of health care against other necessities like food and utilities. The cost-cutting measures proposed by the LFC would place greater strain on family budgets and might cause more families to forego coverage.
Affordable health care coverage for families was worth funding when legislators originally decided to subsidize ACA premiums and it remains worth funding today. Legislators can readily maintain their commitment to affordable health care coverage by simply appropriating additional state funds to shore up the HCAF. An additional appropriation of $90 million in FY28 to support the predicted shortfall would stabilize the fund; a small share of the $924 million to $3.6 billion of new money that legislators will have available for the upcoming fiscal year.
The cost-cutting measures proposed by the LFC may be helpful in sustaining the HCAF. But legislators should prioritize the physical and mental health of New Mexico families over the fiscal health of a government trust fund. With the ample availability of state revenue, legislators can bolster the current funds in the HCAF and sustain New Mexico’s commitment to protect health care affordability.