After enhanced ACA tax credits expired Dec. 31, 2025, marketplace enrollees faced steeper premiums while Congress tried to keep up negotiations. Ultimately, though, states were left scrambling.
But New Mexico had already committed to taking action, becoming the only state to fully replace the expired subsidies for 2026.
Originally, state lawmakers put $22.3 million toward marketplace premium assistance for enrollees with incomes below 400% of the federal poverty level. This supplemented a $50 million recurring appropriation, an Aug. 25 report from the New Mexico Legislative Finance Committee said. During a special session in 2025, lawmakers allocated another $17.3 million to extend premium assistance for enrollees with incomes surpassing 400% of the federal poverty level.
The budget proposal for the next fiscal year, running from July 1, 2026, through June 30, 2027, also sought additional funding. Access to subsidies will continue through that period, according to BeWell, New Mexico’s ACA exchange.
So far, the efforts have seemed to pay off: A July 28 KFF analysis of CMS data showed New Mexico was the only state that saw an increase in ACA effectuated enrollment, up 14% between 2025 and 2026.
How did New Mexico pull this off?
In 2021, New Mexico Democratic Gov. Michelle Lujan Grisham signed a bill to launch the Health Care Affordability Fund, which was designed to reduce health insurance costs. Previously, the federal government collected fees from insurance companies. To back the Health Care Affordability Fund, New Mexico replaced the phased-out federal fee with its own.
The state boosted its existing surtax from 1% to 3.75%, using part of that to finance the fund. An estimated two-thirds of surtax revenue for the fund stems from Medicaid managed care premiums, while the rest comes from privately insured plans, according to the August report.
How long can it last?
Despite the compelling enrollment figures, the assistance’s long-term viability has always been in question.
“In the long term, it is going to create funding issues down the road and I’m sure the [New Mexico] Legislature is going to have some really difficult decisions to make,” Colin Baillio, the New Mexico Health Care Authority’s former health care coverage innovations director, told NBC affiliate KOB in December 2025.
Recent legislation outlines how the share of premium surtax revenue going to the fund will increase over time from 55%, reaching 95% starting Sept. 1, 2028. New Mexico’s behavioral health fund will receive the remaining 5%.
“These changes now dedicate all premium surtax revenue to health coverage affordability and behavioral health programs rather than for general state purposes,” the Legislative Finance Committee’s report said.
Despite this, the New Mexico Health Care Authority is anticipating an $85.3 million shortfall for the fund in fiscal 2028, amounting to $273.3 million by fiscal 2030.
“Maintaining subsidy programs at their current levels will exhaust the fund regardless of [recent legislation’s] additional surtax revenue,” the report said, adding that the Health Care Authority “acknowledges that additional cost containment will be necessary to maintain the fund’s sustainability and is planning cost-containment measures for the next program year.”
What could cost containment look like?
An actuarial analysis for the Health Care Authority gave two sustainability proposals. One would decrease the state’s premium assistance for those under 200% of the federal poverty level while maintaining some $0 premium options. This risks a drop in low-income enrollment.
The other pitch is to lower New Mexico premium assistance for all enrollees and increase consumer costs. All premium assistance for those above 600% of the federal poverty level would go away, leading to potential coverage loss for that population.
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