Analysts warn of insolvency if New Mexico maintains health insurance subsidies

Health insurance is expensive — even for the state of New Mexico.

As health insurance premiums have soared, so has state spending on subsidies to shield some New Mexicans from the rising costs. But absent any changes in program costs or eligibility, the state fund used to pay for those subsidies may be insolvent by fiscal year 2028, according to a Legislative Finance Committee analysis released Tuesday.

“Moving forward, New Mexico may need to consider cost containment measures to ensure the long-term sustainability of the fund,” said Legislative Finance Committee Program Evaluator Elizabeth Dodson.

New Mexico uses money from the state Health Care Affordability Fund to subsidize the cost of coverage purchased through BeWell, the state insurance exchange established by the federal Affordable Care Act. Plans through the marketplace are available to people who wouldn’t otherwise qualify for insurance — like employer-sponsored coverage or public options like Medicare and Medicaid.

Rep. Harlan Vincent, a Republican from Glencoe, likened the marketplace to a store, where health plans are offered under the different “brand names” of insurance carriers.

More than 84,000 New Mexicans — a new record — sought health coverage through BeWell during open enrollment in late 2025 and early 2026. The increase came even as health insurance costs rise and after Congress failed to continue federal subsidies for marketplace enrollees making more than 400% of the federal poverty level — equivalent to about $64,000 for an individual or $132,000 for a family of four.

That’s no small feat. New Mexico was the only state in the nation to see an increase in Affordable Care Act marketplace coverage during that open enrollment period, according to an analysis from the health research and policy organization KFF.

However, the expiration of federal subsidies — officially known as Enhanced Premium Tax Credits — increased costs for the state. In 2025, the state set aside almost $40 million on top of recurring Health Care Affordability Fund spending to backfill the expiring tax credits. As a result, total annual state spending on marketplace coverage increased by more than 600% between 2025 and 2026, according to the Legislative Finance Committee report.

“New Mexico has chosen to provide more generous assistance than the federal government, which has helped to keep coverage affordable and enrollment strong,” committee program evaluator Danielle Ceballes told lawmakers Tuesday. “But maintaining those benefits requires the state to absorb substantially more of that cost.”

The state Health Care Affordability Fund can’t sustain those costs — especially as insurance premiums continue to rise. Even though lawmakers passed legislation earlier this year to increase the money in the fund, maintaining subsidy programs at their current level will result in an $85 million shortfall by fiscal year 2028, the committee report stated.

As a result, the state Health Care Authority has proposed two possible cost containment options, both of which would shift more costs onto enrollees — especially higher-income enrollees, Ceballes said. Both may also result in lower enrollment, as healthier people may choose to forego coverage while facing higher costs.

The higher costs aren’t sustainable for the state, said Sen. George Muñoz, a Gallup Democrat.

“I don’t know how we’re going to get some of this cost containment in healthcare,” Muñoz said. “We can’t keep relying on the state to take a majority of the portion. … People are going to have to pay more for the services.”

He added, “There’s no way for us to keep up with this.”

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