Colorado will receive an unprecedented $361 million in federal ‘pass-through’ funding to further the state’s reduction of health insurance costs.
Those dollars will be reinvested to lower premiums for individual health insurance plans and reduce out-of-pocket costs for eligible state insurance market customers.
The funds saw a notable increase from the $245 million awarded in 2023, a rise that Colorado Insurance Commissioner Michael Conway said reflects how much more money the state saved its residents, and consequently, the federal government.
“(This increase) proves once again that the Reinsurance Program and the Colorado Option continue to deliver for the people of Colorado to save people money on health care,” Conway said.
Those insurance savings are primarily from the state’s Reinsurance program and standardized health benefit plan, dubbed the Colorado Option.
Reinsurance covers a portion of high-cost claims for insurance companies. In doing so, insurers no longer find it necessary to pass those expenses onto individual premiums the next year.
According to a press release from the Office of Colorado Gov. Jared Polis, Reinsurance has reduced premiums for Coloradans by an estimated $1.6 billion since 2020. Additionally, Reinsurance is estimated to save residents an additional 23% on their premiums in 2025.
A CLOSER LOOK AT THE COLORADO OPTION
The Colorado Option created a standardized health benefit plan for the state insurance market, meaning that within each tier of insurance (bronze, silver and gold), many common expenses are fixed by the state across all plans.
Those health plans, regardless of the tier, also undergo an annual decrease in their premiums. According to an overview of the Colorado Option by the Colorado Department of Regulatory Agencies, premiums for standardized health plans in 2025 will be 15% less than in 2021.
“As Director of the Office of Saving People Money on Health Care, I’m thrilled to see Colorado be recognized for our work, but even more excited that we can continue saving Coloradans money on the care they need,” Colorado Lt. Governor and Office of Saving People Money on Health Care Director Dianne Primavera said. “We will continue pushing for ways to help all Coloradans access low-cost, reliable, and quality care.”
The standardized plans also make it easier for consumers to easily understand and compare the costs and benefits of the available insurance plans. Moreover, the Colorado Option requires that accessing services like primary care and mental health result in zero cost to the consumer.
WHAT GOES AROUND COMES AROUND
Because those premiums and out-of-pocket costs are lowered by state subsidies and standards, fewer residents utilize the federal tax credits and cost-sharing reductions established by the Affordable Care Act.
Federal tax credits under the Affordable Care Act are a form of financial assistance for those who are not eligible for Medicaid but cannot afford private insurance premiums. Cost-sharing reductions function similarly but reduce expenses such as deductibles and co-payments.
Colorado was able to implement these programs despite differing from the Affordable Care Act by filing a 1332 waiver with the Centers for Medicare and Medicaid; and, the waiver guarantees that federal savings from fewer tax credits and cost-sharing reductions must be ‘passed through’ to the state.
“Colorado is leading the nation in action to save people money on health care and we continue working to build on successful efforts like Reinsurance and Colorado Option that are helping more people keep their hard-earned money,” Gov. Polis said.
