Colorado Option & Bipartisan Reinsurance Save Coloradans Money on Health Care Leading to $339 Million from Federal Government

Media Contacts:

DOI - Vincent Plymell
[email protected]

Governor's Office - Shelby Wieman
[email protected]

Federal pass-through funding will continue to enhance the Reinsurance and Colorado Option programs.

DENVER - This week, the federal government, through the Department of Health & Human Services and the U.S. Department of Treasury, announced that the Colorado Division of Insurance (DOI) will receive $339 million in pass-through funding for its health insurance initiatives, bringing total pass-through funds awarded since 2020 to $1.49 billion.

"Since day one we have been focused on saving Coloradans money on their health care and our nation-leading priorities are delivering real savings to people. Colorado has received funding back from the federal government because of the success of the bipartisan reinsurance initiative and the Colorado Option, and we look forward to building on this work to save Coloradans money on the health care they deserve," said Governor Jared Polis.

This award demonstrates that the collective work with federal partners over the past three years has resulted in a stable and consistent method of calculating pass-through funds for Colorado's innovative 1332 waiver. This also provides flexibility to respond to any challenges that may occur in Colorado's market resulting from the nationwide failure and market exits of Friday Health Plans and Bright Health Insurance Company.

Most importantly, as with last year's pass-through, the federal government recognizes this funding for the reduced premiums for Coloradans and the combined savings from Colorado's Reinsurance and Colorado Option initiative.

"This funding is a testament to Colorado's innovative leadership in health care reform," Lt. Governor Dianne Primavera and Director of the Office of Saving People Money on Health Care said. "The savings created by the Colorado Option and Reinsurance initiative are making a significant impact, especially in rural communities where costs have historically been higher. By continuing to build on these plans, we are ensuring that every Coloradan has access to quality and affordable health care - because health care is not a privilege, it's a right."

Since 2020, reinsurance has reduced premiums for Coloradans by an estimated $1.6 billion. The initial estimate for 2025 shows that the initiative will save Coloradans 23% on their premiums, which equates to $477 million in savings, bringing the total estimated savings for the initiative to over $2 billion.

The Reinsurance initiative reimburses at different levels in different parts of the state with a three-tiered structure designed to provide more assistance to the rural and mountain areas that have higher health care costs and higher health insurance premiums than other areas. This spreads risk across the Colorado health insurance market, reducing the impact of high-cost claims. Reinsurance thereby lowers premiums for individuals and makes it easier for people to afford coverage.

In 2023, Colorado Option plans were first made available and over 35,000 people enrolled, accounting for 13% of the 2023 open enrollment activity with Connect for Health Colorado. In 2024, enrollment in Colorado Option plans jumped to 80,000 people, accounting for 34% of enrollments in Connect for Health Colorado.

"We continue to improve our plans that deliver savings to the people of Colorado, and we have improved the process of working with our federal partners," said Colorado Insurance Commissioner Michael Conway. "I am always appreciative of their efforts and our team at the DOI as they all worked together to make health insurance more affordable for Coloradans."

While other states have reinsurance efforts that receive pass-through funding from the federal government, Colorado is unique in having a waiver (specifically a 1332 waiver based on section 1332 of the Affordable Care Act - ACA) that combines two savings programs.

These pass-through funds will go back into the bipartisan Reinsurance initiative to continue to lower premiums, as well as provide direct subsidies to lower out-of-pocket costs (such as co-pays or coinsurance) for eligible Connect for Health Colorado consumers.

Both the Reinsurance initiative, signed into law by Governor Polis in 2019, and the Colorado Option, signed into law in 2021, were authorized by the federal government through a process called a 1332 waiver. Section 1332 of the ACA allows states to develop innovative approaches to health insurance by changing or waiving parts of the ACA. If a state can reduce the cost of health insurance for its residents, and by doing so, save the federal government money, the 1332 waiver allows that state to receive those federal savings in the form of "pass-through funding" from the federal government.

Pass-through funding is the result of money saved by reinsurance and the Colorado Option - money the federal government does not have to spend on health insurance subsidies. Rather than the federal government keeping the savings, they are passed back to the State of Colorado and applied to programs that make health insurance more affordable and accessible.

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About the Division of Insurance:

The Colorado Division of Insurance (DOI), part of the Department of Regulatory Agencies (DORA), regulates the insurance industry and assists consumers and other stakeholders with insurance issues. Visit doi.colorado.gov for more information or call 303-894-7499 / toll free 800-930-3745.

About DORA:

DORA is dedicated to preserving the integrity of the marketplace and is committed to promoting a fair and competitive business environment in Colorado. Consumer protection is our mission. Visit dora.colorado.gov for more information or call 303-894-7855 / toll free 800-886-7675.

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