Biden Administration Recognizes Colorado Option and Reinsurance Programs — Representing Unprecedented Savings for Coloradans
The healthcare options available in Colorado are being recognized as some of the best in the country. Today, the federal government, through the Department of Health & Human Services and the U.S. Department of the Treasury, is announcing that the Colorado Division of Insurance (DOI) will receive $245 million in pass-through funding for its health insurance programs for 2023.
This amount includes funds for the Colorado Reinsurance Program, and for the first time, the Colorado Option program. While a number of states have reinsurance programs, this is the first time the federal government has provided pass-through funding in recognition of cost savings for a combined program such as Colorado’s waiver plan.
In its decision, the federal government recognized that the impact of Colorado’s Reinsurance Program and the Colorado Option was that they reduced premiums for Coloradans in the very first year of operation. Specifically, the impact of the Colorado Option was to reduce the second-lowest-cost “Silver” plans throughout the state by an average of 4.7 percent.
“This $245 million in federal funding will directly reduce insurance costs for Coloradans. Saving people money on health care has been a top priority since day one,” said Governor Jared Polis. “Colorado is now proudly the first state in the nation to receive this federal support for the money-saving Colorado Option which, along with the bipartisan Reinsurance program, will further cut healthcare costs.”
Yesterday, Lt. Governor Dianne Primavera, representing Colorado, joined President Biden and Vice President Harris in the East Room of the White House for an announcement of a new effort to lower the cost of prescription drugs and health care costs for seniors.
“Colorado is a national leader when it comes to saving people money on healthcare,” said Colorado Lt. Governor Dianne Primavera and Director of the Office of Saving People Money on Health Care. “The first year they were available, over 35,000 Coloradans enrolled in Colorado Option plans and the OmniSalud program, and the Reinsurance program continues to drive down premiums.
“This announcement from our federal partners allows Colorado to keep making health insurance products even more affordable for residents,” she added. “Access to quality coverage has a wide array of health benefits and promotes financial security for Colorado families. We look forward to continuing this important work because the wellness of our neighbors is foundational to our strength as a state.”
Colorado Insurance Commissioner Michael Conway saw the recognition as, “Unprecedented. Not only is this the largest amount of pass-through funding we have seen, it is an acknowledgment from the federal government of the savings from the Colorado Option, teaming up with the Reinsurance Program for a one-two punch in saving people money on health care.”
“While special interests have always played politics with these programs, this award from our federal partners shows that the Reinsurance Program continues to deliver on the more than $1 billion dollars the program has reduced premiums since it began,” he added. “Today’s announcement shows that the federal government objectively analyzed the impact of the Colorado Option and the Reinsurance Program, and found that overall, they reduced premiums and made coverage more affordable.”
These pass-through funds will go back into the Reinsurance Program 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, and support the OmniSalud program.
“This announcement is a win for all Coloradans – including the hospitals and insurers that have fought these programs in the past,” added Conway. “My sincere hope is that we will all work together moving forward to continue to deliver for Coloradans.”
Colorado residents could be forgiven for not recalling the history of the programs
In 2019, Polis signed the Reinsurance Program into law. The legislation was sponsored by Representatives Julie McCluskie and Janice Rich, and Senators Kerry Donovan and Bob Rankin.
In 2021, Governor Polis signed legislation into law to create the Colorado Option. This legislation was sponsored by then-Representative, (now Senator) Dylan Roberts and Representative Iman Jodeh, and Senator Kerry Donovan.
The Reinsurance Program has already reduced premiums for Coloradans by $1.1 billion ($1,180,015,815) for 2020 – 2023. The initial estimate for 2024 shows that premiums would have been 21 percent higher than they would have been without the program, which equates to $357 million in savings. This is expected to bring the total estimated savings for the program to $1.5 billion, all of which benefits Coloradans.
Colorado Option plans were first made available this year. There are more than 35,000 people enrolling in the plans and accounting for 13 percent of Colorado’s 2023 open enrollment activity with Connect for Health Colorado. By comparison, Washington state’s public option plan only garnered about one percent of enrollment in its exchange for its first year.
The Colorado Option consists of health plans with standard benefits from all current individual and small-group health insurance companies. These standard benefits are the same across all companies, allowing consumers and businesses to easily compare and choose plans that fit their needs.
In addition to covering all essential health benefits required by the Affordable Care Act (ACA), the Colorado Option plans offer free primary care and free mental health health visits, and have been designed to improve access, affordability, and racial health equity.
Both plans — the Reinsurance Program and the Colorado Option — were authorized by the federal government through a process called a 1332 waiver. Section 1332 of the Affordable Care Act (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. This is the reward that Colorado has received today.
Pass-through funding is the result of money saved by these programs – money the federal government does not have to spend on health insurance subsidies for the Affordable Care Act (ACA). Rather than the federal government keeping the savings, the savings are passed back to the State of Colorado and applied to programs to make health insurance more affordable and accessible.