New “Colorado Option” will lower premiums and ensure greater access to health care for more residents, advancing health equity in the state.
The U.S. Department of Health and Human Services (HHS) announced approval of Colorado’s Section 1332 State Innovation Waiver amendment request to create the “Colorado Option,” a state-specific health coverage plan that increases health coverage enrollment and lowers health care costs, making insurance more affordable and accessible for nearly 10,000 Coloradans starting in 2023. It is designed to reduce racial and ethnic health disparities by providing new coverage options for Coloradans, reflecting the Biden-Harris Administration’s commitment to advancing health equity.
“We are thrilled to partner with Colorado in our shared commitment to lowering health care costs and ensuring greater access to quality, affordable care,” said HHS Secretary Xavier Becerra. “The Colorado Option will help thousands more families sign up for health coverage. I applaud Governor Jared Polis and encourage all states to pursue innovative ways to ensure health care is within reach for their residents.”
Section 1332 of the Affordable Care Act (ACA) allows states to apply for State Innovation Waivers to pursue innovative strategies for providing residents with access to high-quality, affordable coverage. Colorado is the first in the nation to adopt this waiver to introduce a new and more affordable state-based health insurance option, and leverage federal savings to support state subsidies to improve affordability and coverage initiatives. Colorado projects that approximately 32,000 Coloradans will gain health insurance under the amended waiver by 2027, which would be an increase of approximately 15% in the individual market.
This 1332 waiver amendment implements the Colorado Option, which lowers premiums and health care costs while making it easier for consumers to compare their coverage options and select the best plan that fits their needs. Starting in 2023, the Colorado Option will be available to all Coloradans who enroll in health insurance plans on the individual market (i.e., not through an employer) and small employers with less than 100 employees. Colorado Option plans will lower health insurance premiums for individuals, families, and small businesses by up to 15% by 2025.
The Colorado Option will operate in tandem with Colorado’s existing section 1332 waiver, a state-based reinsurance program, which is authorized to continue under the amended waiver. The amended waiver is expected to lower premiums by an average of approximately $132 per person per month (or 22%). This is even further than the state’s reinsurance waiver program alone, which has already resulted in statewide average premium reductions of approximately 20% since its implementation in 2020.
“Through this new model, Colorado leverages federal savings to expand affordability and coverage in the state like no other state has done before. The Colorado Option is groundbreaking and a step in the right direction to reduce the uninsured rate, while investing in health insurance coverage affordability and improvements, and advancing health equity,” said CMS Administrator Chiquita Brooks-LaSure. “We encourage all states to consider innovative ways to use section 1332 waivers in the future to expand and improve coverage and lower costs for their residents.”
The Colorado Option will cover all essential health benefits required by the ACA, including many high value services, like primary care, behavioral health, and prenatal visits, at no cost. It will combine standard health benefit plans, required premium reductions, and increased state subsidies for those currently eligible and those not currently eligible for federal subsidies under the ACA to make coverage more affordable. The state’s waiver plan increases competition by establishing premium reduction targets for the Colorado Option and implements better regulatory and programmatic mechanisms as a backstop to ensure providers, hospitals, and issuers meet those targets.
In doing so, the amended waiver will generate savings that the federal government will pass on to the state to implement their waiver (referred to as federal “pass-through funding”). The state will use these savings to implement the amended waiver and make coverage more affordable; this will include providing state-based subsidies through a state program to enhance the financial help available to Coloradans enrolling in coverage, ultimately increasing access to care in the state. As a result, individual market consumers are expected to continue seeing lower premiums, which should attract new consumers while also keeping current consumers enrolled in coverage.
Find more information about the Colorado Option here: Colorado Option website.
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