The U.S. Department of Health and Human Services approved Colorado’s request to amend a federal waiver and create a state option that increases enrollment and lowers health care costs beginning in 2023.
The “Colorado Option” is 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. The program is designed to reduce racial and ethnic health disparities by providing new coverage options for Coloradans.
HHS called the program historic as it is the first in the nation to amend a federal waiver to create a public health insurance option.
"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," CMS Administrator Chiquita Brooks-LaSure said in the announcement. "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."
Section 1332 of the Affordable Care Act (ACA) allows states to apply for State Innovation Waivers to pursue innovative strategies to provide residents with access to high-quality, affordable coverage. 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 percent in the individual market.
Starting in 2023, the Colorado Option will be available to all Colorado residents who enroll in health insurance plans on the individual market and small employers with less than 100 employees. Colorado Option plans are expected to lower health insurance premiums for individuals, families, and small businesses by up to 15 percent 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 percent). The state's reinsurance waiver program has already resulted in statewide average premium reductions of approximately 20 percent since its implementation in 2020.
The Colorado Option will cover all essential health benefits required by the ACA, including 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.
HHIS said that 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, 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.