Source: Colorado Sun
Coloradans who buy health insurance on the open market could be facing a major price jump next year, with the death of a bill in the legislature that was intended to soften the blow.
This gets suuuuuper technical, so we’ll take it step by step.
1. Many people who buy insurance on their own get subsidies from the federal government to help pay the costs of their premiums. In recent years, that help has been boosted by special, enhanced subsidies created as part of a pandemic stimulus bill. Those enhanced subsidies have taken the sting out of rising health care and insurance costs post-pandemic for many folks. Roughly 80% of the nearly 300,000 people who bought an insurance plan for this year through the state’s marketplace, Connect for Health Colorado, received a subsidy.
2. The enhanced subsidies are set to expire at the end of the year, unless Congress extends them. While there is some bipartisan support for extending the subsidies, states are still preparing as if the subsidies will go away.
3. In Colorado, losing these subsidies could create a secondary hit to a different insurance affordability program. That program is reinsurance, in which the state helps insurers pay high-cost claims so those insurers can reduce premium prices for everybody. Money for the program comes from a fee on insurers and also from the federal government.
4. The federal money is the key here. The state receives it because the reinsurance program holds down premium prices, meaning the federal government spends less on insurance subsidies than it would without reinsurance in place. The feds send a portion of that savings — typically hundreds of millions of dollars a year — to Colorado, which uses it to fund reinsurance and also to pay for a separate state subsidy program.
5. If the enhanced subsidies go away, the feds won’t be on the hook for paying as much out. That means reinsurance will generate less savings for the feds, leading to smaller amounts of money coming back to Colorado to fund the program. (And this is assuming the Trump administration continues this pass-through funding system — at last check, the money promised to the state for this year still hasn’t arrived.)
6. To make up for this, the state Division of Insurance backed House Bill 1297. The bill would have upped the fee on insurers by a percentage point to make up for the money lost due to the end of the enhanced subsidies. The bill would have also reallocated where some of the fee money goes, including increasing support to a state program that provides subsidies to people who are not eligible for federal ones because of their immigration status. (Tensions flared over this part.)
7. The bill died in committee Tuesday. As a result, it does not appear that Colorado will come up with any extra money to make up for the likely hit to the reinsurance program caused by the looming end of the enhanced federal subsidies.
8. This could set up a major insurance price increase driven by a number of factors. While it’s not certain this will happen, here’s what it might look like: Health costs continue to rise, so insurance prices will, too. The reinsurance program may shrink, meaning it won’t be able to hold down those prices as much as in previous years. Consumers will receive less in subsidies, meaning they will have to pay a bigger chunk of those premiums. And some consumers will lose their subsidies altogether, creating a catastrophic increase especially for those living in mountain communities.
9. But the head of the state’s health insurer trade group, which opposed the bill, said he hopes the failure of House Bill 1297 “opens the door to a broader conversation about how Colorado funds healthcare affordability in a way that’s transparent, equitable, and structurally sound.” Kevin McFatridge, the executive director of the Colorado Association of Health Plans, also added in an email that the state should reconsider the approach of using fees on insurers to fund affordability programs — those fees, themselves, increase premium prices, he said. And he said the state hasn’t been transparent enough to determine whether concerns about an impending insurance calamity are valid. “If there are looming funding shortfalls, we believe that calls for broader stakeholder engagement and public review,” McFatridge said.
Insurers in the individual market — that’s the open market where people buy coverage on their own — have to file their proposed 2026 rates with the state in the coming weeks, with finalized rates coming out by late summer, early fall. So the next few months will tell whether these dire predictions come true.
