The Colorado Division of Insurance (DOI) will receive $339 million in pass-through funding from the federal government to support its health insurance programs, according to an announcement this week by the Department of Health & Human Services and the U.S. Department of Treasury. Since 2020, Colorado has been awarded a total of $1.49 billion in such funds.
Governor Jared Polis commented on the announcement, stating, “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.”
Officials said that over the past three years, collaboration with federal partners has led to a stable method for calculating pass-through funds under Colorado’s 1332 waiver. This stability is expected to help address challenges in Colorado’s insurance market caused by recent failures and exits of companies like Friday Health Plans and Bright Health Insurance Company.
The funding recognizes reductions in premiums for residents as well as combined savings achieved through both reinsurance efforts and the Colorado Option program.
Lt. Governor Dianne Primavera and Director of the Office of Saving People Money on Health Care said, “This funding is a testament to Colorado’s innovative leadership in health care reform. 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 its launch in 2020, reinsurance has lowered premiums for state residents by about $1.6 billion overall. Projections for 2025 estimate a further 23% reduction in premiums—about $477 million—which would bring total estimated savings above $2 billion.
The reinsurance program uses a three-tiered reimbursement structure designed to provide more support for rural and mountain areas where medical costs tend to be higher than elsewhere in the state. By spreading risk across all insured populations, high-cost claims have less impact on individual premium rates.
Colorado Option plans became available in 2023 with over 35,000 enrollees during that year’s open enrollment period via Connect for Health Colorado—13% of total enrollments at that time. In 2024, participation increased significantly: approximately 80,000 people enrolled, representing 34% of Connect for Health Colorado enrollments.
“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 several states run reinsurance programs with federal pass-through funds under Section 1332 waivers from the Affordable Care Act (ACA), officials note that only Colorado combines two separate cost-saving programs within its waiver.
Pass-through funds received will be used both for continued premium reductions through reinsurance as well as direct subsidies intended to lower out-of-pocket expenses such as co-pays or coinsurance for eligible consumers using Connect for Health Colorado.
Both major initiatives—the bipartisan Reinsurance program signed into law in 2019 and the Colorado Option signed into law in 2021—were made possible through approval by federal authorities using ACA Section 1332 waivers. These waivers allow states flexibility if their reforms reduce insurance costs while also saving money at the federal level; those savings are then returned directly back into state-run affordability programs rather than remaining with Washington.
