As Colorado’s healthcare sector watches the federal budgeting process nervously to see what level of changes it could bring to local providers, the situation isreminiscent of the start of the 2025 legislative session.
However, a review of the 120-day session on a wide range of health-care players found that, despite significant debate, the session ended with very few major changes.
Legislators proposed numerous big and fairly radical ideas. They offered bills to cap hospital pricing, limit health-system acquisitions and expansions, increase fees on insurance policies and require coverage of expensive obesity-treatment drugs.
In the end, however, none of those ideas became law.
Instead, with both hospitals and health insurers warning of potential financial bloodlettings, legislators sought compromise.
Rather than cap hospital prices to generate funds for struggling safety-net clinics, they found another way to raise those funds. They rejected insurance-policy fee hikes and mandates to cover Ozempic and Wegovy. Instead of putting strict limits on the use of federal drug-discounting money, they made that spending more transparent. And they even boosted reimbursements for Medicaid providers, despite a $1.2 billion budget shortfall.
“Can we take a pause?”
In conversations since the end of the 2025 legislative session, health-care sector leaders have acknowledged that the results were different than many expected — and very much needed for large part of an industry that is struggling under cost pressures. Nearly 70% of hospitals have unsustainable operating margins of 4% or less, for example, and they are worried that revenues will decline more steeply if Congress passes a budget this year with substantial Medicaid cuts.
Still, several said they are thankful their pleas for restraint got through to legislators this session, as the largely moderate bills that Gov. Jared Polis signed into law represent a reprieve of sorts to a sector that remains under scrutiny from all levels of government.
“You need to keep those channels of communication open and have dialogue,” said Nico Brown, chief strategy officer for Vail Health. “There’s been a lot of pressure on Colorado hospitals, and a lot of regulatory reporting and requirements that have increased expenses. So, we’re asking: Can we take a pause and look at how those programs are working?”
The cost of pharmaceuticals and hospital services have been key targets for Gov. Jared Polis’ administration.
The reason there’s been so much scrutiny is because Americans’ spending on health care remains so high — roughly one-sixth of the gross domestic product. Reducing health-care costs was one of the pillars of Gov. Jared Polis’ platform when he first ran in 2018, and the early years of his term produced laws to limit prescription-drug prices, increase hospital reporting and require lower-priced insurance offerings.
Seven years into his governorship, however, medical spending levels remain high. But providers’ ability to provide services has been hurt.
Medicaid, acuity changes roiled healthcare industry
A post-pandemic rollback of Medicaid eligibility knocked 575,000 state residents off the publicly funded health-insurance program, yet many of those individuals continued to stream into hospitals seeking care without the ability to pay. Between March 2023 and the beginning of this year, hospitals saw a 50% increase in the number of uninsured patients seeking care. Charity care provided by health systems is up 140% since 2019, according to the Colorado Hospital Association.
Meanwhile, acuity levels of Medicaid patients rose, leading to a 26% increase in spending by the program that played a big part in creating the state budget shortfall, Colorado Department of Health Care Policy and Financing Executive Director Kim Bimestefer said. That rising level of sickness weighed on other programs like the reinsurance program that seeks to keep down costs of private plans in the state’s highest-cost areas and the Omni Salud program that funds no-cost insurance for about 12,000 undocumented immigrants.
In February, leaders from the Polis administration joined with legislative Democrats to introduce a bill that would limit what hospitals could charge to small-group insurance plans and to the 60,000 state-government workers insured under its plan. The goal was to use the savings to the state’s plan to help struggling safety-net clinics that are treating many of the newly uninsured patients, as well as to limit costs to small-group plans to stem premium hikes.
Colorado state Rep. Kyle Brown, supported by Lt. Gov. Dianne Primavera, describes a bill to cap some hospital reimbursements at a news conference in February.
Meanwhile, leaders of the Health Insurance Affordability Enterprise, which oversees the reinsurance and Omni Salud programs and offers subsidies for individual plans on the state’s health insurance exchange, needed financial help. They proposed a 1% fee hike on each private plan sold in Colorado.
Concerns, costs doom big healthcare proposals
That fee hike was needed, they said, because the federal government is expected to end funding to subsidize individual plans sold on exchanges, which could lead to tens of thousands of Coloradans dropping coverage. But after years of pushing through its health-care agenda, the Polis administration ran into insurmountable obstacles with these proposals.
Hospitals warned that capping prices would lead to significant revenue reductions and force them either to cut services or increase what they charge to private insurance plans not affected by the cap. Officials from both parties blanched at raising the existing 2% fees on plans sold by for-profit insurers — a boost expected to cost consumers $73 million — as state residents called for cost-of-living relief. And even insurers opposed capping what they could pay hospitals, calling the idea state interference in private contracts.
So, hospitals worked with opponents of the proposed reimbursement caps to pass an alternative measure using funding from other sources, including contributions from CHA members, to boost spending on safety-net clinics. And the proposed HIAE fee increase died at the end of the session.
Health insurers won several other major battles this year. Sponsors scaled back a bill aiming to boost coverage of obesity-related diseases, eliminating a requirement that plans cover high-cost drugs like Wegovy and Ozempic. They even worked to get Polis to veto a unanimously passed bill capping costs for public ambulance services, arguing the caps could incentivize use of non-emergent ambulance rides and boost insurance costs and premiums by $5.5 million.
Colorado state Reps. Kyle Brown and Karen McCormick explain to the House their bill regarding public ambulance billing.
“We often see these lawmakers advocating for more mandated coverage on one hand, while they decry rising premiums on the other. And you can’t have both,” said Kevin McFatridge, executive director of the Colorado Association of Health Plans. “I think we have to continue to educate lawmakers on impacts of mandates.”
Other victories for hospitals, insurers
Hospitals, long a target of Polis’ cost-cutting efforts, also won major battles as they dealt with more than 50 bills that impacted them. The rate-setting bill died. A bill that could limit hospital acquisitions of doctors’ practices was killed by its sponsor. Legislators OK’d a law barring pharmaceutical manufacturers from limiting the number of pharmacies at which nonprofit hospitals could get discounts through the federal 340B drug-pricing program — a move that likely preserved more than $100 million in discounts for hospitals statewide.
Hospitals lobbied heavily to include the 1.6% Medicaid provider rate increase in the budget — a move necessary to help offset the increasing number of uninsured patients arriving in emergency rooms seeking care, Brown said. And in a quiet but significant victory for health systems, legislators did not make efforts as expected to limit the facility fees that hospitals can charge for non-acute services in off-campus settings — an effort that could have cost them more money.
Arguably the biggest health-care change from the 2025 session, aside from the 340B bill, was the passage of another bill to reform practices of pharmacy benefit managers, the insurance-funded middlemen negotiating lower prices from drug makers. House Bill 1094 requires PBMs earn only flat fees rather than fees based on savings — a change that sponsors believe will discourage their focus on high-cost drugs — and sets minimum requirements for their reimbursement of independent pharmacies.
Colorado state Sens. Dylan Roberts and Byron Peyton explain to the Senate their bill on pharmacy benefit manager reform.
The bill pitted factions of the sector against each other. CAHP argued that by limiting how PBMs can negotiate discounts, the law will raise insurance premiums by $118 million, in addition to another $74 million it will cost them because of the independent pharmacy reimbursement mandate. But supporters included rural interests and those affiliated with local pharmacies, saying the regulations are necessary for their survival.
What comes next
There’s a good chance that the Legislature is not done with health-care issues in 2025.
The “big, beautiful bill” that Congress is debating this week to reduce spending and make some temporary business tax cuts permanent proposes significant cuts to Medicaid spending, which could hit hospitals and providers further. Polis has said that if the changes throw the state’s budget out of balance, he is likely to call the Legislature back into special session to deal with it, which could impact revenue going to health-care businesses.
But those businesses are positioned far better, at least financially, than many expected them to be coming out of a session in which legislators questioned many of the business models used by the health-care industry. (Those legislators, in fact, passed a bill to conduct a study of how the state could implement a Canada-style, government-funded insurance system to replace the private insurance sector, though results won’t be debated until the 2027 session at the earliest.)
“It’s hard to assess where we are right now without taking a look at where we are in Washington. I think we’re in a wait-and-see position, and we’ll continue the dialogue about how hospitals are in a tenuous place,” Brown said. “If rates or reimbursements are slashed, that’s going to put us in a tough position.”