Scrambling to prevent a massive drop-off of Coloradans from private insurance rolls, state regulators have issued proposed emergency regulations to try to salvage some subsidies for individual-market buyers, even as the state loses $100 million in federal funding.
Officials at the Colorado Division of Insurance have been preparing since the election of President Donald Trump for the federal government to discontinue enhanced premium tax credits at the end of 2025 for people buying insurance on state-run health exchanges. That $100 million loss in Colorado could double the average premium prices for individual-market buyers, leading some 40% the people in that market — roughly 110,000 state residents — to disenroll and go without coverage.
Such a mass migration to the rolls of the uninsured could have far-reaching effects. Uninsured, lower-income individuals still would need care but likely would wait until conditions become more acute and seek help in hospital emergency rooms where the care costs significantly more. With few of those individuals able to pay bills, hospitals needing to compensate for revenue losses would have to cut services or increase what they charge to privately insured Coloradans — most of whom get coverage through employers.
“This is going to impact everyone, because the cost of employer-sponsored coverage is going to go way up,” Colorado Insurance Commissioner Michael Conway said in an interview on Monday.
Fee bill, federal requests fail
Colorado Insurance Commissioner Michael Conway
The first effort to replace that income stream was the introduction of a bill in the previous legislative session to increase the Health Insurance Affordability Enterprise fees charged on every health-insurance policy sold in Colorado by as much as 1%. But that fee hike, which would have generated $67.8 million annually for the state’s reinsurance program and Omni Salud program for undocumented immigrants as well as for exchange subsidies, died in the face of bipartisan opposition.
The second effort involved pleas to members of the Colorado congressional delegation to include in the federal bill an extension of the funding for exchange subsidies — pleas that often got lost in the unsuccessful calls for Congress not to cut Medicaid funding. Those efforts officially died Friday, when Trump signed into law the “One Big, Beautiful Bill” that is expected to reduce Medicaid spending by $1 trillion nationally and that did not touch on the exchange subsidies.
As such, the emergency regulations can be viewed as a last-ditch effort by state leaders to try to staunch the massive bleeding of residents from the individual-insurance market.
Existing enhanced federal subsidies ensure that no one buying individual policies through the state-run exchange — policies that are notably more expensive than those purchased by employers — would pay more than 9% of their annual income. Before the 2021 passage of those subsidies, anyone making at least 400% of federal poverty level — $62,600 for a single person or $128,600 for a family of four — could face premiums that amounted to 20% to 30% of their income, Conway noted.
Proposed new subsidies far smaller than existing offerings
State officials also had layered on additional subsidies through the HIAE, including cost-sharing reductions for people making under 250% of federal poverty level that helped keep down deductibles and copayments. However, with such a significant reduction in federal pass-through funding, the emergency regulation proposes subsidies that are for more limited in scope and that will help a smaller cross-section of policy purchasers.
Limited to households at or below 200% of federal poverty level — $31,300 for an individual or $64,300 for a family of four — the proposed enhanced premium subsidy for the first enrollee in a household would be a maximum $50 per month. Each additional family member, up to a cap of three more, would get a maximum $18 per month.
These subsidies would be applied directly to an enrollee’s health-insurance premium balance, reducing the amount they owe to the monthly premium. Insurers would have to foot the bill for the premiums initially, and the HIAE would reimburse them at the end of each fiscal year.
Conway said that without the federal enhanced premium credits, he expects the average premiums on the health exchange to rise by 104%, more than doubling costs to individuals next year and leading many people to choose to forego insurance rather than pay that. Insurance-division leaders said at a Jan. 24 HIAE board meeting that they expect the biggest drop-off in enrollees to come from those making 200% to 250% of federal poverty level, followed by those above 400% poverty level who won’t get any subsidies in the future.
“Not a huge” impact from emergency regulations
Meghan Dollar of the Colorado Chamber of Commerce, Kevin McFatridge of the Colorado Association of Health Plans and Kara van Stralen of America’s Health Insurance Professionals testify in February against a bill to study implementation of a single-payer healthcare system.
Asked Monday how many people he believed the state could keep enrolled in the health exchange with the emergency subsidies, Conway estimated the number at 7,000 — a small percentage of the 110,000 expected to leave without any help,
“It’s not a huge number. But it’s at least 7,000 people who will keep access to health care,” he said. “But unless and until we find ways to increase funding to the enterprise, none of it will fully replace the damage (from the federal cuts).”
Trump and congressional Republicans, speaking more broadly about the reduction in federal healthcare spending for programs like Medicaid, have said it is needed to cut overall federal spending and extend tax breaks that have benefitted businesses. They have argued too that people need to take more responsibility in paying for something as important as their health care.
Because the state receives pass-through money from the federal government based on the number of residents enrolled in exchanges, however, the disenrollments will have ripple effects in other programs.
Changes to Omni Salud, reinsurance too
The Omni Salud program, which now offers cost-free health care to 12,000 undocumented immigrants, will reduce its enrollment to 2,700 next year to reflect the reduction in federal pass-through money. Critics say the program spends taxpayer funds on non-citizens; Conway argues that it lets hospitals and clinics get Medicaid reimbursement for treating those individuals, where they would receive near nothing if those individuals are uninsured and show up for care.
Reducing pass-through money will also cut funds to the state’s reinsurance program, which uses a portion of the HIAE fee to create a risk pool for the costliest care for individual-policy holders and, through that, to bring down premiums in the highest-cost areas, including the mountains and San Luis Valley. While the program now aims to reduce individual-market premiums in those areas by 20% compared to what they would be without reinsurance, the new goal will be just 12% cost breaks, Conway said.
This particularly worries Kevin McFatridge, executive director of the Colorado Association of Health Plans, because the reinsurance market has been key in helping people to buy policies in areas where provider shortages help to drive up care costs and premiums.
“If reinsurance is underfunded, premiums go up across the board, which could make coverage less affordable and suppress enrollment,” McFatridge said.
Finally, the cut in subsidies and the expected hike in premium prices — both directly to the individual market and indirectly to the small- and large-group markets — likely stifles the efforts of the Colorado Option, Conway acknowledged.
Could fee-hike request return to fund subsidies?
Gov. Jared Polis speaks to the Colorado Chamber of Commerce board meeting on April 24.
A 2021 state law requires insurers to offer defined-benefit plans that aimed for 5% reductions in premium costs last year, 10% this year and 15% next year, though reductions have been lower than anticipated so far. With this pinch on individual-market plans, however, Conway expects there to be premium increases for Option plans sold on the exchange next year.
Gov. Jared Polis is expected to call the Colorado Legislature into special session in August to deal with the roughly $1 billion anticipated reduction in Medicaid funding, and officials will look both for ways to cut health-care spending and to raise revenues to offset the cuts. It is possible, then, that the HIAE fee hike that legislators rejected in May could spring back to life as a potential way to boost subsidies and keep more people insured.
Conway said Monday that he’s not sure if there will be enough support to reintroduce the fee hike — a proposed 1% increase to the 2% fee on for-profit insurance policies and 1.15% fee on nonprofit insurer policies — just yet. But the idea must be considered in the future, he said, as the state will see by the start of 2026 the wide-ranging impacts of disenrollment of hundreds of thousands of Coloradans from both Medicaid and private health-insurance plans, including the reduction of healthcare services.
“I don’t know exactly when we will revisit the conversation. But we will revisit the conversation,” Conway said. “It’s simply not tenable that we have 110,000 people who will lose coverage.”