Colorado gets OK to amend federal waiver, will launch public option

By: Maya Goldman, June 23,2022

Colorado will be the first state in the nation to amend a federal waiver to create a public health insurance option for 2023, the Health and Human Services Department announced Thursday.

HHS greenlighting the state's amended Section 1332 State Innovation Waiver will create a "Colorado Option," which will use federal funds to create a public health plan intended to narrow the state's uninsured rate and provide more affordable coverage for residents. In 2021, 6.6% of Colorado residents lacked health insurance, according to a survey conducted by the Colorado Health Institute.

The Colorado Option will be available to residents who enroll in health plans on the individual market and small employers with fewer than 100 employees. Insurers must offer Colorado Option plans in every county they operate and meet premium reduction targets by 2025. If carriers fail to cut premium costs during that time frame, the state's insurance commissioner can order healthcare providers to join Colorado Option plans at set rates, following a public hearing.

The Colorado option is expected to lower average exchange premiums for consumers by 15% by 2025, HHS said. By 2027, the state expects the program will provide insurance to 32,000 previously uninsured residents, increasing enrollment in its state exchange by 15%.

"We are thrilled to partner with Colorado in our shared commitment to lowering healthcare costs and ensuring greater access to quality, affordable care," HHS Secretary Xavier Becerra said in a news release. "The Colorado Option will help thousands more families sign up for health coverage. I applaud Governor Jared Polis and encourage all states to pursue innovative ways to ensure health care is within reach for their residents."

Colorado's legislature passed a bill authorizing the state to create a public option in May 2021, and the state applied for the 1332 innovation waiver in November. The waiver allows the state to use premium tax credit pass-through funding to implement the public option, since the federal government is expected to spend less on the credits under the waiver than it otherwise would. Colorado plans to use the federal dollars to create subsidies for residents enrolling in coverage, including those ineligible for federal subsidies.

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