The federal government has announced that the Colorado Division of Insurance (DOI) will receive $339 million in pass-through funding for its health insurance programs. This brings the total amount awarded to Colorado since 2020 to $1.49 billion.
Governor Jared Polis said, “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 say this funding reflects ongoing collaboration with federal agencies over three years, resulting in a stable method for calculating pass-through funds under Colorado’s 1332 waiver. The process allows flexibility to address market challenges, such as those caused by recent exits of Friday Health Plans and Bright Health Insurance Company.
The federal government recognized these funds as a result of reduced premiums for state residents and overall savings from both the Reinsurance program and Colorado Option.
Lt. Governor Dianne Primavera, who also directs the Office of Saving People Money on Health Care, stated, “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 2020, reinsurance has led to an estimated $1.6 billion reduction in premiums for Coloradans. Early estimates for 2025 suggest a 23% average premium savings, or about $477 million statewide. This would bring total estimated savings from the initiative above $2 billion.
Colorado’s Reinsurance program uses a three-tiered structure that offers greater support in rural and mountain regions with higher medical costs and insurance premiums than other parts of the state. This approach spreads risk across insurers statewide and helps lower individual premiums.
Enrollment in Colorado Option plans has increased since their introduction in 2023: more than 35,000 people signed up during that first year—about 13% of open enrollment activity through Connect for Health Colorado—and enrollment rose to 80,000 people in 2024, representing about 34% of enrollments.
Colorado Insurance Commissioner Michael Conway commented, “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. 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 operate reinsurance programs supported by federal pass-through funding, only Colorado holds a section 1332 Affordable Care Act waiver combining two cost-saving initiatives: reinsurance and the public option plan known as Colorado Option.
Funds received will be used both for lowering insurance premiums through reinsurance and providing direct subsidies that reduce out-of-pocket expenses like co-pays or coinsurance for eligible Connect for Health Colorado customers.
Both major initiatives—the bipartisan Reinsurance program (enacted in 2019) and Colorado Option (enacted in 2021)—were authorized through federal waivers under section 1332 of the ACA. These waivers allow states to experiment with ways to make coverage more affordable if they can show cost reductions benefiting both residents and federal spending levels; any resulting federal savings are returned as pass-through funding for further affordability efforts within the state.
Pass-through funding represents money saved due to lower insurance costs from these programs—funds which would otherwise be spent by Washington on subsidies but instead are redirected back into state-led affordability measures.
