Cost reductions from Colorado health insurance programs saved the federal government $245 million in 2023, money which will soon be returned to the state.

The U.S. health and treasury departments announced Colorado’s $245 million in pass-through funding on Wednesday — the largest amount Colorado has received, said Insurance Commissioner Michael Conway. This is the first time the amount includes funds for the Colorado Option Program, which began being sold this year, on top of the Colorado Reinsurance Program.

This makes Colorado the first state awarded federal pass-through funding for a combined program, according to the Colorado Division of Insurance.

“This is unprecedented,” Conway said. “Today’s announcement shows that the federal government objectively analyzed the impact of the Colorado Option and the Reinsurance Program, and found that overall, they reduced premiums and made coverage more affordable.”

The Reinsurance Program was created in 2019, helping health insurers pay for their highest-cost claims to let insurers lower premiums for individual health insurance plans. The Colorado Option was created in 2021, establishing state-designed plans that health insurers are mandated to carry at lower prices.

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The state estimates the Reinsurance Program reduced premiums for Coloradans by $1.1 billion through 2023 and kept estimated 2024 premium increases 21% lower than they would have been.

The success of the Colorado Option is more debatable. Over 35,000 Coloradans enrolled in Option plans for its first year in 2023, a feat celebrated by the state. But health insurers have struggled to meet the price-reduction targets mandated for Option plans. Of the 13 carriers offering Option plans, only Denver Health Medical Plan met the targets for every plan sold in 2023 — and only Denver Health said it could meet the targets for 2024.

The $245 million in federal funds will go to the Colorado Division of Insurance to lower premiums for the Reinsurance Program, provide direct subsidies for Connect for Health Colorado consumers, and support the OmniSalud Program, which allows undocumented immigrants to obtain health insurance from Colorado Option plans.

“This $245 million in federal funding will directly reduce insurance costs for Coloradans,” said Gov. Jared Polis. “Colorado is now proudly the first state in the nation to receive this federal support for the money-saving Colorado Option which, along with the bipartisan Reinsurance Program, will further cut health care costs.”

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