Colorado Option is Reducing Hospital Prices and Saving Coloradans Money

DENVER - Today, the Colorado Division of Insurance (DOI), part of the Department of Regulatory Agencies (DORA), announced that the Colorado Option is meeting its cost control targets for lowering hospital prices in the program. Two-thirds of hospitals have now met their Colorado Option reimbursement rate reduction targets. When hospital prices are reduced, this means lower prices for Colorado consumers, and lower out-of-pocket spending.

"We need to do a lot more to reduce hospital costs. The important work of saving Coloradans money on healthcare is still delivering real savings for those who buy insurance in the exchange. Health care should be affordable for everyone, and our work to save Coloradans money on healthcare and reduce hospital charges is a strong beginning," said Governor Jared Polis.

"The Polis-Primavera administration and Office of Saving People Money on Health Care have been committed to ensuring all Coloradans have access to high-quality and affordable healthcare. I'm incredibly proud to see the Colorado Option continue saving Coloradans money, and this new data shows the impacts of efforts like this one for our neighbors across the state," said Dianne Primavera, Lt. Governor and Director of the Office of Saving People Money on Health Care.

"The North Star of the Colorado Option program has always been to save people money on their health care. We are seeing time and again that this program is producing results and controlling the costs of health care. That is why it's not a surprise that half of enrollees in the individual market chose Colorado Option plans in 2026," said Colorado Insurance Commissioner Michael Conway.

The Colorado Option was enacted to address the continuous rise in underlying health care costs that drive up premiums. Prior to the Colorado Option, an analysis conducted by Wakely estimated that, on average, hospitals in Colorado were getting paid over two-and-a-half times what Medicare pays (254% of Medicare) for the same hospital and outpatient service. According to further analysis, insurance companies would need to reimburse hospitals between 116% to 142% of Medicare for a hospital to break even.

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Coloradans are choosing Coloradan Option plans thanks to these savings. Over 138,000 people are enrolled in a Coloradan Option Plan, which is 50% of the on-exchange enrollment. For those enrolled, average monthly premium savings are $14-$33 per month, depending on plan type, and out-of-pocket costs are 15% lower than non-Option plans. The number of people enrolled in a Colorado Option plan has grown by 395% since the plans were first offered in Plan Year 2023. The Colorado Option legislation sets an annual reimbursement rate floor for each hospital above these breakeven levels and below 254% of Medicare. It sets ambitious yet flexible reimbursement reduction targets by requiring larger hospital systems to meet more aggressive cuts while providing more flexibility to independent and rural hospitals. The average CO Option reimbursement rate floor for a hospital that is part of a major health system is now 173% of Medicare, significantly below the previous 254% average.

Two thirds of Colorado hospitals are now receiving payment levels for patients with Colorado Option plans that are at the floor set by the program. The remaining third of hospitals either don't play a significant role in premium increases or are reducing reimbursement rates but are not yet at their floor.

In addition to reduced hospital prices, preliminary Plan Year 2027 rate data shows that the Colorado Option is operating as a crucial cost control measure for the market. For consumers who need to choose a new health insurance plan on the individual market this year, on average, it will be 6.7% cheaper for them to purchase an Option plan versus a non-Option plan.The DOI has also found that if CO Option plans didn't exist in the market, predicted PY27 premium increases would be almost 3% higher.

A Health Affairs analysis shows that it's not just Colorado Option plans that are benefiting from lower hospital reimbursement rates. Prices in both hospitals that participate in the Colorado Option program and those that don't were reduced, as were prices for both Colorado Option and non-Option health insurance plans.

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"When examining prices for non-Colorado Option plans across both named and non-named hospitals, prices for these services were approximately 10% lower than projected based on prior trends. Further, within non-Colorado Option plans, prices at the named hospitals were almost 14% lower than those at hospitals not subject to mandated price reductions in 2024," the analysis explains.

These savings in hospital prices translate into savings in premiums for consumers. The Colorado Option has also been shown to save Coloradans $100 on their premiums compared to other states. In the analysis completed by Brown University, research authors compared premiums across different states and found that the addition of Colorado Option plans to the individual market led to premium reductions of over $100, even for non-Option plans. Another study by Mathematica bolstered these findings.

The Colorado Option provides standardized health insurance plans, offered by private health insurers, that aim to make health care more affordable and accessible for Coloradans. About half of consumers in the individual market are choosing Colorado Option plans. The DOI worked in partnership with health insurance companies, hospitals, health-care providers, small businesses, and consumer advocates to develop the Colorado Option benefit design. The resulting plans offer many high-value services and allow consumers and small businesses to easily compare plans across all health insurance companies to choose the plan that is right for them. These plans cover all essential health benefits required by the Affordable Care Act (ACA), and the benefit design makes it easier to know what you will pay in advance for services, such as visiting a doctor or filling a prescription. Colorado Option plans cover many services, such as primary care visits and mental health office visits, at $0 cost to the consumer. Learn more about the Colorado Option.

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