How Colorado’s Extra Subsidies Lower Your Health Insurance Premiums

So if you recently earned too much money to get a health insurance subsidy, this year’s Open Enrollment period is a great time to take a second look.

But it’s important to get quotes from multiple different carriers, rather than automatically renew your current policy.

According to a state estimate, Coloradans who qualify for a subsidy under the Affordable Care Act (ACA) can save up to 21 percent this year just by having a broker help them find a more affordable plan on the state health insurance exchange.

State health officials also estimate you can save up to 5 percent by looking around at other carriers. But if you don’t qualify for an ACA, or if it’s small, you should also consider healthsharing – a more affordable alternative to traditional health insurance. 

Healthsharing usually saves 40 to 50 percent, compared to the out-of-pocket cost of an Affordable Care Act plan without a subsidy.

This is important because heading into 2023, the cost of health insurance before subsidies are taken into account is going up for individuals and families by more than 10%, according to state insurance filings. Well above the already high rate of inflation.

For small employers with fewer than 100 employees, group health insurance costs are going up by 7.4%. 

So the cost savings potentially available by switching to healthsharing are more important than ever.

But if you do qualify for a significant subsidy, or if your preexisting conditions or other special circumstances mean traditional health insurance is the best decision for you, Colorado is making health insurance more affordable in several ways: 

NEW: The “Colorado Option”

First, the much-debated “Colorado Option” will be available to Coloradans in almost all counties for the first time in 2023.

Colorado Option plans are standardized across all carriers, which makes it easier to compare your options. However, all of them will cover all the Essential Health Benefits required under the Affordable Care Act.

Colorado Option plans also offer free access to primary care, and free mental health visits.

Premium Tax Credits

Under the Affordable Care Act, Premium Tax Credits may help you reduce your out-of-pocket health insurance every month.

Recently, Congress changed the way the Premium Tax Credit is calculated. The change means that more families are eligible for a premium subsidy, and the subsidy amount has also increased for most Coloradans. About 80% of Coloradan households will be eligible for a premium tax credit subsidy in 2023. 

Background

Previously, no-one qualified for a subsidy if their annual income was more than 4 times the Federal Poverty Level for their family size. So eligibility for a subsidy for a family of four, for example, was capped at $106,000.

But Congress removed the income cap. Instead, they capped the out-of-pocket amount that families pay in health insurance premiums for their area’s “benchmark” plan at 8.5% of their monthly income.

So there’s no set subsidy amount that applies to all households. Every family is different.

The amount of your premium tax credit will vary based on: 

The amount of the subsidy is calculated based on the cost “benchmark” plan available in your area.

You can buy a more expensive plan than your benchmark plan. But the extra costs for that plan over and above the benchmark plan premiums would not be subsidized. You would have to pay them out of pocket. 

Two Ways to Receive Your Health Insurance Premium Tax Credit Subsidy

You can use your premium tax subsidy to offset your health insurance premiums all year. If your income is higher than you expected, you would owe money to the IRS next year when you file your taxes.

If you want to avoid the uncertainty of owing more money to the IRS at tax time, you can also elect to pay the full unsubsidized premium price for your health insurance, and take your subsidy in the form of a refundable tax credit.

That is, if you get a refund, the IRS will add your subsidy to your refund.

If you don’t get a refund, the  IRS will lower your tax bill by the amount of your premium subsidy. So you have to write a smaller check when you pay your taxes.

Connect for Health Colorado estimates that the change in how premium tax credits are calculated will save Colorado families about $56.30 per month, on average. However, the savings for some families will be much more than that.

About Cost-Sharing Reductions

Cost sharing reductions take two forms: Discounts at the point of service for medical care or at the pharmacy, and a reduced maximum out-of-pocket cost.

The point-of-service of discounts are automatically applied when you receive medical care, or when you fill a prescription.

To be eligible for this benefit, you must qualify for a premium tax credit, and you must sign up for an ACA-qualified “Silver” level plan.

The plans that offer healthcare discounts also feature a lower maximum out-of-pocket cost. After you reach this threshold, your plan will cover 100% of eligible expenses, with no more copays or coinsurance paid out of pocket.

While these don’t reduce your monthly premiums, they make getting care more affordable for those who do need care, and reduce your individual or household risk.

Depending on your income level and the size of your family, you may qualify for lower monthly premiums alone, or for both lower monthly premiums and cost-sharing reductions.

To Save Money, Shop Around

Thanks to the Inflation Reduction Act, which extended relief from the American Rescue Plan Act into 2023, Coloradans who qualify for a subsidy under the Affordable Care Act will actually spend less money for health insurance this year.

Especially if they shop around.

By using the assistance of a health insurance broker who can help compare offers from multiple insurance carriers, many people will be able to get health insurance coverage in 2023 for substantially less than they paid per month in premiums the year prior.

For example, state health officials estimate that Summit County residents who simply renew their current health insurance plan could see their out-of-pocket premiums reduced by up to 38%. 

But by using a broker to compare plans, they could reduce out-of-pocket costs by up to 53%. 

Similarly, El Paso County residents (the greater Colorado Springs area) who qualify for an ACA subsidy will see their out-of-pocket premium costs fall by 17% if they simply renew their existing policies.

But by using a broker to compare competing plans, they could save up to 33%. 

Save Money With Health Sharing

If you’ve been left out of the Affordable Care Act and don’t qualify for a significant subsidy, you may be much better off switching to a healthsharing plan in Colorado, rather than an ACA-qualified Marketplace health insurance policy.

Healthsharing plans are run by non-profit organizations that facilitate the sharing of medical expenses among like-minded members.

They aren’t insurance plans, and aren’t subject to ACA regulations. They also typically don’t cover all of the mandated essential coverages under the ACA. For example, they may restrict care for drug abuse treatment or injuries received while you’re driving drunk.

They also typically impose a waiting period before bills related to pre-existing conditions or surgeries are eligible for cost sharing.

For those in good health, however, who aren’t worried about pre-existing conditions waiting periods, and who live a healthy, drug-free lifestyle, healthsharing is a viable and increasingly popular alternative.

And cost savings can amount to thousands of dollars per year for a family of four.