Why Is Colorado Health Insurance So Expensive?

Colorado health insurance costs are skyrocketing. Again!

According to a study from ValuePenguin, average health insurance premiums for a 40 year-old single male with a middle-of-the road Silver-tier health insurance policy rose from $409 to $489 every month, or $5,868 per year.

That amounts to an increase of 19.6% – roughly three times the 6.5% inflation rate for 2022. That means Colorado consumers are facing among the biggest health insurance premium price hikes in the country, second only to Georgia’s 20.3% average increase. 

Most Colorado Health Insurance Carriers Raised Rates

Of the five major health insurance companies selling policies on the individual market in Colorado this year, Friday Health presented customers with the biggest average premium hikes for 2023, with rates increasing by 25.1% according to Axios research.

Coming in second was Rocky Mountain HMO, which bumped rates by 11.4 percent, or just under twice the rate of inflation.

Third was Cigna, whose customers saw a 6.5% increase in premiums this year – roughly in line with overall inflation.

Anthem’s HMO offering increased prices by 5.7% – slightly below the inflation rate for the previous year, while Anthem RMHM customers saw increases of 4.9%.

Kaiser’s prices were unchanged. And Denver Health managed to actually reduce premiums by about 2.6%for 2023, according to Colorado Department of Insurance filings and Axios.

It’s not just bad news for Coloradans. It’s also bad news for Govern Jared Polis, who ran for office largely on promises to reduce healthcare costs for Rocky Mountain State residents.

Colorado Health Insurers Pulling Out

Thanks in large part to government-imposed price controls and regulatory intimidation by Colorado insurance officials, insurance companies are fleeing the Rocky Mountain State, and leaving thousands of Coloradans to scramble for health coverage.

Most recently, Friday Health Plans announced it was closing operations over the course of the next six months, though that was a nationwide problem, as the company had trouble finding the financing they needed to support their recent rapid expansion.

Previously, Bright Health announced last year that it was pulling out of Colorado entirely this year, leaving about 40,000 people looking for a new plan. Observers expect two more carriers will exit Colorado over the next year or two. And Humana has announced it was pulling out of group health insurance plans in Colorado.

With fewer competitors, there is much less pressure on remaining market participants to keep premiums down. As more insurers abandon the Colorado market, the remaining players have more pricing power. And consumers and employer sponsors of group health insurance plans have fewer health insurance choices.

The Failing “Colorado Option”

Turns out price controls don’t work.

Colorado insurance premiums had been fairly stable for years. But ironically,  this year’s premium increases are coming even as Colorado rolls out the much ballyhooed “Colorado Option” – a program that was supposed to reduce premiums and save Colorado taxpayers $326 million in premiums this year.

Obamacare was supposed to reduce premiums, too.

That isn’t happening.

The plan was based on health insurance companies knuckling under to price controls imposed by state officials. Price controls which quickly proved impractical as providers refused to take Colorado Option patients and insurance carriers were unable to make sufficient cuts to meet state mandates.

Under state law, insurance carriers must offer Colorado Option plans at progressively lower rates for the first three years. For 2023, plans had to be priced at least 5% below 2021 offerings, after adjusting for inflation. For 2024, plans must be priced at 10% below 2021 rates – targets which the Colorado Association of Health Insurance Plans has called “arbitrary and unrealistic.”

This month, all Colorado health insurance carriers were required to report their progress in meeting the state-imposed price controls to state insurance officials. But only one company – the Denver Health Medical Plan – was able to meet their targets. All the others said they could not.

The projections for 2026 were even worse than for 2025. At least in 2025, some insurers had at least partial success in meeting the state price control targets with some of their plans. But in 2026, no company other than Denver Health expects it will meet the state’s pricing requirements.

The Colorado Option faltered in its first year in operation, as many providers balked at the low reimbursement rates. These rates threatened to shutter some hospitals, especially in rural areas.

Enrollments were far lower than projected as well – which gave these plans less pricing power versus providers than policymakers hoped. They also brought in less revenue than the rosy scenarios envisioned by Governor Polis and his staff and plan supporters in the State Legislature predicted.

Decisions made by the Polis administration regarding the program “were fundamentally contradictory to the stated goal of saving people money on healthcare,” said Amanda Massey,  executive director of the Colorado Association of Health Insurance Plans.

“We fully support market-based policies that actually drive down costs,” she said.  “But the result of Colorado’s first-in-the-nation policy shows the administration chose politics over math.”

Colorado health insurance costs are rising because of state intrusion and distortion of free market mechanisms, price controls, and forcing competitive insurance companies to abandon the state altogether.

What You Can Do About Your Colorado Health Insurance

Fortunately, if you are among those affected by insurance carrier pullouts, there are several things you can do.

First, you can continue to shop around medical insurance policies offered by Colorado’s remaining carriers. If you’re on the individual market, and your income is low enough, you may qualify for a subsidy under the Affordable Care Act. This will mask the effect of the recent premium increases, since it will be the taxpayers picking up the higher prices, rather than subsidized policyholders.

But if you make too much to qualify for an “Obamacare” subsidy, then you are facing the full brunt of higher premiums this year and in future years. 

However, there is a reasonable, cost-effective, and more affordable way to opt out: join a healthsharing plan.

These plans offer an affordable non-insurance option that can provide protection against the risk of high healthcare costs – at just a fraction of the price of an unsubsidized traditional health insurance policy.

Typical savings run up to 50%, which can save a family of four, thousands of dollars per year compared to traditional health insurance premiums without an Affordable Care Act subsidy.

To learn more about healthsharing, click here to schedule a free, no obligation consultation with an experienced ColoHealth Personal Benefits Manager.

Conclusion

Colorado’s recent experiences show that there’s a lot more to keeping health insurance costs down than waving a magic wand or imposing a government fiat.

The Polis Administration put the cart before the horse, trying to impose a pricing system that was not feasible either for insurance carriers or the providers who had to treat patients with reduced compensation rates.

The state did little or nothing to attract new competing health insurance carriers to the market, and even chased some away with onerous price controls and threats of government sanctions.

The state also did little or nothing to attract talented medical professionals so that competition could lower health care costs.

And the state also didn’t do the hard work of tort reform, which would help doctors and hospitals lower costs and avoid overutilization.

The results Colorado saw were exactly the results predicted by critics of the Polis Administration’s plan: fewer carriers, fewer providers, less competition, and higher costs.

For Further Reading

As the Colorado Option Fizzles, Colorado Legislators Scramble to Find a “Fix.” | How to Shop for Health Insurance in Colorado | Colorado Introduces New “Public Option” for Health Insurance. We’re skeptical. | What is a Deductible in Health Insurance?

Colorado Health Insurance Frequently Asked Questions

What is the Colorado Health Insurance Public Option?

The Colorado public option is a state-sponsored health insurance plan designed to provide affordable coverage options for Colorado residents. It aims to increase competition in the marketplace, reduce healthcare costs, and improve access to quality care, though in the first year of its implementation it has done none of these things.

The Public Option will be available alongside other private insurance plans, offering individuals and small businesses additional choices for their healthcare coverage.

How does the Colorado public option differ from other health insurance plans?

The Colorado public option differs from other health insurance plans in several ways: it is a government-sponsored plan that aims to provide more affordable options through increased competition and cost controls. It may have different provider networks, pricing structures, and benefit designs compared to other private insurance plans available in the state.

Are healthsharing plans available in Colorado?

Yes, there are many excellent health sharing plans available in Colorado. Health sharing plans, also known as medical cost sharing plans or health sharing ministries,  operate on a community-based model.

They are voluntary associations of like-minded individuals who agree to live healthy lifestyles, and who also agree to help share the medical expenses of other members.

These nonprofit associations can provide a viable alternative to traditional health insurance, at up to 50% lower cost compared to unsubsidized traditional health insurance premiums.

How do health sharing plans work in Colorado?

Health sharing plans in Colorado operate by pooling members’ contributions to cover medical expenses. Members typically contribute a monthly share amount, which is then used to pay for eligible medical costs. It’s important to note that health sharing plans may have different coverage guidelines and limitations compared to traditional health insurance plans.

For example, they may impose waiting periods before costs associated with preexisting conditions become shareable.

Are health sharing plans regulated like traditional health insurance plans in Colorado?

Health sharing plans are not regulated in the same way as traditional health insurance plans in Colorado. They often operate as nonprofit organizations or faith-based ministries and may have their own guidelines and requirements for participation and coverage.

Do healthsharing plans let me choose my own doctor?

Generally, yes. Unlike most traditional medical insurance plans like HMOs, which impose narrow care networks of authorized providers, most healthsharing plans allow you to use your benefits with any qualified provider.