Colorado Implements Section 1332 Waiver to Advance Health Equity

The US Department of Health and Human Services (HHS) has approved the “Colorado Option,” a Section 1332 state innovation waiver amendment intended to address health equity in the Centennial State.

“Through this new model, Colorado leverages federal savings to expand affordability and coverage in the state like no other state has done before,” CMS Administrator Chiquita Brooks-LaSure said in the emailed press release. “The Colorado Option is groundbreaking and a step in the right direction to reduce the uninsured rate, while investing in health insurance coverage affordability and improvements, and advancing health equity.”

Colorado is the first state to leverage a 1332 state innovation waiver to institute a new state-based health plan. The health plan covers all of the mandated essential health benefits.

The waiver funnels federal savings into state subsidies that lower premium costs for enrollees using “pass-through funding.” As a result, the health plan could lower premiums by on average 22 percent for enrollees—approximately $132 per person.

“The state’s waiver plan increases competition by establishing premium reduction targets for the Colorado Option and implements better regulatory and programmatic mechanisms as a backstop to ensure providers, hospitals, and issuers meet those targets,” the press release explained.

Anyone who is eligible for coverage through the individual health insurance market or who works for a small employer with under 100 employees will be able to receive coverage through the Colorado Option. Coloradans do not have to be eligible for federal subsidies through the Affordable Care Act in order to access the lower-cost health plan.

According to the state, around 32,000 residents in Colorado will have access to coverage on the individual heath insurance marketplace by 2027 as a result of this waiver. This represents a potential 15 percent increase in the state’s individual health insurance market enrollment.

According to the state’s site dedicated to this endeavor, the goals of this waiver are to lower Coloradans’ premiums, lower healthcare spending with $0 copays for certain services, diversify the medical workforce by incorporating community-based providers and certified nurse midwives, simplify plan comparison through standardization, and enable price transparency.

The health plans are required to lower premiums by five percent in 2023, 10 percent in 2024, and 15 percent in 2025 and they are only allowed to increase to account for medical inflation following 2025.

The federal savings are projected to amount to $214 million in 2023 and $1.6 billion by 2027. The waiver will go into effect in 2023.

“We are thrilled to partner with Colorado in our shared commitment to lowering health care costs and ensuring greater access to quality, affordable care,” HHS Secretary Xavier Becerra said in the press release. “The Colorado Option will help thousands more families sign up for health coverage. I applaud Governor Jared Polis and encourage all states to pursue innovative ways to ensure health care is within reach for their residents.”

Administrator Brooks-LaSure echoed the HHS Secretary’s call to action.

“We encourage all states to consider innovative ways to use section 1332 waivers in the future to expand and improve coverage and lower costs for their residents,” Administrator Brooks-LaSure urged.

Officials emphasized the potential benefits that this waiver poses for advancing health equity. By expanding the number of coverage options available, the waiver aimed to improve access to care across racial and ethnic disparities. However, a post from Commonwealth Fund found that Colorado’s race and ethnicity data is lacking. Such data is core to health equity advancement.

The press release noted that the state of Colorado has already lowered statewide average premiums by 20 percent through its reinsurance program.

Separate changes to Colorado’s individual health insurance marketplace and small business healthcare coverage that have occurred in the past year included making gender-affirming care an essential health benefit.