The Colorado Option health insurance program is meeting its cost control targets for lowering hospital prices, according to the Colorado Division of Insurance. Two-thirds of hospitals participating in the program have met their reimbursement rate reduction targets, the state announced.
Before the Colorado Option, hospitals in Colorado were receiving payment at an average of 254% of Medicare rates, according to a Wakely analysis cited by the state. The program established annual reimbursement rate floors with target reductions that vary by hospital size, requiring larger health systems to meet more aggressive cuts while providing flexibility to independent and rural hospitals.
The average reimbursement rate floor for hospitals that are part of a major health system is now 173% of Medicare, significantly below the previous 254% average. The remaining third of hospitals have either not yet reached their floor or do not significantly influence premium rates, according to the Division of Insurance.
Over 138,000 people are enrolled in Colorado Option plans as of the 2026 plan year, representing 50% of on-exchange enrollment. Enrollees receive average monthly premium savings of $14 to $33 depending on plan type, and out-of-pocket costs are 15% lower than non-Option plans, the state said. Enrollment has grown 395% since the plans were first offered in 2023.
Preliminary 2027 rate data shows Colorado Option plans will be 6.7% cheaper on average than non-Option plans for consumers purchasing new individual market plans. The Division of Insurance found that without Colorado Option plans, predicted 2027 premium increases would be almost 3% higher for the overall market.