Colorado health insurance enrollment hits a record, as a threat to federal subsidies looms

A record number of Coloradans signed up for health care coverage through the state's insurance exchange in the recently concluded open enrollment period, but looming changes to federal assistance could make that a fragile peak.

For the open enrollment period that ended Jan. 15, there were 282,483 people who signed up for a health plan through the exchange, which is called Connect for Health Colorado. The exchange is one place where people who buy health insurance on their own, without help from an employer, can shop for plans.

This year's enrollment total is 19% higher than last year — which was itself a record year — and it is a more than 100,000-person increase since 2021. Kevin Patterson, the CEO of Connect for Health, said he is elated by the numbers, as he had expected to see a smaller increase this year over last.

Enrollment through Colorado Connect, a separate exchange where immigrants can buy coverage regardless of legal status, also hit a record at 13,968.

"I think it's the affordability," Patterson said earlier in the open enrollment window, when it became clear the state would again smash the record. "People are seeing some prices that they're really happy about."

But that affordability is in peril, and therein hangs the storm cloud over this sunny story.

Enhanced subsidies could expire

Not everyone shops for coverage through Connect for Health Colorado. But the state estimates that roughly 80% of people who did this year received federal subsidies to help them pay for their insurance premiums. The subsidies, known officially as advance premium tax credits, are based on your income and how much insurance costs in your area.

The subsidies work by knocking money off the up-front cost of coverage. And they can be quite generous — 77% of people eligible for subsidies can find a plan for under $100 a month and 62% can find a monthly premium of under $25. Without subsidies, plans for a single person can run several hundred dollars a month, depending on your age and where you live.

Tax subsidies for health coverage have been around since the start of the Affordable Care Act. But what really made the deals on plans possible this year were the enhanced tax credits that went into effect as a result of the American Rescue Plan Act, a pandemic stimulus bill.

Those enhanced subsidies were put in place for a limited time, and they have already been extended once, when Democrats ran the show in Congress. Now the subsidies are about to expire again, at the end of 2025.

Republican leaders in Washington, who control Congress and who have for years fought to dismantle the Affordable Care Act and slim federal health spending, have not committed to extending the subsidies. (There is, though, some optimism that Republicans may warm to the idea.)

This has a lot of people in Colorado nervous about what's going to happen.

"We need Congress to act to extend the enhanced subsidies that help make insurance affordable for Coloradans," Michael Conway, the state's insurance commissioner, said in a statement earlier this month. "If Congress fails to do that, health insurance premiums will spike for the vast majority of Coloradans enrolled in the individual market."

What makes the enhanced subsidies significant is that they are "enhanced" in two ways. First, they are more generous to people with lower incomes who were already receiving federal assistance. That turned plans previously available for $100 a month into plans available for $10 a month.

But, second, the subsidies also stretched to cover more people at higher incomes, smoothing out what had been a steep jump in prices for people who previously made just enough that they didn't qualify for support.

Colorado's mountain communities could be hard-hit

This phenomenon was known as "the subsidy cliff." It was especially steep in Colorado's mountain communities, where unsubsidized insurance plans can cost a single, middle-aged person $400 or $500 a month, and families can easily spend tens of thousands of dollars a year just to purchase high-deductible coverage.

For instance, Ian Billick, the mayor of Crested Butte, said his family became eligible for federal assistance through the enhanced subsidies. Without a subsidy, their health insurance plan would run them $2,500 a month — that's $30,000 a year, and the plan comes with a $9,000 deductible.

Because of the enhanced tax credits, his family now receives a monthly $1,500 subsidy. Billick said it would be a hardship on his family if the enhanced subsidies go away, but he said it could be devastating for employers in his community.

In addition to being Crested Butte's mayor, Billick is the head of the Rocky Mountain Biological Laboratory, though he is retiring soon. The lab used to buy health insurance for its employees, but the costs became too much — rising to around 10% of the lab's entire budget. With the enhanced subsidies available, the lab decided to cut the employer-sponsored plan and give its workers a pay bump to help them shop for coverage in the individual market.

"The health care costs were just eating us alive," Billick said. "So we were able to go take advantage of the premium tax credit."

But if the enhanced subsidies go away, Billick said likely none of the lab's employees would qualify for assistance. That could put those health care costs back into the lab's already tight budget.

"It's just so brutal because a lot of what our employees are experiencing is every year or two it changes," Billick said. "And it's just so complicated. We find an option, figure it out and then the cost structure turns on its head."

Potential impacts to the state budget

Conway, the insurance commissioner, said the end of the enhanced subsidies could hit the state in another not-so-obvious way.

Colorado has a number of programs — such as reinsurance and the Colorado Option — designed to bring down the cost of insurance. If insurance prices are cheaper than expected, that saves the federal government money because it won't have to pay as much in subsidies.

The federal government rewards the state for this by delivering "pass-through" funding. This year, the amount of pass-through funding that the federal government awarded Colorado is $339 million — a not-insignificant sum in an otherwise tight budget year. (Whether that funding could be held up in the Trump administration's funding freeze is unclear.)

Colorado uses that federal money to help pay for the cost-saving programs but also to provide additional assistance to people with the lowest incomes.

But if the enhanced subsidies go away, the pass-through funding amount will drop, as well, putting some of those state programs in peril.

"If the enhanced subsidies at the federal level go away," Conway said in an interview, "we're going to have an issue."