Opinion: The Colorado Option is failing to meet the needs of small businesses for healthcare coverage

When the Colorado General Assembly created the Colorado Option in 2021, we were thrilled. As an advocate for small-business owners across Colorado, Small Business Majority had heard for years from entrepreneurs who were unable to afford health coverage for their employees and who struggled to access care for themselves.

The Colorado Option presented real hope for small businesses' ability to access affordable health insurance in part because it is supposed to reduce the cost of annual health insurance premiums for small firms with less than 50 employees.

Much to the disappointment of small-business owners, the Colorado Option has not delivered on that promise. Three years ago, we explained how the Colorado Option was already failing to achieve its goals of creating competition, lowering premiums and holding hospitals and insurers accountable for skyrocketing costs.

Unfortunately, costs have only continued to rise since then as hospitals and insurers face little accountability. There's also been a lack of needed investment in the Colorado Option for small businesses, and we continue to see the small-group market in Colorado shrink. Fewer and more expensive options for coverage spell trouble for small businesses that struggle to offer health coverage to their employees. In fact, Small Business Majority's research found that 24% of entrepreneurs who offer health coverage to their employees have been forced to drop health coverage altogether due to high costs.

That is why we are so concerned that based on carriers' initial rate filings, there's an average 13.4% premium increase expected in the small-group health insurance market for next year. We expect many small businesses will either turn to less comprehensive coverage options or utilize individual coverage Health Reimbursement Arrangements instead of offering traditional health insurance.

If small businesses are forced to drop coverage completely, entrepreneurs and their employees won't find much relief from expensive premiums in the individual marketplace. Although Colorado policymakers have put significant effort into bringing down costs after the expiration of the Affordable Care Act's enhanced premium tax credits, there's still an average premium increase of 11% expected in 2027.

WIth most small-group market insurers raising rates between 10% and 20% next year nationwide, Colorado is not alone in our struggle to secure affordable health coverage for our residents. The Colorado Option was supposed to shield small businesses from double-digit healthcare premium spikes, yet it is failing in this regard.

It's especially troubling that all the Colorado Option public hearings were vacated for Plan Year 2027 as this was a missed opportunity for small businesses and advocates like us to hold carriers accountable in meeting the premium-reduction targets. Amid this lack of public input, none of the small-group carriers met their premium-reduction targets for next year.

To address problems with a well-intentioned policy that is not functioning as planned, we urge the Colorado Division of Insurance to hold small-group carriers accountable in meeting premium-reduction targets for Colorado Option plans.

First, they should reinstate public hearings for the 2028 plan year so small-group-option participants have a meaningful opportunity to weigh in on rate filings before they are approved. Increased transparency promotes greater accountability because carriers have a greater incentive to meet reduction targets when they face public scrutiny.

Additionally, the Division of Insurance should use its full range of enforcement tools when carriers fail to meet their Colorado Option premium-reduction targets. Carriers can be forced to justify their pricing and lack of cost reduction, and state insurance Commissioner Michael Conway can also set new reimbursement rates that insurers must use to recalculate their premiums.

We appreciate the work that the Division of Insurance has done to address these issues thus far, but we still see carriers failing to meet their premium-reduction targets. While we don't expect that carriers can immediately meet their targets overnight after failing to meet them for years, they should be expected to make progress in bringing costs down.

We cannot accept annual double-digit premium increases as the status quo in the small-group health insurance market. If we do, small businesses won't be able to continue offering health coverage to their employees and will become less competitive employers. High health insurance costs are especially difficult for rural entrepreneurs who already struggle to retain a workforce as many workers leave their small communities for larger ones with more perceived opportunity. Without the ability to offer jobs with quality benefits, this problem will only worsen.

Affordable access to high-quality care is a necessity for small businesses and their employees. We urge the Division of Insurance and state policymakers to hold carriers and hospitals accountable so the Colorado Option can better deliver on its goals.

Hunter Nelson, of Parker, is the Colorado director for Small Business Majority.

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Type of Story: Opinion

Advocates for ideas and draws conclusions based on the author/producer's interpretation of facts and data.