Colorado has enacted a new law designed to cushion the impact of expiring enhanced Affordable Care Act (ACA) tax credits, setting up as much as $100 million in state-backed funding to limit premium hikes in the individual health insurance market.
Gov. Jared Polis signed the measure on August 28, authorizing the transfer of funds to the state's Health Insurance Affordability Enterprise (HIAE). The money will come largely from the sale of insurance premium and income tax credits, with an additional one-time $10 million transfer from a refinance discretionary account. The state treasurer may issue premium and income tax credit certificates worth up to $125 million, or generate proceeds up to $103.2 million. If sales do not reach the target, the shortfall will be covered by the state’s general fund.
According to a report from BestWire, proceeds will first cover administrative expenses, with $100 million earmarked for the HIAE cash fund. Up to $50 million will be directed to Colorado’s reinsurance program, while another $50 million will support carriers in reducing costs for individual market policyholders who previously relied on federal premium tax credits. An additional $5 million may be used for other HIAE programs.
The law is structured as a contingency, with provisions taking effect only if Congress does not extend the enhanced ACA tax credits before their December 31, 2025 expiration date. Without state intervention, Colorado regulators project premiums for individual market plans could increase by 28% on average. Lawmakers say the reinsurance investment will reduce that increase to roughly 20%.
State Rep. Kyle Brown, a Democrat, said the measure is intended to shield around 20,000 residents from losing coverage while blunting projected rate hikes. Insurance Commissioner Michael Conway called the legislation a necessary “stopgap measure,” but warned that state action alone cannot prevent steep cost increases. He urged federal lawmakers to extend the tax credits, warning that without action, some enrollees could face net premium increases of more than 100%, and in some cases close to 200%, the report said.
The uncertainty is already influencing insurer behavior. UnitedHealth’s Rocky Mountain HMO and Anthem’s HMO Colorado have announced they will discontinue multiple lines of individual market coverage for 2026, citing the unsettled funding outlook.
While the state’s move is expected to stabilize the market in the short term, analysts said it highlights the increasing reliance of state health systems on both reinsurance mechanisms and federal subsidies to keep premiums affordable.
