Colorado Allocates $100M to Counteract ACA Tax Credit Expiry Impact
Colorado has taken legislative action to mitigate the financial impact resulting from the expiration of enhanced Affordable Care Act (ACA) tax credits on its individual health insurance market. The newly signed law authorizes up to $100 million in state-backed funding through the Health Insurance Affordability Enterprise (HIAE) to help offset premium increases and stabilize coverage costs.
Funding is primarily sourced from the sale of insurance premium and income tax credits, supplemented by a one-time $10 million transfer from a refinance discretionary account. The state treasurer may issue tax credit certificates valuing up to $125 million, generating net proceeds estimated at $103.2 million, with any shortfall covered by the state’s general fund.
The allocated funds will cover administrative expenses and bolster HIAE’s cash fund, including $50 million dedicated to Colorado’s reinsurance program and another $50 million to assist insurers in reducing premium costs for policyholders previously benefiting from federal tax credits. An additional $5 million is earmarked for other HIAE initiatives.
This legislation acts as a contingency measure, activating only if Congress does not extend the enhanced ACA tax credits beyond their December 31, 2025 expiration. Absent federal intervention, Colorado regulators estimate an average individual market premium increase of 28%, which the state’s reinsurance efforts aim to reduce to approximately 20%.
The policy intends to protect approximately 20,000 residents from losing insurance coverage and dampen projected premium spikes. However, state officials acknowledge that without renewed federal subsidies, premium hikes could be severe, potentially exceeding 100% in some cases. This uncertainty has already influenced carrier decisions, with major insurers like UnitedHealth and Anthem announcing plan discontinuations for 2026 due to funding uncertainties.
The Colorado initiative underscores how state health insurance markets increasingly rely on reinsurance programs and federal support to maintain affordable premiums. While the state’s funding strategy provides short-term market stability, it highlights ongoing challenges in sustaining coverage affordability in the evolving regulatory landscape.