Colorado Option Fails as Small Business Health Premiums Rise 13.4%

One in four entrepreneurs who offer health coverage to their employees has dropped it entirely.

That is the hard number from Small Business Majority’s research, and it hits close to home for folks running shops, restaurants, or service businesses across the state. You hired staff because you could afford to pay them wages and benefits. Then the premiums jumped, and suddenly keeping your team healthy costs more than you can manage.

The Colorado General Assembly created the Colorado Option in 2021 to fix this. The promise was simple: reduce annual premiums for small firms with fewer than 50 employees by forcing competition and holding hospitals and insurers accountable.

It didn’t happen.

According to the Colorado Sun, the program has failed to deliver on that core promise. Since its inception, costs have continued to rise because hospitals and insurers face little accountability. The small-group market in Colorado is shrinking, leaving fewer options that are more expensive.

The short version: the system meant to protect small businesses is letting them drown in double-digit rate hikes.

Carriers’ initial rate filings show an average 13.4% premium increase expected in the small-group health insurance market for next year. Read that again. Thirteen point four percent.

That is not a typo. That is the cost of doing business in Colorado right now. Most small-group market insurers are raising rates between 10% and 20% nationwide, but the local impact is what matters. When premiums spike that high, owners have two bad choices: switch to less comprehensive coverage or use individual coverage Health Reimbursement Arrangements instead of traditional insurance.

If a business can’t do either, they drop coverage altogether. That’s the 24%.

There is a secondary trap waiting for those employees. If their employer drops group coverage, they turn to the individual marketplace. But relief is scarce there too. Even after policymakers worked to bring down costs following the expiration of the Affordable Care Act’s enhanced premium tax credits, an average 11% premium increase is expected in 2027.

So the employee loses their job benefit, turns to the individual market, and sees premiums jump again. The initiative was supposed to shield small businesses from these spikes. It is failing in that regard.

What makes the situation worse is the process behind these numbers. All public hearings were vacated for Plan Year 2027. That was a missed opportunity for small businesses and advocates to hold carriers accountable in meeting premium-reduction targets.

Amid this lack of public input, none of the carriers were forced to justify their rate hikes in front of regulators or the community. No hearings. No accountability. Just a 13.4% average jump on your invoice.

The program was designed to create competition and lower premiums. It has done neither. Instead, it has allowed a shrinking market where the remaining options are pricier and less comprehensive.

Small Business Majority advocates for these owners across Colorado. They have heard the complaints for years: entrepreneurs unable to afford health coverage for their employees and struggling to access care for themselves. The program presented real hope. It has delivered disappointment.

The gap between the promise and the reality is widening. Premiums are rising, options are shrinking, and accountability is absent.

When the story is told, it ends with a question that policymakers seem to be avoiding: If the program isn’t working, why are we keeping it running without hearings?