Small business health insurance in Colorado

How Colorado's market is set up

Connect for Health Colorado is the state's official marketplace and the only place residents can receive financial help for individual coverage. Six carriers offer medical plans for 2026: Anthem, Cigna, Denver Health, Kaiser Permanente, Rocky Mountain Health Plans, and Select Health (Connect for Health Colorado, October 31, 2025). Premiums follow the federal 3:1 age curve, but Colorado limits tobacco rating to 1.15:1 in both markets and uses a state-specific composite premium method for small groups (CMS, State Specific Rating Variations). CMS divides the state's 64 counties into nine rating areas.

The 2026 small-group change: 100 becomes 50

Colorado had expanded its small-group market to employers with 1–100 employees. SB24-073, signed May 1, 2024, redefines a small employer as one with an average of at least one but not more than 50 employees, effective January 1, 2026. Employers already in small-group plans who no longer qualify may keep them for up to five years while they transition to large-group coverage (Colorado General Assembly, SB24-073; Colorado DOI, July 31, 2025).

For a Colorado employer with 51–100 employees, that is a forced decision with a clock on it: move to a large-group plan, or use the transition window to redesign benefits. For an employer under 50, nothing changes about eligibility — but the market you are in just got smaller.

What Colorado premiums are doing in 2026

Insurers submitted 2026 individual-market filings averaging a 28.4% increase. The Division of Insurance attributed roughly 8 of those points to a loss of reinsurance funding — an approximate 40% cut to the program's impact in 2026 — and the remainder largely to the expiration of the enhanced federal premium tax credits (Colorado DOI, July 16, 2025). Small-group carriers requested an average 13.6% increase (DOI, July 31, 2025). The Division's final approvals in October 2025 reported that, net of the lost federal credits, subsidized marketplace enrollees faced an approximate 101% average net premium increase — reduced from 174% by the state's HB25B-1006 emergency funding — and that reinsurance would save Coloradans 21.3% on 2026 premiums, ranging from 13.1% in Pueblo to 39.4% in Grand Junction (DOI, October 27, 2025).

The DOI publishes final approved gross averages in its rate dashboards rather than a single press-release figure, so we do not state one here. The direction is clear enough: Colorado's individual market got materially more expensive for anyone who lost a federal credit, and the reinsurance program is doing a lot of work to hold the gross premium down.

Your four real options as a Colorado employer

There are four ways to offer health insurance to employees in Colorado, and the state's market rules change how each one performs.

• A small-group plan (1–50 employees) through a carrier or the SHOP route. Predictable coverage, age-rated premiums, annual renewals, participation and contribution minimums. Employers with 51–100 who were in small-group plans have up to five years to transition.
• A PEO, which pools your staff into its own group plan and bundles payroll and HR for a fee on top of premiums. See our ICHRA vs PEO comparison.
• A taxable stipend. Simple, but it is wages: you owe employer payroll tax on it, the employee owes income tax, and it does not count as an offer of coverage. See our guide to health insurance stipends.
• An ICHRA — a fixed, tax-free monthly allowance employees use to buy their own individual plan on or off Connect for Health Colorado. No participation minimum, no renewal negotiation, and the allowance is a number you choose.

The Colorado Option and what it means for ICHRA employees

The Colorado Option, created by HB21-1232, is a set of standardized plans every carrier must offer on the individual market and to small employers under 50. The standard design includes $0 non-preventive primary care visits, $0 mental health, behavioral health and substance use visits, $0 prenatal and postnatal visits, and $0 diabetic supplies (Colorado DOI, Colorado Option). Colorado Option enrollment grew 375% between the 2023 and 2025 open enrollment periods, reaching 132,791 Coloradans for 2025 (Colorado DOI, The Colorado Option 2026 report), and by 2026 it was half of all Connect for Health Colorado enrollment, with carriers meeting their cost-control targets for a fourth year (DOI, May 27, 2026).

For an ICHRA employer this is a practical advantage: every employee, in every county, has a standardized plan with predictable first-dollar benefits available with your allowance — which makes it easier to explain the benefit and easier to compare against your old group plan.

Reinsurance and OmniSalud

Colorado's reinsurance program, created by HB19-1168 and launched in 2020 under a Section 1332 waiver, pays a portion of high-cost individual-market claims so carriers can price lower; the program and waiver run through December 31, 2027 (DOI, Reinsurance Program). Colorado received $339 million in federal Section 1332 pass-through funding for 2025 (Colorado DOI, January 16, 2025). OmniSalud is a separate program for Coloradans who do not qualify for Medicaid or marketplace assistance, including undocumented residents; from 2027 it will cost $15 per month (DOI, OmniSalud). OmniSalud plans are sold through Colorado Connect rather than the ACA individual market, and no federal or state guidance has addressed whether they satisfy the individual-coverage requirement an ICHRA depends on. Employers with mixed-status workforces should confirm each employee's coverage type with a licensed advisor before setting up the arrangement.

Is there a Colorado ICHRA tax credit?

Colorado does not currently offer a state-level ICHRA or QSEHRA tax credit that we could identify; its 2026 affordability measures — the HB25B-1006 subsidies and the reinsurance program — support individual-market premiums directly rather than employer contributions. Plan the arrangement on its own economics and confirm current state law with a tax professional.

Setting an ICHRA allowance in Colorado

Colorado rates individual premiums on the federal 3:1 age curve, so a 64-year-old's premium can be up to three times a 21-year-old's for the same plan. Federal ICHRA rules let you vary the allowance by age up to that same 3:1 ratio, and in an age-rated state that is usually the fair design: a flat allowance treats a 25-year-old and a 60-year-old very differently in real purchasing power.

Location matters too. Colorado's nine rating areas separate the Front Range from the mountain and Western Slope counties, where premiums run highest. In our 2026 calculator dataset (the figures shown on our ICHRA in Colorado page), the lowest-cost Silver plan for a 40-year-old in Colorado averages about $576/month, ranging from $500 to $853 across the state's 64 counties. That spread is why an allowance set from a statewide average fails the ACA affordability test in some counties and over-funds others.

Our ICHRA calculator uses those county-level 2026 lowest-cost Silver premiums by ZIP code, so you can see the affordability line for each employee before you set a number. For 2026, an offer is affordable when the employee's cost for the lowest-cost Silver plan, minus your allowance, is no more than 9.96% of the applicable income measure (IRS).

Group plan vs. ICHRA for a Colorado employer

Colorado's individual market is unusual: standardized plans with $0 primary and mental-health care, a reinsurance program holding gross premiums down, and a state that just narrowed its small-group market. The table puts the two models side by side in Colorado terms.

How to set up an ICHRA in Colorado

The setup is the same federal process as anywhere: adopt a written plan document, define employee classes, set the allowance (by age band and rating area if you choose), deliver the required employee notice at least 90 days before the plan year begins, and reimburse against proof of individual coverage. Give employees a clear enrollment path — Connect for Health Colorado or an off-exchange carrier — and time the launch to a window when they can actually enroll: the annual open enrollment, or the special enrollment period that a new ICHRA offer triggers.

Who we are

The ICHRA Broker is licensed in New York and works with employers nationwide, including Colorado. We design, set up, and support ICHRAs for small and mid-sized employers — the county-by-county allowance work, the affordability testing, and the enrollment support employees need. Free quote, no obligation. This page is education, not tax, legal, or insurance advice.

Sources

• Colorado General Assembly, SB24-073 (small employer 1–50, effective January 1, 2026) and HB25B-1006 (emergency affordability funding).
• Colorado Division of Insurance press releases: July 16, 2025 (individual requests ≈28%); July 31, 2025 (small group 13.6%; definition change); October 27, 2025 (final approvals; reinsurance −21.3%).
• Colorado DOI, Colorado Option page; 2026 Colorado Option Standard Plans; Colorado Option report, January 16, 2026; May 27, 2026 release (50% of enrollment).
• Colorado DOI, Reinsurance Program page; DOI release, January 16, 2025 ($339 million pass-through); OmniSalud page.
• Connect for Health Colorado, October 28 and October 31, 2025 releases (six carriers).
• CMS, Colorado Geographic Rating Areas (9); Market Rating Reforms — State Specific Rating Variations (tobacco 1.15:1).
• Colorado General Assembly, Summary of 2025 Health Care and Health Insurance Legislation.
• The ICHRA Broker calculator dataset: 2026 lowest-cost Silver premiums by ZIP.