UCare Loses State Contracts

Big savings for the government due to the new managed care contracts will come at the expense of UCare. UCare is currently the largest HMO in Minnesota’s public health insurance programs. Recently, the results from the latest round of competitive bidding on HMO contracts were revealed by Gov. Mark Dayton. He reported that there should be nearly $450 million in saving in 2016 from the process, dismissing UCare as an option for most enrollees. The state will also be receiving $200 million in repayments from HMOs and the county based purchasing organizations. This is due to the fact that enrollees didn’t use as much coverage as previously thought.

The praises for the bidding process have been that it’s good for taxpayers and enrollees. State officials evaluated bids from health plans not only in terms of the cost, but also in the quality of the plan. The previous sets of bids resulted in more enrollees shifting to UCare, which currently manages care for around 360,000 people. This fall, these enrollees will need to switch plans for the upcoming year.

The news was less positive at UCare, who currently employs about 900 people. UCare’s health plans chief executive said that they will have to eliminate jobs due to the downsizing in their business.

The Medicaid and MinnesotaCare contacts have an estimated value of approximately $4.9 billion for the upcoming enrollment cycle. Participation in these public programs has increased significantly under the Affordable Care Act. The ACA expanded the availability of Medicaid for people at or below the poverty line. MinnesotaCare covers a slightly higher income level.

In September, current UCare enrollees may begin the process of picking a new plan. This is a month earlier than usual in order to aid in the transitioning away from UCare. The bidding process for the 2016 contracts was the first time that "competitive" bids were used statewide. This will also be the greatest number of individuals and families that will have to switch plans in a given year.

This will constitute a significant blow to UCare’s $3 billion in revenue that they received last year. The state public programs accounted for half of that number. It also was their most profitable area which covered losses in the MN individual health and MN Medicare supplement market. UCare will survive but will most likely backtrack to the size it was in 2009. UCare officials want information about why they lost in the competitive bidding.

In an article for MPR, Rep. Matt Dean, R-Dellwood, said lawmakers will debate how to spend the $650 million in savings. He also said that he was surprised UCare wasn’t among the bidding winners. However, of the overall process, Dean said, “Competition is yielding good results from the standpoint of taxpayers saving money.”