Job shock for about 700 workers as UCare moves toward shutdown

UCare will lay off about 250 workers in early January as the Minneapolis-based health insurer takes major steps toward its eventual shutdown.

Another group of current employees at the nonprofit group — about 650 people — are expected to get jobs with Medica, the Minnetonka-based insurer that announced in November it would acquire UCare’s remaining business providing Medicaid and MNsure coverage.

That leaves about 450 people still working on the Medica transition, who may not have jobs once UCare winds down, the insurer says. All told, about 700 workers are being laid off or at risk of it.

UCare’s total financial reserves fell from nearly $1.1 billion at the end of 2023 to about $595 million at the end of 2024. It’s been a stunning reversal for the health insurer, which posted a record profit of more than $300 million in 2022. The closure comes as insurers nationally are aggressively raising premiums and taking less-profitable options off the market.

The job-change figures at UCare were provided to the Minnesota Star Tribune by sources at the insurer. UCare is holding a series of meetings Thursday with employees who for weeks have been dreading word of significant job cuts during the holiday season. These same workers will be critical to making sure hundreds of thousands of patients successfully shift to coverage over the next month to health plans run by Medica while still carrying the familiar UCare brand.

“We understand that there will be difficult news for a number of you and we want to acknowledge the significance of this moment,” Hilary Marden-Resnik, the UCare chief executive, said in a memo distributed to employees that was obtained by the Star Tribune. “Please know we are working to get you answers as quickly as we can.”

A statement from Medica on Thursday confirmed the nonprofit will offer roles to about 650 UCare employees, subject to the insurer’s “standard approach to hiring.”

UCare is trying to close a yawning budget deficit as it begins winding down operations after suffering huge losses over the past two years. The insurer is projecting a cash flow deficit of $372.9 million by the end March, according to a petition filed this month by the state of Minnesota to take over operations at UCare.

This projection does not factor savings from eliminating jobs and shifting workers to Medica, a source tells the Star Tribune, so the moves announced Thursday will help address the insurer’s impending cash flow problem. This source said it’s unknown if payments to UCare creditors might be delayed, but the insurer under supervision from the state should eventually be able to pay most, if not all, its debts. Those creditors may include health care providers visited by UCare members.

UCare’s cash flow projection “reflects that UCare will be entitled to a certain amount of revenue from the state and federal government throughout 2026 and in 2027 and beyond,” according to the state’s petition in Ramsey County District Court. “However, the cash flow projection estimates that UCare would be operating at a significant loss during the entirety of 2026, even when this eventual revenue is considered.”

For more than 40 years, UCare has been a major provider of health insurance for Minnesotans who qualify for government-funded benefits. It was created by family medicine doctors at the University of Minnesota to test whether an HMO could manage care for efficiency and quality in patients who qualify for Medicaid, the state-federal program for low-income residents.

In time, UCare expanded to sell Medicare Advantage coverage, which is a privatized version of original Medicare benefits for seniors and specific patient groups. It’s also the largest insurer selling to individuals and families who buy coverage through the state’s MNsure exchange, often tapping tax credits under the federal Affordable Care Act.

Last year, UCare suffered its largest-ever annual operating loss — $602.3 million — and then grew its Medicare Advantage enrollment just as other insurers were stepping back from the market amid declining payment rates. UCare also saw significant losses in the Medicaid market, where insurers argue the state’s payment rates have been too low.

In September, UCare announced it would shut down its large Medicare Advantage health plan as of Jan. 1, a decision that forced about 158,000 to find new coverage for 2026.

The decision has had ripple effects across the market, with other health insurers cutting back on commissions to agents and brokers for fear of taking on too much costly enrollment too quickly. Last month, the state’s largest Medicare insurer, Blue Cross and Blue Shield of Minnesota, drew outrage from seniors by dropping gyms run by Life Time and YMCA of the North from its popular SilverSneakers fitness benefit.

“Much of the timing ties back to the unexpected announcement from UCare in September,” Eagan-based Blue Cross said this month. “All of our financial forecasts and plans for 2026 were suddenly rendered out of date.”

Some 300,000 people enrolled in Medicaid and MNsure health plans from UCare will maintain the coverage next year, but the health plans will be run by Medica.

In April, after announcing the dismal financial results from 2024, UCare leaders said they were doing everything possible to avoid layoffs. Then in May, the insurer announced it was laying off 80 workers while trimming open positions amid mounting financial challenges. UCare in September announced layoffs that hit another 144 workers.

Through the first six months of the year, UCare lost $176.9 million on operations. Neither the health insurer nor state officials have released the insurer’s third quarter financial statement, which typically is made public in early November.

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