Medica eliminating 250 more jobs as it exits state contract

April 27--Minnetonka-based Medica is eliminating 250 more jobs following its decision last year to drop a major state contract in public health insurance programs.

About 110 Medica employees lost their jobs as of Thursday, the health insurer said in a statement to the Star Tribune, while another 140 open positions will not be filled.

In January, Medica eliminated about 100 full-time jobs, bringing the overall impact to 350 positions -- about 20 percent of the workforce as of December, the health insurer says.

Until the end of the month, Medica will continue as one of the largest managed care organizations in the state's public health insurance programs, which include Medicaid and MinnesotaCare coverage. But in November, the HMO told state officials it would stop managing care for those in the "families and children" portion of the programs as of May 1 due to financial losses.

"This week, Medica made the second and final round of employee layoffs due to our withdrawal from the Medicaid Families and Children business," the health insurer said in the statement. "The first round was in January, which was reported at that time."

Medica said it lost $187.5 million on families and children's business in 2016, which was part of a total loss of $250 million.

For 2016, Medica had significantly expanded enrollment through a contract win in the families and children business, which includes the bulk of all state public program enrollees.

Medica says payment rates to HMOs aren't sustainable. The state announced earlier this year that Minneapolis-based UCare would significantly expand its business in the programs to help replace Medica.

Medica, in turn, has sued the state, arguing the process used to recruit other health plans didn't comply with state contracting rules. State officials counter that Medica is trying to manipulate its way into a better contract.

A hearing in the case is scheduled for June.

With the job cuts announced Thursday, Medica is restructuring its operations by combining the remaining state public programs business with its Medicare operations. Among other things, the change means that call centers that previously operated independently will now be consolidated, the insurer says.

The federal Affordable Care Act has significantly expanded Medicaid coverage and boosted federal funding for MinnesotaCare. For decades, Minnesota has hired HMOs to managed care for public program enrollees, and the business generated record profits for health plans in 2015.

At that point, UCare was the largest HMO in the programs, but it surrendered that position in 2016 under a new contract that directed many more enrollees to Medica and the HMO division at Eagan-based Blue Cross and Blue Shield of Minnesota.

As of January, Medica was managing care for about 295,000 people in the families and children contract. Those enrollees are shifting to other health plans as of May 1.

While Medica is dropping the families and children contract, the HMO continues to manage care for certain special populations in the state programs.

About five years ago, the state started moving to competitive bids for awarding HMO contracts in public programs following complaints about excessive health plan profits. State officials say the change has generated hundreds of millions of dollars worth of savings for taxpayers.

In the last two years, however, the bidding process has resulted in large shifts of enrollees between health plans, with waves of related job cuts and hiring.

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