UCare to cut 88K from Medicaid health plans amid financial troubles

Financial troubles at UCare will force about 88,000 people to switch Medicaid health plans by September, when the Minneapolis-based HMO will stop providing state-funded coverage in Ramsey County and 10 other counties in Minnesota.

The pullback is the latest in a series of moves by the nonprofit health insurer to stanch red ink following big losses last year managing care in the Medicaid and Medicare Advantage programs.

Previously, UCare announced 80 layoffs and suspended some broker commissions. UCare is one of the largest health insurers in Minnesota, and most of its business derives from patients who use publicly funded programs.

Medicaid, which provides coverage for lower-income residents, is the largest line of business at UCare. After the cuts in September, the insurer will continue to manage benefits for about 250,000 enrollees in the government program.

“As UCare prioritizes its financial turnaround, we made the necessary but difficult decision to temporarily withdraw from Medicaid ... in several counties starting September 1, 2025 through the end of the year,” the insurer said in a statement to the Minnesota Star Tribune.

Although Medicaid has been in the national news recently for significant budget cuts affecting millions of Americans, the financial issues at UCare predate the reductions, stemming from recent upticks in use by beneficiaries and payment rates that providers call insufficient.

“Like health plans across the nation, UCare has experienced significant losses in Medicaid because of a payment mismatch between the government payments we receive and the rising cost of care among our members,” the statement said.

The Minnesota Department of Human Services, which administers the state’s Medicaid program, said it will help enrollees transition to alternate health plans from Eagan-based Blue Cross and Blue Shield of Minnesota or Minnetonka-based Medica.

UCare is reducing its service area in the Prepaid Medical Assistance Program (PMAP) and MinnesotaCare, the largest of several health care programs in Minnesota that are funded via Medicaid.

As of Sept. 1, UCare will be leaving PMAP and MinnesotaCare in the following counties: Benton, Chisago, Crow Wing, Pennington, Ramsey, Roseau, Sherburne, Stearns, St. Louis, Wadena, and Wright, state officials said.

Medicaid is a widely used program, including by about 23% of all Minnesota women of child-bearing age in 2025, researchers at Georgetown University found.

UCare says its service area will remain unchanged for its Medicaid plans for seniors and people with disabilities.

Similarly, the changes don’t impact UCare’s large Medicare Advantage health plan, which provides coverage to about 180,000 seniors in Minnesota. Medicare Advantage is a privatized form of Medicare, where seniors opt to receive government-funded benefits through private health insurers. Also unaffected is UCare’s business selling coverage for individuals and families through the MNsure health insurance exchange.

In Medicaid, UCare says it will continue managing care for enrollees in Hennepin and 44 other Minnesota counties.

“We remain as committed as ever to Minnesota Medicaid, and are confident this short-term solution will result in long-term sustainability,” the HMO said in a statement. “We look forward to returning to these counties in the future.”

UCare was the sixth largest nonprofit group in Minnesota in 2023, with about $6.2 billion in revenue. Following job cuts announced in May, employment fell to about 1,600 people.

To some extent, UCare’s troubles reflect problems that many health insurers are experiencing right now in the Medicaid and Medicare Advantage businesses. Medicare Advantage woes, in particular, contributed to an unprecedented sell-off in shares of Minnetonka-based UnitedHealthcare in May.

Bloomington-based HealthPartners and Medica both posted large operating losses for 2024, as well, and earnings were tighter at Blue Cross of Minnesota.

UCare is distinct from its rivals for not selling commercial coverage to employer groups, which lately has been a more reliable source of profits for health insurers. The HMO also has lost money with failed attempts to grow into the Medicaid markets in Kansas and Iowa.

In 2023, UCare agreed to pay $100 million to support a variety of health care programs at the University of Minnesota as part of a legal settlement in which the U relinquished its majority on the HMO’s board of directors.

Family medicine doctors at the U created UCare in the 1980s to test whether an HMO could effectively manage care for Medicaid beneficiaries.

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