UnitedHealth loses legal fight to rejoin Minnesota’s Medicaid program

A Ramsey County judge has halted a lawsuit that could have restored UnitedHealth Group to the Medicaid health plan market in Minnesota.

The ruling is the latest development in a 50-year debate in Minnesota over who should be able to participate in the state’s HMO market, a segment of the health insurance market that, at times, has been lucrative for nonprofit carriers in the state.

On the last day of legislative session in 2024, Minnesota lawmakers passed a massive budget bill that included a ban preventing for-profit carriers such as UnitedHealthcare, the huge health insurance division at Eden Prairie-based UnitedHealth, from winning state contracts to manage care for Medicaid beneficiaries.

UnitedHealth sued on grounds the legislation violated the “single subject clause” of the Minnesota Constitution by covering a wide range of topics beyond Medicaid contracts, including everything from higher education and traffic cameras to veterinary licensure and power plant emissions.

But violations of the single-subject clause occur only if the challenged provision is not germane to the title of the bill, according to a ruling late last month from Ramsey County District Court Judge Mark Ireland.

The title for the massive budget bill in question clearly specified its focus on state government operations and financing, Ireland wrote.

“After review, this court finds that the HMO Contracting Provisions are germane to the operation and financing of state government,” the judge said in the ruling. “The plain text of this provision prohibits a state agency ... from entering into contracts with for-profit HMOs for state employees and state programs.”

Ireland granted the state’s motion for summary judgment in the case, which means the lawsuit effectively has come to an end without a trial.

In a statement, UnitedHealth Group said it was disappointed with the ruling and is evaluating its options.

“UnitedHealthcare was unfairly removed from its hometown Medicaid program, which limited the options available to the citizens of Minnesota,“ the statement said. “Meanwhile, Minnesotans have had their options further restricted by other health plans choosing to leave the Medicaid program.”

Earlier this year, HealthPartners trimmed its Medicaid enrollment after the Bloomington-based health insurer and health system lost nearly $200 million on operations in 2024.

Minnesota Attorney General Keith Ellison, who defended the constitutionality of the budget bill, said in a statement he was “pleased the court has found the Legislature properly mandated that only nonprofit organizations may participate in state-run health programs or provide health care to state employees.”

HMO is the abbreviation for a health maintenance organization. Today, these insurance companies provide a type of coverage for patient medical bills that’s not uniformly different from benefits provided by licensed health insurers.

But a few decades ago, there were important differences — the reason for the distinct licensure.

Minnesota’s state government has hired HMOs since the 1980s to serve as managed care organizations in Medicaid, the health insurance program for lower-income residents that is partly funded by the federal government.

The Medicaid managed care market in Minnesota was effectively reserved for nonprofit health plans, when the Legislature voted in 2017 to drop what had been a 40-year ban on for-profits being licensed as HMOs.

UnitedHealthcare dates back to the early 1970s when a predecessor for-profit company provided back office services to Physicians Health Plan, a nonprofit HMO based in Minneapolis. And it became the first for-profit HMO to win a contract in Minnesota’s Medicaid managed care market in 2021.

DFL lawmakers in 2024 were driven by concerns over profit motives in health care when they reinstated a key provision from the old ban by stipulating that for-profit HMOs in Minnesota could not win Medicaid contracts. This knocked out UnitedHealthcare’s Medicaid health plan, even though the insurer can still compete in other parts of the state’s health insurance market.

Late last year, a Ramsey County District Court judge did not grant the company’s request for a temporary restraining order to retain the business, which was part of the company’s challenge to the constitutionality of the 2024 budget bill.

In December, about 32,000 people in Minnesota were receiving Medicaid benefits via UnitedHealthcare, according to state data, which ranked the company’s membership sixth largest among nine health plans in the market.

UnitedHealthcare is the nation’s largest health insurer, but doesn’t have that hefty of a market share in Minnesota, where the company in 2017 announced a push to get bigger in its home state.

Over the years, one impediment to growth was a contractual relationship to provide back-office services to Minnetonka-based Medica, an agreement that worked like a noncompete agreement, to some extent. The inability to obtain an HMO license also was a barrier for UnitedHealth in Minnesota.

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