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Anonymous UCare customer sues state over contract bidding

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Ucare headquarters
UCare's Minneapolis headquarters
Jim Mone | AP 2014

An anonymous Minnesota resident is suing the state over its decision to drop nonprofit health insurance provider UCare from public health care programs after a competitive bid process, alleging the Department of Human Services hasn't offered the company's 370,000 enrollees adequate avenues to keep their current providers.

UCare dropped its own lawsuit with the state this week, citing a desire to avoid more upheaval for low-income residents on MinnesotaCare or Medical Assistance who may need to pick new plans for next year when UCare is no longer an option. The Minneapolis company had originally argued that the Department of Human Services arbitrarily cut it out in a competitive bid process that state officials say will save $450 million in taxpayer dollars.

But a lawsuit filed in Ramsey County District Court on Wednesday alleged that the state hasn't done enough to save UCare customers the headaches of picking a new insurer — and the possibility of being forced to switch doctors and hospital systems. And it argues that the decision to drop the company in all but one county will disparately hurt minorities in Minnesota, who comprise a large share of UCare's customer base.

The suit was filed on behalf of the estimated 370,000 current UCare customers by a person using a false name who claims to be on a UCare public program plan. Attorney Peter Erlinder says his client is not connected to the company, but fears retaliation and the possibility of his or her medical benefits being affected.

The Department of Human Services declined to comment on the case until reviewing it further.

Erlinder's client alleges that Minnesota officials are required by the federal government to offer free choice of plans to all enrollees on Medical Assistance — Minnesota's name for Medicaid. It also alleges the state has failed to notify current customers on UCare of an option to keep their current doctors: The state could directly reimburse health care providers for those enrollees, rather than go through insurance companies.

State officials have generally contracted with insurance companies to cover the low-income residents on public programs. Erlinder said the state is using the "fee for service" model for more than 170,000 enrollees and should have notified UCare customers of that option rather than forcing them to select a new insurer.

Bypassing the administrative costs of those insurers "would be a cost savings for the state, for the people of Minnesota and for the federal government," he said.

Department officials say fee-based plans are generally reserved for enrollees with disabilities and as a temporary fix until customers can pick an insurer.