Health insurance confusion, questions abound amid UCare failure and rising costs
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Many Minnesotans' heads were already spinning during this open enrollment period as they face eye-popping increases in health insurance premiums and significant changes in the health care marketplace. Add to that news that a big Medicaid and Medicare insurer, UCare, is going out of business and its customers will be transitioning to Medica, leaving many with even more coverage questions and concerns.
The Minneapolis-based nonprofit announced Monday that it is shutting down at the start of next year. Its members across Minnesota and western Wisconsin — many of whom are on government-funded Medicaid and Medicare plans — will automatically transition to larger nonprofit insurer Medica in January.
Many of you wrote to MPR News with questions about your UCare coverage, Medica and what will happen next. We’ve tried to answer a few of them here.
Will Medica automatically pick up my Medicaid coverage, or do I need to call or see someone to make it happen?
Lisa Erickson, CEO of Medica, is promising a seamless transition, saying currently enrolled UCare members won’t see any changes to their coverage next year during the transition. She said UCare plans will automatically transfer to Medica, and enrollees will keep the same in-network providers, while premiums and deductibles will remain the same, too. That goes for Medicaid plans and for those who have original Medicare coverage, Erickson said.
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"Healthcare coverage is so important, and this impacts many Minnesotans, about 300,000,” Erickson said in an interview with MPR News. “And our top priority from the beginning was ensuring the least possible disruption for members."
Do I need to apply for a new Medicare Advantage plan, or will it transfer to Medica?
Medica will not automatically pick up UCare’s Medicare Advantage members. UCare announced in September that it would not offer Medicare Advantage in 2026 — before this agreement was reached. Those members will have their UCare Advantage coverage continue through the end of December but will need to select a new plan for 2026 with Medica or another insurance company during the current open enrollment period, which ends Dec. 7.
“I would encourage people who were on a plan that is not going forward to make some calls,” Erickson said. “Reach out to [an] advisor, reach out to the plans and get the information and help [you] need to get enrolled.”
What is UCare, and who is its primary customer base?
UCare was started back in 1984 as a pilot with the University of Minnesota’s family medicine school to see if it could offer affordable coverage primarily to lower-income Minnesotans. For decades they did just that — building up a customer base of mostly Medicaid and Medicare enrollees — with record enrollment and revenue just a few years ago. But that overreliance on government-funded health plans ultimately might have been UCare’s downfall.
Stephen Parente, a finance professor at the University of Minnesota's Carlson School and the Minnesota Insurance Industry Chair of Health Finance, told MPR News that UCare's strategy only works when cost trends are working in their favor.
"UCare has a tremendous — and has had a tremendous — public mission in terms of serving folks that are poor as well as folks that are elderly in that market,” Parente said. “But, I mean, they did not necessarily reach out as much to get folks that were in the commercial market for employers, which is actually a good hedge in case some of the rules, regulations and trends in the government programs turn against you."
Health insurance industry headwinds
And those trends did turn, as health care costs soared while government reimbursement rates fell. As a result, UCare had already begun trimming back services before this week’s announcement. Earlier this year, UCare announced it would stop providing state-funded health care coverage in 11 counties, forcing about 80,000 Minnesotans to find new insurance plans. Then, in September, the insurer dropped its Medicare Advantage plan affecting another 158,000 members.
Erickson said it’s a difficult time for many nonprofit insurers, including Medica, which reported a $176 million dollar operating loss last year. Erickson acknowledges her company faces some of the same financial headwinds as UCare, like rising costs and lower government reimbursement rates.
But Medica has a broader customer base, including many employer-based plans; and it is a larger company than UCare, with more than 1 million enrollees across nine states, reducing the risk of taking on more Medicaid and Medicare customers.
“We've done a significant amount of work this year, working with the state to ensure that we have rates that make sense and that allow us to feel like we have a sustainable path going forward,” Erickson said. “And so we felt like we could pick up these [UCare] members, create a seamless transition for Minnesotans and do something that's really consistent with our mission.”
The Minnesota Attorney General's Office said it is currently reviewing UCare's agreement with Medica.
Fewer insurers and soaring costs
Denise Robertson is a Navigator Program Director at Health Access Minnesota, an organization that offers free assistance to Minnesotans looking to enroll in health care coverage. She said she hopes the UCare transition will be smooth, but she said there will likely be long-term consequences, as Minnesotans will have fewer choices for health care coverage.
"Anytime you take another player out of the picture, you're reducing competition, and especially in greater Minnesota, where the counties in general don't have as many plans to choose from to begin with," Robertson said.
She said this year, there are about 90 private health insurance plans available in the metro area but only 28 in Rochester, where she lives.
And costs are already skyrocketing. Robertson said she recently checked how much premiums were going up in Rochester. She found that a person on a MNSure plan who makes $65,000 a year and doesn't qualify for a tax credit may see their premiums nearly quadruple next year.
"When you take another health insurer out of the picture, is that going to actually — with reduced competition — drive those costs even higher?"
