Minneapolis – Founded over 40 years ago to offer health insurance to low-income individuals primarily reliant on Medicaid, UCare has faced numerous challenges, including rising healthcare costs and unsuccessful expansion attempts.
UCare to close in 2026
What we know:
UCare is set to shut down early next year, pending approval of a takeover plan by state regulators.
In this arrangement, Medica will assume control of all of UCare’s existing Medicaid and family health plans.
This announcement underscores a concerning trajectory for the nonprofit organization, which has served low-income Minnesotans for more than four decades.
After the news of the acquisition was released, UCare did not provide representatives for interviews.
It’s been a swift decline for UCare—just two years ago it was reporting substantial profits and actively seeking to expand.
An analysis of financial documents, court cases, and regulatory filings reveals how UCare has struggled to manage soaring healthcare expenses, unfruitful expansion initiatives, and other legal hurdles.
UCare’s struggles after huge surplus
In numbers:
In 2022, UCare reported a surplus of $325 million.
However, UCare acknowledged that this might have been a one-time occurrence due to pandemic-related factors.
According to its financial reports, the organization informed state regulators it was taking measures to guard against future setbacks while adjusting its pricing and forecasts.
“Future impacts might change but aren’t expected to significantly affect UCare’s fiscal health,” the organization stated.
Unfortunately, losses mounted swiftly.
In 2023, UCare reported losses of $102 million, followed by $478 million in 2024.
This situation prompted a failure in a financial assessment earlier this year, leading to a restructuring plan involving the Minnesota Department of Commerce.
It remains unclear if Medica’s acquisition is linked to the restructuring plan.
When asked about this plan, the Commerce Department indicated it had no public information available.
“The demise of UCare isn’t surprising to those familiar with Minnesota’s medical assistance landscape,” remarked David Finewax, a former general counsel for the Minnesota Hospital Association. “What is surprising is the apparent lack of oversight from state officials in this expected downfall.”
UCare is severed and collapses.
Why should you care:
This year, UCare began reducing its services statewide, affecting 88,000 Medicaid beneficiaries across 11 counties.
Additionally, UCare entirely exited the Medicare Advantage sector.
This followed accusations of submitting incorrect diagnosis codes to the Centers for Medicaid Services, leading to millions in overpayments, as highlighted by a 2024 audit.
In over 250 cases, UCare couldn’t produce valid medical records or presented records that didn’t support the diagnosed conditions.
The audit revealed multiple instances where UCare inaccurately reported conditions like cancer, stroke, and sepsis when those diagnoses were not present.
As a result, UCare received at least $4.7 million in overpayments through the Medicare Advantage program.
In response, UCare contested the findings, arguing they were “fundamentally flawed” and didn’t factor in instances of underpayment.
Shortly thereafter, the company terminated all Medicare Advantage contracts.
UCare then started exploring ways to transition its members to community-centered organizations with similar missions, according to their press release.
UCare tried to expand but failed.
Let’s explore further:
UCare attempted to broaden its Medicaid operations into additional states before pulling thousands of plans in Minnesota.
The organization invested over $9 million to establish locations in Iowa and Kansas, yet failed to secure any operational bids in those areas.
The Kansas Insurance Commissioner’s Office deemed UCare’s proposal as weak and lacking detail.
While other companies had a mix of strengths and weaknesses in evaluations, UCare had only one strength and 19 weaknesses.
Kansas officials noted that UCare’s proposal lacked sufficient details on operational strategies.
Timeline:
These expansion failures coincided with a decline in UCare’s long-term relationship with the University of Minnesota, as court documents show.
Founded by the university in the 1980s, UCare faced rejection for merger and expansion attempts because they “failed to uphold UCare’s mission to serve Minnesota,” according to a 2022 lawsuit.
The lawsuit alleged that UCare retaliated by undermining the university’s influence.
Additionally, UCare was accused of misappropriating annual donations to the University of Minnesota Foundation, earning over $300 million in surplus.
The lawsuit was eventually settled, with UCare agreeing to contribute $100 million over three years to collaborate with the University of Minnesota Medical School on health initiatives.
Back story:
UCare was established by the University of Minnesota in 1984 to provide Medicaid recipients with continued access to healthcare.
It evolved into a health maintenance organization (HMO) in the following years.
At its peak revenue in 2022, UCare operated across 79 counties, mostly within the Twin Cities metro area.
Currently, it provides services to over 300,000 members throughout Minnesota and parts of western Wisconsin.
The company has received significant funding from state and federal governments for its Medicaid and Medicare Advantage services.
Notably, it controversially donated $30 million to the state Department of Human Services in 2012, which sparked congressional inquiries regarding federal fund allocation to HMOs like UCare.
Given that UCare operated as a nonprofit, they essentially accumulated money by increasing reserves and distributing large bonuses, states a report to Congress from 2012.
Unlike many other HMOs in Minnesota, UCare seldom ventured beyond Medicaid.
This near-costly decision surfaced when it unexpectedly lost its Minnesota Medicaid contract in 2015.
Yet, the company bounced back and re-entered the market.
Having reported substantial surplus revenue by the end of 2022, UCare was poised to expand into additional states.
Now, it is permanently closed.
“The most pressing questions remain unanswered,” Finewax noted in an email. “How and why did we reach this point?”
What’s next:
UCare and Medica have expressed commitment to ensuring a smooth transition for UCare policyholders.
“Individuals enrolled in UCare’s 2026 Medicaid and Individual and Family Plans will continue to receive uninterrupted services,” they stated.
For further information, members or providers with questions are encouraged to visit the respective websites for Medica or UCare.
