Minnesota lawmakers are once again blocking for-profit HMOs from winning managed care contracts in the state's Medicaid program.

The change begins next year and will be felt most immediately by Minnetonka-based UnitedHealthcare and its nearly 32,000 enrollees covered through state health care programs. The company called the legislation an unnecessary blow to competition and questioned the process used by lawmakers.

For decades, Minnesota has hired HMOs to serve as managed care organizations in these government-run programs, which primarily serve lower-income residents. The market was reserved for nonprofit health plans up until the Legislature in 2017 voted to drop what had been a 40-year ban on for-profit HMOs. However, earlier this month legislators reversed course, including this change as part of a massive omnibus bill passed on the last day of the legislative session.

Opponents have argued for-profit insurers may be more likely to stint on coverage, though there's a lack of comprehensive research on the subject. Some critics also contend for-profits are too willing to trade away good care access to protect profits.

"To me, it's really a systemic problem that we have so much corporate interest in all sectors of our health care, from the provider side to the health plan side," said Rep. Liz Reyer, DFL-Eagan.

UnitedHealthcare, which is the nation's largest health insurer, is the only for-profit HMO currently in Minnesota Medicaid (known as Medical Assistance) and a related program called MinnesotaCare.

"We are deeply disappointed this legislation was added as part of a closed-door process, without public input, and appears to be specifically targeting a local company that employs over 19,000 people in the state," UnitedHealthcare said in a statement to the Star Tribune.

At the end of March, the company was managing care for nearly 7.7 million Medicaid beneficiaries in states across the country. Managed care is the term for when private insurers provide benefits — in this case, as specified by government programs — through their networks of health care providers and systems for reviewing claims.

The company's enrollment total in Minnesota this month is about 31,724 people.

The Health Plan Partnership of Minnesota — a trade group representing for-profit HMOs — called the change discriminatory. The group said the decision is based on unsubstantiated beliefs about differences between for-profit and nonprofit HMOs.

"Creating laws based on myth, rather than evidence, and disrupting health coverage for more than 30,000 vulnerable Minnesotans sets a dangerous precedent," said Heidi Holste, executive director of the Health Plan Partnership of Minnesota, in a statement.

UnitedHealthcare's current contract ends this year, Reyer said, so there was no guarantee UnitedHealthcare would remain an option for beneficiaries in 2025.

Sen. Melissa Wiklund, DFL-Bloomington, called it "prudent" to restore the old approach because lawmakers in 2017 didn't sufficiently study the initial change to make sure care wouldn't be compromised. Wiklund also defended the process used by lawmakers, saying versions of the legislation were heard and debated at various points this spring.

"I don't think it's focused so much on United as the principle of making sure that our public programs are served by entities that are dedicated to that not-for-profit status," Wiklund said.

She added that for-profit companies "maybe don't place the same value on making sure people have access to high quality health care. They have another perspective that they need to keep in mind, and that's satisfying shareholders and stakeholders who are expecting to be able to maintain profitability."

Sen. Paul Utke, R-Park Rapids, argued for-profit HMOs have a proven track record that includes boosting competition.

"Our own Department of Human Services, they put out requests for proposals and they picked a for-profit HMO," he said.

Medicaid contracts in Minnesota have been a huge source of revenue over the years for health insurers. While there are years when some health plans lose money on the business, it generated record profits in 2022.

At that time, the state Department of Human Services (DHS) said its managed care contracts accounted for about $8.7 billion in annual spending, with coverage provided for about 1.3 million residents. Those figures were somewhat inflated, however, by continuous-coverage requirements during the COVID public health emergency.

As of May, total managed care enrollment in the programs stands at about 1.1 million people, as the state has resumed coverage redeterminations for beneficiaries.

The previous ban stopped for-profit health insurers from obtaining HMO licenses in Minnesota, while the new ban blocks DHS from awarding contracts to these insurers. For-profit HMOs still can be licensed in Minnesota and compete for other types of business, such as customers in the fully-insured markets for groups and individuals.

Reyer said she worked for the change due to concerns the profit motive has too often pushed health insurers to wrongly deny or delay coverage for needed medical services. There are also concerns about nonprofits denying care, Reyer said, adding that she's "no apologist" for those health insurers.

"Let's face it, for-profit companies exist to legally maximize shareholder value," she said. "That's their requirement."

The new law also prevents for-profit HMOs from winning managed care contracts in the State Employee Group Insurance Program (SEGIP). Currently, the for-profit insurers Humana and Allina Health Aetna also have HMO licenses in Minnesota, although they don't have Medicaid contracts here.

Forty states plus the District of Columbia provide Medicaid coverage through managed care companies, but researchers say there's been a lack of transparency about how well this has worked for beneficiaries. This data void, in turn, has made it difficult to compare the relative quality of for-profit and nonprofit health plans in Medicaid, said Andy Schneider, a researcher with the Georgetown Center for Children and Families, during a University of Minnesota forum earlier this year.

A number of Minnesotans have submitted public comments saying they place a high value on coverage being provided by nonprofit HMOs, while believing these health plans are "more community engaged and responsive to local needs," the Minnesota Department of Health said in a report this year. But this study also found that "minimal data are available to shed light on whether differences exist between nonprofit and for-profit HMOs with regard to day-to-day operations, enrollee satisfaction and quality of care."

DHS says enrollees that need to change health plans for 2025 will receive a notice as part of the annual health plan selection. They do not need to take any action right now, the agency says. Enrollees typically have a choice between two or more managed care options, depending on their county of residence.