State seeks takeover at UCare after ‘hazardous’ financial conditions at health insurer

Insurance regulators are petitioning a Ramsey County judge to let the state take control of operations at UCare, a move designed to protect consumers and stabilize operations as part of an orderly wind-down at the Minneapolis-based health insurer.

The petition asking the court to put UCare in a status known as “rehabilitation” follows a previously undisclosed September finding that UCare should submit to administrative supervision and take immediate steps to “remedy its hazardous financial condition by seeking an acquisition or merger partner.”

UCare first announced in September it would stop offering Medicare Advantage plans next year due to its large financial losses. Then last month, the Minnesota Star Tribune reported, Minnetonka-based Medica said it would acquire UCare’s remaining Medicaid and MNsure business in a deal meant to minimize disruption for patients while setting the stage for UCare’s shutdown next year.

For seniors, the moves mean fewer Medicare options, while other people will remain in UCare-branded health plans run by Medica.

The new court filing doesn’t alter the Medica transaction, nor does it provide any information about the fate of more than 1,000 workers still employed by UCare.

Instead, it memorializes that UCare is entering its final chapter after 40 years as a major provider of health insurance to Minnesotans who qualify for government-sponsored benefits. The HMO in recent years experienced what some market watchers described as “catastrophic growth,” where UCare kept adding membership even as it lost more money with each new subscriber.

“UCare is in such condition that further transaction of business would be hazardous, financially or otherwise, to its policyholders, its creditors and the public,” according to findings outlined in the petition filed Dec. 1. “UCare is unable or is expected to be unable to meet its debts as they come due.”

If approved by a judge, the rehabilitation would allow for the orderly wind-down of the HMO’s operations, regulators say, plus a smooth transition for enrollees.

The petition does not list information about health care providers or other potential creditors that could be owed money by UCare. At the end of June, the HMO had about $404 million in capital and surplus.

The Minnesota Department of Health put UCare under administrative supervision in September to protect the interests of “policyholders, creditors and the insurance buying public,” according to the petition.

A closing of the Medica deal is expected during the first quarter of 2026. Financial terms have not been disclosed.

“UCare will no longer have any active insurance business, and it will not be writing any new insurance policies,” the petition states. “It will wind down its operations, including managing the runoff of its 2025 business.”

As of June 30, about 51,000 people were buying UCare coverage for individuals via MNsure.

Rather than move to immediately liquidate UCare, the health commissioner’s petition seeks a period of rehabilitation and continued operation for UCare to support the Medica transition.

“The commissioner will petition the court for an order of liquidation at a later date, to be determined,” the Dec. 1 filing says.

The state Department of Human Services is coordinating with the federal government over transition plans for people in UCare health plans where beneficiaries qualify for both Medicaid and Medicare. That work is ongoing.

In September, UCare announced it would completely exit the Medicare Advantage market after the end of this month. About 150,000 people with this coverage are looking for new health insurance, as a result.