UCare is back in hiring mode as the Minneapolis-based health insurer returns in a big way to state public health insurance programs.
It's a reversal from two years ago, when the HMO cut 250 jobs after losing the vast majority of the state business through competitive bidding.
"We're excited about again being a larger player in this market," said Jim Eppel, UCare's chief executive, during an interview this week. "UCare was founded to serve this population, so in many ways it's what we've always been about."
For years, the state has hired HMOs to manage care for most in the Medicaid and MinnesotaCare public insurance programs, which primarily cover lower-income residents.
Last year, Medica announced it would stop serving as a managed care organization in the programs this spring due to mounting financial losses. As a result, the state in February said that UCare and other carriers would step in as replacements for the roughly 300,000 enrollees currently covered through Medica.
Eppel said UCare is "satisfied" with its new contract agreement but declined to discuss financial details or Medica's assertion that payment rates set through competitive bids were too low.
UCare says it expects to hire 90 full-time workers as it prepares to receive an estimated 150,000 former Medica subscribers in May. The insurer this week started publicizing openings for jobs ranging from customer service to claims processing.
It's a remarkable change from July 2015 when UCare's outlook was "very, very grim," recalled Roger Feldman, a professor of health policy and management at the University of Minnesota.
At the time, the HMO's downsized contract with the state eliminated roughly half of UCare's annual revenue. By January 2016, the insurer had eliminated 250 jobs, or nearly one-third of a workforce that stood at about 850 people just a few months earlier.
It was a challenging time, Eppel said during the interview at the nonprofit company's headquarters in northeast Minneapolis. But UCare tried to do right by employees, he said, by notifying workers of layoffs several months in advance and pledging they'd be hired back if possible.
Over the past year, about 40 former workers have returned as openings emerged, Eppel said. With the return this spring of UCare's bigger role in the state programs, other old-timers likely will be coming back, too.
"I just had a text from a former employee this morning saying, 'Hey, Jim, I really want to come back. Who should I talk to?' " Eppel said on Wednesday.
"We committed to being totally open and transparent and respectful of folks when they left," he said. "We also committed to them that when we were in a position to bring them back, they would be our first choice."
With the 2016 change, much of UCare's enrollment and revenue shifted to Medica and Eagan-based Blue Cross and Blue Shield of Minnesota. But in November, Medica and Blue Cross collectively reported about $195 million in losses during the first three quarters under the new contracts.
With Medica's departure this spring, enrollees will have a choice of at least two managed care organizations in all counties, so it's impossible to make precise revenue projections. But a Star Tribune analysis suggests UCare's amended contract for 2017 could generate roughly $500 million in revenue over eight months.
The boom-bust cycle for UCare shows the trouble for insurers when they aren't diversified, said Feldman of the U. The process also suggests the state's system of awarding contracts is causing more disruption than it should, Feldman said, adding that he's not sure what changes should be made.
"What bothers me is this idea that when so much of your business is dependent on a state contract, that you can go from boom to bust to boom again," Feldman said. "That's got to involve extra costs for the plans and the public."
In the public programs, UCare won't be paid the relatively high rates it initially submitted during competitive bidding in 2015. Even so, the state will pay the HMO more money in most cases than it's been paying Medica.
In 2017, the state expects to pay an extra $33 million to UCare and other insurers that fill in, according to the state Department of Human Services (DHS). In addition, the replacement health plans will collect $22 million in transition payments (at an estimated average of $73 per person) for signing up former Medica enrollees.
The state says it's saving $21 million during the first four months of 2017 by paying Medica at 2016 rates. So, the net financial impact is about $34 million in extra costs, according to DHS.
Competitive bidding and related changes have saved the state $1 billion since 2011, DHS said in a statement, adding the system is better than its old process that "resulted in greater inefficiencies and higher costs to taxpayers."
The department said any costs connected with Medica's exit should be attributed to the HMO's decision, rather than competitive bidding. A Medica official disputed the point, writing by e-mail: "Since competitive bidding began we haven't had a year without significant member disruption in this state."
UCare was founded in the 1980s to manage care for people in state public programs. The HMO has since branched out into the Medicare market as well as the individual market, where self-employed people and those who lack employer or government coverage buy insurance.
Profit margins in Medicare, however, have been relatively low. The individual market, meanwhile, has been a mess with losses for insurers and premium jumps for 2017 that averaged 50 percent or more.
Eppel said UCare is committed to working through the tough times in the individual market and is pushing for changes that could help it stabilize.
Before 2014, many individuals with high costs were covered through Minnesota's high-risk pool, Eppel said, where the expense was spread across a much larger group of people. That contrasts with the current market, where Eppel pointed to the example of one person with individual coverage at UCare whose medicine costs add $5 per member, per month for all other individual market subscribers.
"That means every one of our individual members is spending $5 more per month, to cover [one patient's] drug costs," Eppel said.
Christopher Snowbeck • 612-673-4744