Opinion | UCare’s collapse isn’t a surprise

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Minnesota is facing one of its most significant health care failures in decades with the collapse of UCare — a 40-year nonprofit serving more than 300,000 Minnesotans (“Insurer UCare to shut down next year as financial losses mount,” Nov. 18). But the most troubling part is not that it happened. It’s that the warning signs were clear years ago and state leadership failed to act.

Back in 2017, Medica — one of Minnesota’s largest insurers — exited most of the state’s Medicaid market after losing nearly $200 million in a single year serving children and families. The company cut roughly 350 jobs, sued the Minnesota Department of Human Services and publicly alleged that the state’s competitive bidding and reimbursement practices were fundamentally unfair and unsustainable. Medica said the system was broken. State officials denied it. And nothing changed.

That moment should have triggered a comprehensive review of how Minnesota funds and manages Medicaid services. Instead, the system carried on as if the collapse of a major insurer was a fluke rather than a flashing warning light. Now, seven years later, UCare has hit the same wall — only harder.

The root of the problem is Minnesota’s Medicaid competitive bidding model. On paper, competitive procurement is meant to create efficiency. In practice, it forces nonprofit health plans to underprice care to win contracts. These organizations are then required to serve some of the most medically complex populations in the state — seniors, people with disabilities, individuals with chronic illness and those struggling with mental health or substance-use disorders — all while operating on razor-thin margins.

Health plans must manage unpredictable spikes in medical and pharmacy costs, growing behavioral health needs and post-pandemic utilization surges without the ability to adjust their pricing or build adequate reserves. Administrative resources are constrained even as member needs grow more complicated. This isn’t a functional marketplace. It’s a structural trap.

Yet instead of addressing the flaws, Minnesota’s approach remained unchanged — and the pressure continued to build until one of the state’s largest nonprofit health plans could no longer sustain it.

The consequences will fall hardest on Minnesotans least able to navigate disruption. More than 300,000 people will now be moved into new plans with different rules, networks and authorization processes. These are not abstract administrative adjustments. They are disruptions that affect dialysis and cancer patients, homebound seniors, individuals with disabilities and families already stretched thin.

Clinics, hospitals and community organizations will absorb a heavy administrative burden as they adjust to new contracts and systems. For rural Minnesota, where provider access is already limited, instability only magnifies existing barriers. The ripple effects will be real, immediate and significant.

This moment requires more than smooth messaging and transitional planning. It requires a frank acknowledgment that the system itself is broken. Minnesota’s Medicaid framework prioritizes low bids over sustainability, short-term budget targets over long-term stability and administrative limits over the capacity needed to coordinate increasingly complex care.

Transitions alone will not prevent future failures. Another nonprofit will eventually face the same pressures UCare faced unless the underlying structure is reformed.

• Reevaluate the competitive bidding model.

• Establish reimbursement rates based on actual, not theoretical, costs.

• Allow nonprofit plans to build administrative and financial capacity.

• Reduce volatility in plan assignments and contract changes.

• Prioritize continuity of care for vulnerable populations.

A 40-year nonprofit did not collapse because of market trends. It collapsed because leadership failed to address longstanding structural flaws in a system responsible for protecting our most vulnerable residents. If we do not learn from this moment — and fix what has been broken for years — more failures will follow.

Minnesotans deserve better.

Now it’s time for state leadership to prove we can do better.