Minnesota’s Medicaid Program To Block For-Profit Insurers From Participation

Dive Brief:

• Minnesota will no longer allow for-profit health insurers to participate in its Medicaid program starting in 2025, under a provision in an omnibus bill signed into law last week.
• The ban will only immediately affect UnitedHealthcare, which is the sole for-profit managed care organization with a Medicaid contract in the state.
• Minnesota Medicaid covers roughly 1.1 million people, with UnitedHealthcare covering more than 31,000 of that population.

Dive Insight:

The legislation restricts Medicaid contracts to nonprofit entities, restoring Minnesota’s four-decade-long ban that was briefly overturned in 2017 by the state’s then-Republican legislature. Before the 2017 repeal, Minnesota was the only U.S. state that banned for-profit companies from selling health insurance.

Now, once again, “the commissioner must not enter into a contract with a health maintenance organization,” unless they’re a nonprofit corporation or a governmental unit, reads the bill, which passed the Democrat-controlled Minnesota legislature on May 19. It was signed into law by Gov. Tim Walz, also a Democrat, on Friday.

Medicaid managed care, wherein states pay private health insurers a flat rate per enrollee, has grown to become the dominant Medicaid delivery system in the U.S. The programs can be a major source of revenue for insurers — Minnesota’s managed care contracts account for $8.7 billion in annual spending, according to the state’s Department of Human Services (DHS).

However, insurers are facing rising criticism for restricting care to retain more in Medicaid revenue as profit. Since the companies are paid on a capitated basis, they may be incentivized to deny or limit medical services to pocket a larger portion of the healthcare dollar.

That incentive has underpinned recent concerns about the adequacy of Medicaid managed care plans. Top Democrats in Congress launched an investigation into the quality of MCOs last year, following research finding high rates of coverage denials.

Concerns are compounded when insurers are driven by profit motivations, according to supporters of Minnesota’s ban.

Members of the Minnesota public included in a DHS study on the state’s insurance markets said they place a high value on insurance coverage and care provided by nonprofits. They also believe that nonprofits are more engaged with the community and responsive to local needs.

Yet data is scarce on the differences between for-profit and nonprofit HMOs, including around operations, care quality and member satisfaction, the DHS report published in February found.

A spokesperson for UnitedHealthcare said in a statement the company is “deeply disappointed” by the legislation, which “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.” 

“This legislation is unnecessary and will disrupt health care coverage for more than 31,000 Minnesotans while taking away choice for many others by creating a less competitive marketplace,” the spokesperson continued.

Minnesota isn’t the only state shaking up its Medicaid providers. Multiple others have recently reprocured contracts.

Earlier this month, Kansas awarded contracts to incumbents UnitedHealth and Centene, while replacing CVS with an Elevance plan.

Florida issued Medicaid awards in April, renewing contracts with Centene, Elevance and Humana but removing UnitedHealth, CVS and Molina from the state. Molina has already said it plans to challenge the decision, while UnitedHealth signaled it would move to protest as well. Molina is also challenging a recent Medicaid contract loss in Virginia.

New Hampshire and Michigan also reprocured bids earlier this year, with Centene renewing its contract in New Hampshire. The Michigan awards essentially preserved the status quo in the state, with Centene, CVS, Molina and UnitedHealth reprocuring contracts with minor membership changes.