Minneapolis-based UCare looks to expand into Iowa health insurance market

UCare is planning to bid on a contract that would let the Minneapolis-based health plan begin managing care for a large group of beneficiaries in Iowa's Medicaid program.

If successful, the move would expand the nonprofit insurer's service area beyond its current health plan offerings in Minnesota and Wisconsin.

Iowa started hiring private, managed-care companies to administer coverage for Medicaid beneficiaries in 2016. But the transition was bumpy, with two carriers entering and quickly leaving the market within the first few years.

Currently, Medicaid benefits in Iowa are provided to individuals through contracts with subsidiaries of two for-profit insurers — Indiana-based Anthem and Missouri-based Centene.

"We have been looking for geographic expansion opportunities that fit with the areas where we really feel we have expertise ..," said Ghita Worcester, the senior vice president for public affairs at UCare. "That idea of being able to bring a nonprofit health plan into the market and really try to create partnerships ... is being very well received as we talk to folks there."

Medicaid is jointly funded by states and the federal government to provide health insurance primarily for lower-income people under the age of 65.

In 2015, two other nonprofit carriers in Minnesota — Bloomington-based HealthPartners and Minnetonka-based Medica — expanded into other portions of the Iowa health insurance market. Those insurers continue to do non-Medicaid business in the Hawkeye state.

Minnetonka-based UnitedHealthcare, which is the nation's largest health insurer, also sells some types of coverage in Iowa.

With nearly 1,200 employees, UCare was Minnesota's fourth largest nonprofit health plan as of 2019. It provides coverage for those in the Medicare and Medicaid programs as well as people who buy individual policies through the MNsure health insurance exchange.

Worcester said UCare will compete in Iowa for a state contract that's now held by Amerigroup, a subsidiary of Anthem that currently covers more than 400,000 people. The state's request-for-proposals is due this spring with contracts to selected managed care organizations expected this summer, she said.

Work covering beneficiaries would begin in July 2023. UCare says it is hiring local executive management and plans to open an office in Iowa.

"Medicaid would be the first product offering that we're considering," Worcester said. "We would consider Medicare and individual-and-family, but we're starting with Medicaid."

Through the first nine months of 2021, UCare's operations in Minnesota posted operating income of $43.1 million on $3.65 billion of revenue. More than half of the insurer's revenue and enrollment comes from contracts with Minnesota's Medicaid program.

For decades, Minnesota has hired private HMOs including UCare to manage care for Medicaid recipients. The state reserved the market for nonprofit insurers until a 2017 law opened it up to for-profit competition.

UnitedHealthcare subsequently competed for a contract and is entering the market this year. In Iowa, United was one of the two health insurers that dropped out of Medicaid during the early years of the state's switch to managed care.

In 2015, HealthPartners announced plans for a joint venture with a Des Moines-based hospital system to create a health insurance company to sell Medicare health plans. The next year, Medica began offering individual market coverage in Iowa, at one point becoming the largest seller of health-exchange policies in the state.