UnitedHealthcare loses appeal to retain Minnesota Medicaid business in 2025

UnitedHealthcare has suffered two setbacks in its legal fight against a new Minnesota law that blocks for-profit HMOs from winning contracts to serve the state Medicaid program.

First in late August and then again in October, Minnetonka-based UnitedHealthcare failed to persuade a judge to impose a temporary injunction that could have preserved the health insurance giant’s position as a Medicaid vendor in Minnesota in 2025.

Even so, company executives are not about to give up on the underlying lawsuit.

The litigation extends a 50-year debate in Minnesota over whether profit motives should disqualify health plans from competing as HMOs in the state’s health insurance market.

“We strongly believe that Minnesotans deserve the right to choose among health plans that offer the broadest access to care, the most innovative services and the highest quality benefits to meet their health care needs,” UnitedHealthcare said in a statement.

In May, the Legislature passed a bill that stops the Minnesota Department of Human Services (DHS) from contracting with for-profit HMOs to manage care in Medicaid and a number of related public health insurance programs. Gov. Tim Walz signed the bill in late May.

In August, UnitedHealthcare filed its legal challenge, arguing the statute violated the “single subject clause” of the state Constitution since it was part of a massive omnibus bill on a wide variety of topics.

A Ramsey County judge on Aug. 29 rejected UnitedHealthcare’s bid for a temporary injunction, saying DHS had the authority not to renew the company’s contract independent of the new law. The company turned to an appellate court, but the appeal was dismissed Oct. 15.

“UnitedHealth will not have contracts in 2025 as a result of the ruling,” DHS said in a statement, referring to the Medicaid business.

Medicaid is the state-federal health insurance program for low-income residents known as “Medical Assistance” in Minnesota.

It’s one of several safety-net health insurance programs in the state that help groups ranging from low-income seniors to people with disabilities. Another related public program is MinnesotaCare, which covers residents with slightly higher incomes who are employed but don’t receive job-based coverage.

Across these public programs, the state has for decades hired HMOs to manage care for beneficiaries. As of last month, UnitedHealthcare was managing care for nearly 33,000 state residents in Medical Assistance and MinnesotaCare.

For-profit companies in Minnesota have long sold health insurance. But when a new type of insurer emerged in the early 1970s called the “health maintenance organization,” the Legislature decided only nonprofits could be licensed as HMOs.

HMOs had a greater degree of influence than traditional health insurers on how patients obtained care. Policymakers worried that profit-making motives at HMOs would lead to stinting on patient care.

UnitedHealthcare, which was based in Minnesota, could not directly sell HMO plans to Minnesotans or Minnesota employers because of the legal prohibition, even as it was growing into the largest health insurer in the country.

Minnesota’s ban on for-profit HMOs was eliminated in 2017 when Republicans in the Legislature sought to bring more competition to the health insurance market. UnitedHealthcare became the first for-profit to obtain an HMO license and used it to win a contract in the state managed care public programs, where only HMOs can serve as vendors.

In May, state lawmakers instituted a new version of the old for-profit ban — companies could keep their HMO licenses, but DHS could no longer award them public insurance contracts. DFL leaders argued service to patients could be compromised by shareholder demands for profit.

In August, UnitedHealthcare filed its lawsuit, which cited a recent state report that asserted “little to no data are available to assess whether differences across for-profit and non-profit HMOs exist.” The complaint also said for-profit HMOs are not reimbursed at a higher rate than nonprofits, since DHS allows a profit margin of about 1% for all health plans.

The lawsuit named as defendants Minnesota Attorney General Keith Ellison, DHS and the state of Minnesota. The attorney general in September gave notice to the court that he would be filing a motion to dismiss UnitedHealthcare’s complaint.