Medica sues Minnesota DHS for offering its competitors better rates

The insurer's withdrawal from the MinnesotaCare and Medicaid programs affected 300,000 patients.

Medica is suing Minnesota Department of Human Services, accusing it of offering better deals to its competitors for public health insurance programs.

The Minnetonka-based company announced last year it would no longer continue as a health maintenance organization (HMO) for MinnesotaCare and Medicaid patients in the state, a move affecting 300,000 enrollees who will from May 1 be covered by a new provider.

It stems back to 2015, when the Department of Human Services (DHS) sought bids for its Medicaid (known in Minnesota as Medical Assistance) and MinnesotaCare contracts, and Medica led other health providers in offering low bids that saved the state $400 million.

When it came to renew for 2017, Medica told DHS it had lost money on the previous contract and demanded that the new contract should be sufficient to pay providers' costs and tried to renegotiate at a higher level.

The DHS did not agree to this and offered "no meaningful concession" to the health company, the lawsuit says.

But after Medica announced it would not be renewing its contact, the DHS began shopping around its 300,000 patients for bidding from its competitors – including UCare, HealthPartners and Blue Plus.

Rather than offering these patients at rates these companies had already agreed with the DHS when renewing their own contracts, they were offered boosted payment rates higher than those offered to Medica for the same patients.

UCare scooped up most of Medica's patients.

"We believe the State of Minnesota violated state procurement law by refusing to include Medica in negotiations that resulted in higher 2017 payments and other favorable terms to other health plans for this business," a Medica spokesperson told GoMN.

"For that reason, Medica today filed a lawsuit against the DHS, arguing that because of actions by the state that violate their policies and the law, Medica should be given the opportunity to again serve the Prepaid Medical Assistance Program (PMAP) and MinnesotaCare populations as early as 2018."

The DHS defended its actions over Medica, telling the Pioneer Press it had an obligation to ensure coverage for the 300,000 people affected by Medica's decision to cancel its contract.

"Throughout this process, we have negotiated in good faith, fully aware of our responsibilities to the taxpayer and our duties under the law."

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