Court Orders Rehabilitation of UCare as Fairview Files $100 Million

In a major and unsettling development for Minnesota’s health care system, a Ramsey County judge has placed the Minneapolis based nonprofit insurer UCare into court ordered “rehabilitation,” a legal takeover that signals the beginning of an orderly wind down toward liquidation and the transfer of its remaining insurance business to Medica.

The order, issued in mid December following a petition from the Minnesota Department of Health, removes operational control from UCare’s board and executives and places the company under direct state supervision. Regulators concluded that the insurer’s financial condition had become “hazardous” and that immediate intervention was required to protect members, providers, and the broader health care system.

A legal step toward liquidation

Despite its reassuring name, rehabilitation in Minnesota insurance law is not a recovery plan. It is a structured precursor to liquidation. The process allows the state to seize and manage an insurer’s assets, oversee claims, and prevent a chaotic collapse while coverage obligations are unwound.

Under the judge’s order, UCare’s officers and directors are barred from transferring property or spending assets without written approval from the Department of Health. The state now controls UCare’s finances, claims processing, and remaining contractual obligations.

Regulatory filings indicate the intervention was driven by projections that UCare could face a cash flow deficit of approximately $372.9 million by the end of the first quarter of 2026, a shortfall regulators said the company could not survive without court supervision.

Fairview’s $100 million claim

The rehabilitation order has immediate and significant implications for providers, most notably Fairview Health Services, which has moved to intervene in the case as a major creditor.

Fairview told the court it is owed roughly $103.7 million by UCare, broken down as approximately $80 million for unpaid medical services and about $23.7 million for unpaid pharmacy claims. In its filing, Fairview alleged that beginning in April 2025, UCare started reopening and denying claims that had already been paid, describing the practice as an apparent cost saving measure carried out without reviewing medical records.

Fairview warned that if UCare proceeds into liquidation without sufficient assets, the health system may never recover the full amount it is owed, raising broader concerns about financial strain on hospitals and clinics that served UCare members.

From record profits to collapse

UCare’s downfall has been unusually rapid. As recently as 2022, the nonprofit insurer reported more than $300 million in annual profits. By 2024, it posted an operating loss of roughly $504 million, a reversal that regulators and industry analysts attribute to a convergence of pressures.

Like many insurers nationwide, UCare was hit by rising medical costs and higher utilization as patients returned to care after the pandemic. At the same time, strategic exits sharply reduced its enrollment base. Earlier in 2025, UCare withdrew from the Medicare Advantage market, affecting about 158,000 members, and ended state funded coverage in 11 Minnesota counties.

These moves failed to stabilize the company’s finances and instead accelerated its decline.

The Medica transition

To prevent an abrupt loss of coverage for remaining members, UCare reached an agreement to sell its remaining assets and book of business to Medica. The deal is expected to close in early 2026 and would transfer coverage for roughly 300,000 Medicaid and Affordable Care Act individual and family plan members.

State officials have said coverage for those members is expected to continue without interruption during the transition. However, UCare members enrolled in Medicare Supplement, or Medigap, plans were recently notified that their coverage ends on December 31, 2025, forcing many seniors to quickly find new insurers.

Workforce impact

The collapse is also rippling through UCare’s workforce. Approximately 250 employees are expected to be laid off in January 2026, with another 450 positions at risk as operations wind down. Medica has indicated it plans to absorb about 650 UCare employees as part of the transition, though hundreds of jobs are still expected to be eliminated.

What comes next

Rehabilitation gives the state authority to assess UCare’s assets, validate creditor claims, and manage outstanding obligations before liquidation begins. For patients, Minnesota law generally prohibits providers from billing enrollees directly for covered services during insolvency proceedings. For providers like Fairview, the process will determine how claims are prioritized and how much, if anything, is ultimately recovered.

For Minnesota’s health care system, the case stands as one of the most consequential insurer failures in state history, raising new questions about oversight, nonprofit insurance models, and the stability of coverage for hundreds of thousands of residents.

MinneapoliMedia