Managed Care Consolidation in Minnesota

Even as Minnetonka, Minnesota-based UnitedHealth Group (NYSE: UNH) reported larger-than-expected losses in its health-exchange segment in the fourth quarter, a smaller Minnesota managed care company found relief from its own health exchange losses. PreferredOne, based in Golden Valley, was acquired by Fairview Health Services in Minneapolis for an undisclosed price. Fairview is a not-for-profit, integrated health system that has partnered with the University of Minnesota.

PreferredOne serves more than 1,500 employers and 285,000 members. The company enjoyed dramatic growth in the first year that the state’s healthcare exchange, MNsure, opened, but it was forced to drop out in 2015 after incurring $139 million in losses. It will operate as a wholly-owned subsidiary of Fairview, which already had a 50% ownership stake. North Memorial Health Care and PreferredOne Physicians Group each held a 25% stake. They are now out of the picture, and PreferredOne’s CEO, David Crosby, will continue to lead the company.

Meanwhile, UnitedHealth said it booked a $245 million loss in the fourth quarter of 2015 in advance recognition of 2016 losses it expects to incur from its ACA-related products. That’s about half of the $500 million it now projects it will lose in 2016. Enrollment continues to grow, and has now reached about 700,000 members in 2016. Be careful what you wish for.

 

 

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