Minnesota Debates Removing Health Insurers from Medicaid, MinnesotaCare

State Senate committee hears testimony on bill to replace managed care organizations with direct state administration of public health programs

Published on Mar. 10, 2026

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The Minnesota Senate's Health and Human Services committee heard testimony on a bill that would eliminate managed care organizations (MCOs) from the state's Medicaid and MinnesotaCare programs. The bill, sponsored by Sen. John Marty, would replace the MCO system with a Patient-Centered Care program administered directly by the state Department of Human Services. Proponents argue this would reduce administrative costs and increase the share of funding going directly to patient care, while opponents raised concerns about potential impacts on provider participation and patient access.

Why it matters

This proposal represents a significant shift in how Minnesota manages its public health insurance programs, moving away from the managed care model used by most states. The outcome could impact access to care, costs, and administrative burdens for both patients and providers in the state's Medicaid and MinnesotaCare plans.

The details

The bill, SF 3612, would replace the current MCO system with a Patient-Centered Care program administered by the Minnesota Department of Human Services, contracting with a single administrative services organization (ASO) to handle claims processing and other administrative functions without taking on financial risk. Proponents argue this would reduce overhead costs, with Connecticut seeing over $4 billion in savings after a similar transition. However, opponents raised concerns that the change could lead to fewer providers accepting Medicaid patients due to lower reimbursement rates without the leverage of MCO contracts.

  • The Minnesota Senate Health and Human Services committee heard testimony on the bill on March 10, 2026.
  • Connecticut transitioned from an MCO to an ASO system for its Medicaid program in 2012.

The players

Sen. John Marty

A Democratic-Farmer-Labor (DFL) senator from Roseville and the chief author of SF 3612, the bill to remove health insurers from Minnesota's Medicaid and MinnesotaCare programs.

Tina Liebling

A DFL representative from Rochester who is carrying the House version of the bill to eliminate MCOs from Minnesota's public health insurance programs.

Sheldon Toubman

An attorney with Disability Rights Connecticut who testified that Connecticut's transition from an MCO to an ASO system for Medicaid saved the state over $4 billion.

Chelsea Olson

A representative of the Minnesota Council of Health Plans, a trade group for the state's nonprofit health insurers, who testified against the bill, raising concerns about potential impacts on provider participation.

Sen. Bill Lieske

A Republican senator from Lonsdale and a chiropractor who runs his own clinic, who shared concerns about the bill reducing market negotiability for providers.

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What they’re saying

“This proposal would eliminate that middleman for the two public programs because they create barriers to patient care using limited networks, different drug formularies which change, prior authorizations.”

— Sen. John Marty, Chief author of SF 3612 (postbulletin.com)

“We have very high medical cost ratios, around 97%, meaning almost all the taxpayers' money is actually going to health care, very little to administrative cost.”

— Sheldon Toubman, Attorney, Disability Rights Connecticut (postbulletin.com)

“Managed care organizations leverage their commercial contracts and require in-network doctors to see patients on both their commercial and MA lines of business. How will the state replace this leverage to prevent providers from prioritizing commercial payers over the lower-paying MA enrollees?”

— Chelsea Olson, Representative, Minnesota Council of Health Plans (postbulletin.com)

“I worry with a single option, you run into a market where the market's going to be even less negotiable than what we currently have.”

— Sen. Bill Lieske, Republican senator, chiropractor (postbulletin.com)

“I may have to trial three different psychiatric medications to support and stabilize a patient, because I can't get the one that isn't covered until they at least tried (the other medications) and failed. It's ridiculous.”

— Nancy Westman, Psychiatric nurse practitioner, Hennepin Health (postbulletin.com)

What’s next

The bill was laid over for future consideration by the Minnesota Senate Health and Human Services committee. A fiscal note analyzing the anticipated costs of the bill has not yet been released.

The takeaway

This debate over removing health insurers from Minnesota's Medicaid and MinnesotaCare programs highlights the ongoing tensions between controlling administrative costs, ensuring adequate provider participation, and maximizing the share of public health funding that goes directly to patient care. The outcome could have significant implications for access to care and the state's management of these critical public health insurance programs.