The Minnesota Department of Health has asked a court to place health maintenance organization UCare Minnesota into rehabilitation, citing a projected deficit of $372.9 million by the end of the first quarter of 2026.

According to the petition for rehabilitation, UCare’s capital and surplus fell 47.5% in 2024, from $1.05 billion to $551.6 million as of Dec. 31. By June 30, capital and surplus had declined a further 26.7% to $404.2 million, with risk-based capital figures and some other financial details redacted in the filing.

In August, UCare notified the health and commerce departments that it expected upcoming cash flow and liquidity strain and that it would need to be acquired to remain operational. The company was placed under administrative supervision in September while it pursued a buyer, according to the filing.

Read more: JAB Insurance to acquire Columbian Financial Group, exiting rehabilitation

In November, Medica Holding Co. agreed to acquire certain UCare contracts and assets in a transaction expected to close in the first quarter of 2026. Under the agreement, UCare will assign its 2026 Medicaid and individual and family plan contracts to UCare Community Health Plans, in which Medica will hold sole interest.

Once those 2026 contracts are transferred, UCare will no longer have active insurance operations and will stop writing new business, the petition said.

Although the Department of Health initiated the UCare rehabilitation action and oversees HMOs, the Minnesota Department of Commerce generally supervises insurers’ financial condition and examined UCare’s financial statements on its behalf.

Read more: North Carolina appeals court upholds contempt in Lindberg insurer asset-freeze case

The UCare plan fits into a broader pattern of using transactions to resolve stressed insurers, including life carriers in formal rehab. In one recent example, JAB Insurance agreed to acquire Columbian Financial Group, with the deal structured in coordination with rehabilitators in New York and Illinois and framed as a central component of Columbian’s plan of rehabilitation, backed by a fresh equity capital infusion to support policyholders.

Courts have also been active in policing compliance with rehabilitation orders, as seen in North Carolina, where the Court of Appeals recently upheld civil contempt findings against Greg Lindberg and Global Growth for violating a temporary restraining order that protected several insolvent insurers under rehabilitation, including Bankers Life Insurance Company and Colorado Bankers Life Insurance Company.