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UnitedHealth Faces TriCare Battle

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A health insurer has succeeded at slowing U.S. Department of Defense efforts to shift a giant health plan administration contract to a competitor.

Humana Military Healthcare Services, an arm of Humana Inc., Louisville, Ky., (NYSE:HUM) has persuaded the U.S. Government Accountability Office to have the U.S. Department of Defense take another look at a contracting decision.

The department recently awarded the South Region TriCare program contract to the UnitedHealth Military & Veterans Services unit at UnitedHealth Group Inc., Minnetonka, Minn. (NYSE:UNH)

TriCare is a program that manages health benefits for military personnel, dependents and retirees who get care away from military and Veterans Department facilities.

The new contract could last about 6 years. It has a total potential estimated value of about $22 billion, according to Humana.

The old contract is due to expire March 31, 2010.

Under the old contract, Humana has been managing delivery of health benefits for 3 million active-duty military personnel, dependents and military retirees in the South region, which includes Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee and Texas.

Humana told the GAO that were discrepancies between the award criteria and procedures prescribed in the request for proposals issued by the Defense Department and those that appear to have been used by the department in making its contractor selection.

The GAO has sustained Humana’s protest.

“UnitedHealth Military & Veterans Services made a very strong proposal to the Department of Defense,” according to Lori McDougal, chief executive officer of the unit. “We stand ready to support the health care needs of our nation’s service members, retirees and their families. We will continue to participate in the process as the Department of Defense determines how to implement GAO’s recommendations.”


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