DOD Awards UnitedHealth $20.5B Military Health Contract Over Triwest Healthcare

The U.S. Department of Defense has awarded UnitedHealth Group a five-year health care services contract for Tricare's 21-state West region valued at about $20.5 billion, reversing on the contract it first awarded to the TriWest Healthcare Alliance.

Tricare is the health care coverage program for active-duty and retired military service members and their families.

UnitedHealth Military & Veterans Services unit was awarded the administrative services contract to provide managed care support to the program, with the contract expected to generate about $1.4 billion in revenue for UnitedHealth over the five-year period. The first year of operations is expected to start April 1, 2013.

UnitedHealth Group "looks forward to providing service members and their families the high-quality health care that they deserve," said Matt Stearns, a spokesman the largest U.S. health insurer by total revenue.

TriWest had originally been awarded the contract in July 2009. "At this time, we will seek to ascertain whether it was appropriate and fair, and to determine our future course of action," TriWest said in a statement.

In July 2009, TriWest Healthcare, a consortium of Blue plans affiliated with Blue Shield of California, was awarded the five-year contract, which at that time was valued at about $16 billion (Best's News Service, July 15, 2009). But in April 2011, UnitedHealth won the protest of the contract then worth about $17 billion, convincing the Pentagon to reconsider its decision to award the contract to TriWest (Best's News Service, April 8. 2011).

"We are extremely disappointed that the Department of Defense chose to reverse their decision," said David J. McIntyre, Jr., president and chief executive officer of TriWest, in a statement. "For the past 16 years, we have worked tirelessly and with the highest levels of respect to meet the health care needs of West region military families who have very much become our family.

"TriWest will continue to deliver on the promise of Tricare throughout this challenging transition period," McIntyre said.

UnitedHealth will be the contractor serving nearly 2.9 million Tricare beneficiaries the West region that includes Alaska, Arizona, California, Colorado, Hawaii, Idaho and Iowa, excluding Rock Island Arsenal area; Kansas, Minnesota and Missouri, excluding the St. Louis area; Montana, Nebraska, Nevada, New Mexico, North Dakota, Oregon, South Dakota, portions of Texas and Utah, Washington and Wyoming.

The contractor helps the Military Health System to operate an integrated health care delivery system combining its resources with the military’s direct medical care system to provide health care, plus medical and administrative support services to eligible beneficiaries in the West region, the DOD said. UnitedHealth will provide contract and claims processing, as well as cost trend risk management, fraud and abuse detection, and quality management services.

"This contract was competitively procured using the best value source selection process with two initial offers received," the DOD said in a statement.

Last June, UnitedHealthcare sued the DOD over its award of the Tricare South region administrative services contract then valued at $23.5 billion to Humana Inc. (NYSE: HUM). Filed in the U.S. Court of Federal Claims, UnitedHealth's lawsuit followed a decision by the U.S. Government Accountability Office to uphold the Department of Defense's award of the contract to Humana, rejecting UnitedHealth's protest of that award (Best's News Service, June 15, 2011).

UnitedHealth has since dropped its suit and Humana is the incumbent for the South region.

UnitedHealthcare Insurance Co. currently has a Best's Financial Strength Rating of A (Excellent).

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])