Humana Continues to Gain Due to TRICARE Contracts

by: Matthew Potter
October 12, 2010

Category: Business Line, Companies, Contract Additions, Contract Awards, Department of Defense, Events, Federal Budget Process, logistics, medicine, Services | RSS 2.0

Update – The posted has been updated to clarify the grounds on which the protest was upheld. I had confused the Aetna and Health Net contract.

Over two years ago the U.S. Department of Defense competed a new round of five year TRICARE management contracts. TRICARE is the HMO type health program used as the primary care for active duty military, their dependents, retirees and selected Reserve and National Guard personnel. The country is divided into several regions and different contracts are awarded to companies to manage the program.

These contracts are very large upwards of two billion dollars a year due to the size of the program. Two of the awards were protested by losers and in their case Humana (HUM) was successful. Humana was the incumbent in this case.

The Government Accountability Office (GAO) upheld Humana’s protest on the grounds that the source selection criteria were not applied correctly.

Because of the protests the government has awarded temporary contract extensions to the incumbents to keep the program going while a decision is made. This has worked out well for the company as they went from a situation where they were losing several billion in revenue to where at least temporarily they were keeping the work and probably even expanding it a little as the military’s demand for health care continues to grow.

There won’t be a decision soon as the government just announced that they are awarding yet another extension to Humana. This will be for a further year.

This means that the company has gained two years work or forty percent of the originally planned new contract. The military probably wants to recompete the contract but they need to make sure that they do everything right to avoid a protest as well as probably rewrite the RFP to take into account changes in U.S. health care law and regulation.

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