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TRICARE Protests Continue

TRICARE is the primary medical insurance program for the United States’ military. It covers those personnel, their dependents and retirees along with selected Reservists and National Guardsmen. It functions like a HMO for its members. The Defense Department divides up the country into regions and awards large contracts to individual health insurers to manage these. In 2009 new contracts were awarded but three of them were protested with one, the Southern Region, still not resolved.

The Southern contract was originally awarded to UnitedHealthCare but the incumbent Humana (HUM) protested the decision. The Government Accountability Office (GAO) which reviews protests agreed that the Defense Department had failed to carry out a proper source selection and it was decided to have another competition for the potential $23.5 billion of work.

That contract source selection occurred this spring and it was decided that Humana was the winner. UnitedHealthCare promptly protested that decision basing their claims on a belief that Humana offered too low a payments to providers to lower their costs and that may end up forcing providers from TRICARE limiting the members options.

That protest has now been resolved with the GAO ruling in Humana’s favor. UnitedHealthCare is still reserving the right to appeal that decision which it can to the Federal Courts. Normally in these situations the incumbent stays in while the protest goes on which means Humana will be the provider and collect revenue and earnings from this contract.

There is no doubt the Defense Department made serious errors in this cycle of contracts. Three of the four were protested and in all three cases the original winner has not kept the contract. UnitedHealthCare looks like they will continue their protest of the second attempt to award the South Region contract so a final decision may not be made until the Fall. It will have taken the Defense Department almost two-and-a-half years to resolve all of this.

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