Filed under: Business Line, Companies, Contract Awards, Department of Defense, Events, GAO, logistics, medicine, Protest, Services, UnitedHealth
Earlier this month the U.S. Department of Defense decided to award the TRICARE West management contract to UnitedHealth Group (UNH). This was the culmination of almost two years of effort to award this very large contract. Previous attempts to award the nearly $20 billion contract were protested by the loser as TriWest Health Alliance the incumbent and UnitedHealth attempted to win the contract.
TRICARE is the main medical insurance program for the U.S. military. It covers active duty members, their dependents, retirees and some Reservists and National Guard members. Under TRICARE personnel utilize civil providers as well as military medical facilities and the companies with the contracts manage the execution of their benefits. The U.S. is divided into regions and different contracts are awarded to various contractors to operate them. TriWest had been formed to do the West contract and has had it until the latest round of contracts in 2009.
Now only ten days after the announcement of the award to UnitedHealth after two rounds of protest TriWest is saying it will file a protest against this latest decision. In their press release the company states that this is due to concerns that the “contract is the result of a flawed and unfair process.” Specifically they believe that due to their lower price the contest should be re-evaluated.
The normal process for the protest is that it will be reviewed by the Service awarding, then may go to the Government Accountability Organization (GAO) and ultimately to the Federal Courts if a party is not satisfied. The result of the review could be denying the protest allowing UnitedHealth to keep the contract, a direction to redo the source selection, a new contest or in rare cases the award is overturned and given to the protester. Protests normally are allowed 100 days. During the protest the new contract cannot be executed so UnitedHealth’s effort will be placed on hold.
The contract is the majority of TriWest’s business. The near term health of the company requires them to keep it. They have little to lose by protesting this award.
Filed under: Business Line, Companies, Contract Additions, Contract Awards, Department of Defense, Events, Humana, logistics, medicine, Protest, Services, UnitedHealth
Updated – To make clear this was an Agency level protest and not a GAO one.
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 by different losers. Since then the Department of Defense has been working through the protests and getting new contracts in place.
The contracts are awarded regionally to provide management of care and providers. The West contract was originally won by the incumbent, TriWest, but UnitedHealth Group (UNH) protested. The Department of Defense upheld the protest and the contract was put up for bid again. Again TriWest and UnitedHealth bid on the contract. Now it is expected that a decision on the winner will be made in the near future.
Of course with the history of these contracts there is no guarantee that the loser may protest this decision. With the Southern contract Humana (HUM) and UnitedHealth went trough several iterations as the awards and protests followed each other. The last decision was by a Federal court in October that sided with Humana. This contract was in protest and litigation for over two years.
If the government can make a decision with this contract that sticks it should close out this saga. TRICARE contracts are usually only for five years so the next round should be coming up in 2014-2015. Expect competition to be just as fierce with that round.
Military health care is in transition as the Department of Defense looks for ways to reduce costs. These have increased greatly over the last decade due to the commitments to Iraq and Afghanistan and the larger size of the military. There are also now much more retirees and veterans who need care. In the next budget there is a proposal to increase the co-pays and fees paid by members for their TRICARE. There will also be pressure to reduce payments to service providers.
Even so expect the large health insurance companies compete for these contracts just like the last round.
Filed under: Business Line, Companies, Congress, Events, Federal Budget Process, logistics, medicine, Proposal, Restructuring, Services
TRICARE is the major health insurance program for the U.S. military, their dependents and retirees. It was created in the Nineties as a follow on to the CHAMPUS program primarily due to the end of the Cold War and the BRAC process. This led to the closing of hundreds of installations across the country making it harder for military retirees especially to gain access to health care. TRICARE is similar to an HMO in that it allows members to utilize private health care providers and facilities. The way it is set up requires a small premium each year.
As the U.S. military has grown over the past decade which includes numbers of dependents and retirees health care has become a major cost to the Defense Department. In 2012 it will cost over $50 billion or about eight percent of the total proposed budget. In the last decade the cost of military health care has increased from about $20 billion to a projected $64 billion in 2015 in unadjusted dollars.
In a move to try and counter these increases Secretary of Defense Robert Gates has proposed charging more for the premiums by as much as 300 percent. These moves have not been included in the defense budget as Congress has eliminated the increases. In 2012 the proposal is a much more modest $2.50 to $5.00 a month and this may have a better chance of approval.
The size of TRICARE is illustrated by the on-going struggle between Humana (HUM) and UnitedHealth Group (UNC) over the Southern region management contract. The two companies have protested the awards to each other of this potentially $20 billion contract.
Personnel costs as a whole have increased dramatically over the last two decades and this is eating up the Defense top line budget authority. Gates has already proposed the simplest way to lower these costs by eliminating Soldiers and Marines but this is also being fought by Congress as it makes little sense to reduce the size of the military when it is still engaged in Iraq and Afghanistan.
If defense spending will stay flat or start to be reduced to keep a decent amount of money for development and production of weapons health care costs need to have their growth limited. At the same time the nation and Government must pay for the care of its active duty forces and retirees as failure to do so would negatively impact recruiting, retention and the effectiveness of the U.S. military. Transferring some of the costs to the users may be a simple solution in the short term but it does set a precedent where larger and more harsh increases to premiums could be added by a future administration and Congress which then could lead to lack of access and care for military personnel.
As with all aspects of cutting Federal spending this won’t be easy but it is clear that something needs to be done due to the current deficits and budgetary pressures.
Filed under: Business Line, Companies, Congress, Contract Awards, Department of Defense, Events, Federal Budget Process, logistics, medicine, Protest, Services
Just when it looked like the last round of TRICARE management contracts had been resolved with the award to Humana (HUM) of the Southern Region contract after a lengthy protest process and review the loser, UnitedHealth Group (UNH), has protested that award.
This is one of several contracts awarded by the Department of Defense to manage what is basically the HMO for military members, their dependents and retirees. The value of the contracts are quite large due to the size of the population being served and this contract is worth $2.5 billion initially and has a total value of over $23 billion if all options are exercised.
In 2009 United won the contract away from incumbent Humana but that company protested and it was upheld. It has taken DOD over a year to resolve the issue ending up with requiring the bidders to submit new proposals. A few weeks ago it was announced that Humana’s bid was chosen over its rival. United is now protesting that award.
The protest is based on the fact that the losing company believes Humana “offered steep discounts in its latest bid that will pay doctors and hospitals below rates paid in the Medicare system.” This could drive providers out of TRICARE and limit care options for the users.
The protest will mean that the new contract will be delayed and the incumbent, Humana, will get basically a bridge to maintain their current services while it is resolved. Depending how it goes the Government Accountability Office (GAO) has the first attempt to review and rule on the protest although it may go further into court. Most protests are resolved within 100 days so there may be a further three months delay before the new contract starts.
If there really is cuts to the U.S. defense budget including attempts to reduce the cost of medical care as proposed by Secretary Gates then protests might become more common. Less big contracts mean their value to an individual company is heightened which leads to a greater need to win them. The potential for changes to the whole health insurance business with the implementation of health care reform also may lead companies to value contracts like this one for their stability and size.
This is now approaching the two year mark for these contracts to be resolved and it could drag out for several more months.