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TRICARE West Contract Finally Settled in UnitedHealth’s Favor

In 2009 the Department of Defense attempted to award new contracts to administer their primary healthcare program, TRICARE. These are regional contracts with the country divided up in groups of states as well as a contract to provide overseas services. The Western and Southern regions due to the density of military bases were the two largest and amount to several billion a year. As to be expected competition was fierce for these by different health insurance companies. It is just now, over three years later, that the government is finally resolving these contracts due to the amount of protests and reviews required.

The Western Region contract is worth about $21 billion over its predicted five year life. After a final round of awards and protests the Government Accountability Office (GAO) has upheld the award earlier this year to UnitedHealth (UNH). The GAO ruled in a protest by the incumbent, TriWest to the award in 2012.

TriWest has had the contract since 2003 and won the original re-compete in 2009. This decision was protested by UnitedHealth. In the last three years there have been new competitions, awards and protests. This final decision should stand and UnitedHealth will become the provider.

This is unfortunate for TriWest as their primary business is the TRICARE contract and the company may have to fold without it. There is a good chance that many of their employees could be absorbed by UnitedHealth as is often the case when a new company takes over an existing contract but that is not guaranteed.

The Defense Department faces growing pressure on their health spending which has increased dramatically over the last ten years due to the fighting in Iraq and Afghanistan. Not only has the size of the military grown with more dependents there are also more retirees and severely injured that require health care. TRICARE is the primary mechanism for this.

The Obama Administration has proposed raising the co-pays and annual payments that the military and retirees make but that was struck out of the 2013 defense budget by Congress loathe to pass those costs onto the military. Obama has threatened to veto the bill as it stands due to that provision but many times once the bill is complete it will be signed.

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TRICARE Disputes to Continue as TriWest to Protest UnitedHealth’s Win

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.

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UnitedHealth Is Final Choice for Tricare West Contract

Almost two weeks ago it came out that the Department of Defense had made a final decision in to whom to award the TRICARE West management contract to. The rumors were that UnitedHealth (UNH) would be the winner and that was confirmed at the end of last week.

UnitedHealth won the over $20 billion, 5 year contract after a series of competitions, awards and protests that have taken almost three years to resolve. The losing company, TriWest Healthcare Alliance, had been formed to just manage the contract.

One of the issues facing TriWest was the fact that they had paid a fine of $10 million to the U.S. Government after a whistleblower lawsuit about pricing. How much this affected the source selection is of course impossible to know.

There are reports that UnitedHealth will most likely absorb some of the jobs that TriWest will lose to help it manage the contract.

TRICARE is the U.S. military’s primary medical provider. It is used to cover active duty members, their dependents, retirees and selected Reserve and National Guard personnel. In 2008-2009 new five year contracts to manage the different regions were awarded but several faced protests and took some years to work out.

Defense Department medical costs have increased greatly over the last ten years as the military has fought in Iraq and Afghanistan, grown in size and also gained more retirees. This has caused the TRICARE, Veterans and other health care programs to grow significantly. The recent Obama budget proposal hopes to begin reining in this cost growth by in some ways requiring members to pay more in co-pays and fees. Whether that is politically acceptable remains to be seen. Certainly TRICARE will be a big part of that budget discussion.

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Long Running Saga of TRICARE Management Contracts Coming to an End?

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.

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