Humana not assured of regaining Tricare contract

Tricare will take "corrective action" after a successful protest of its contract for the southern region, but it's unclear exactly what that means to bidders.

By Emily Berry — Posted Jan. 18, 2010

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Humana appears to have won at least some measure of victory in its push to keep its Tricare membership, but it's unclear whether it will win another five-year contract to administer Tricare benefits in the southern region.

Tricare is the government health plan for military service members, their families and survivors. Commercial insurers are contracted to administer the benefits domestically in three regions: South, North and West.

In July, UnitedHealth Group's subsidiary United Military & Veterans Services won the "third generation" contract for the South region. Humana lost the bid to keep that contract, which it had held since 1996.

The contract is worth an estimated $21.8 billion in revenue over five years.

The third-generation contract period was supposed to begin in 2010, but Humana challenged the bid award process. In October 2009, the Government Accountability Office sustained the protest, finding that Tricare Management Activity, which runs Tricare, had failed in its bid evaluations to account adequately for how much Humana's network discounts could save the government.

In a Dec. 23, 2009, notice to shareholders filed with the Securities and Exchange Commission, Humana said it had learned of the TMA's "intent to implement corrective action" in line with the GAO's recommendations.

Humana's notice said the company "is unable to determine the specific nature or specific timing of the corrective action that will be implemented by the TMA, or what effect such corrective action will have upon the ultimate disposition of the contract award."

To clarify, TMA spokesman Austin Camacho said in an e-mailed statement: "The corrective action could include a range of different processes but will include some sort of proposal evaluation and new source selection decision as the GAO recommended. The same or a different company could be selected."

In the meantime, while TMA sorts out the contracting for the next long-term period, Humana has been awarded a temporary extension of its current Tricare contract, so it will continue administering benefits until at least March 31, 2011.

The GAO also upheld Health Net's protest of the bid process for the next five-year Tricare contract for the North region, but the final award of that contract also is pending.

The reviewers recommended that TMA assess whether Aetna, which originally won, should be disqualified because of "appearance of impropriety" created when Aetna hired a former Tricare official to help prepare its bid.

"We are conducting an investigation of the Aetna apparent unfair competitive advantage the GAO observed and will make an independent determination," Camacho said.

"Depending on the conclusion, we may decide to take some sort of action, which may be to exclude Aetna or otherwise make Aetna ineligible for award. If we exclude Aetna, there are multiple alternatives we can pursue. If Aetna is not excluded, we would do some sort of proposal evaluation and make a new source selection decision consistent with the GAO recommendation," he said.

Aetna spokesman Alfred Laberge declined comment until the TMA makes its final decision. Health Net spokeswoman Molly Tuttle said the company was notified of the TMA's plans and said in a statement that the agency "did not provide a timeline for concluding the review."

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