Health Net triumphs over Aetna for $17 billion TRICARE military contract

TRICARE Management Activity (TMA), the Falls Church, Va.-based management arm of the U.S. Department of Defense Military Health System's TRICARE healthcare program, is shaking up the managed health care industry. TMA has reversed its decision on who won one of three TRICARE regional managed care support (MCS) contracts estimated to be worth an aggregate $55.5 billion, as well as re-opening the bidding on a second contract.

TMA terminated "for the convenience of the government" a disputed contract previously awarded to Aetna Government Health Plans in Hartford, Conn., and announced its intention to hand back the estimated $17 billion contract to Health Net Inc., subsidiary Health Net Federal Services LLC in Rancho Cordova, Calif. "We are very, very pleased and excited at the outcome," Steve Tough, president of Health Net Federal Services, tells the Sacramento Business Journal.

The contract to serve as the TRICARE MCS contractor for the military's North region was awarded to the Aetna Inc. subsidiary--and taken away from Health Net--in July 2009. At the same time, TMA awarded the TRICARE MCS contract for the South region to UnitedHealth Military and Veterans Services, a subsidiary of UnitedHealth Group Inc., in Minnetonka, Minn., and for the West region to TriWest Healthcare Alliance Corp., in Phoenix. Formal protests were filed against all three contract awards. TMA consequently put the three new MCS contracts on hold and extended the contracts of the current contractors through March 31, 2011. The current contractors are: Health Net for the North; Louisville, Ky.-based Humana Inc. subsidiary Humana Military Healthcare Services for the South; and TriWest Healthcare for the West.

Last fall, the U.S. General Accountability Office sustained the protests filed by Health Net over the North contract and by Humana over the South contract, prompting TMA to re-evaluate the proposals for both regions and look at potential corrective actions. TMA calls the decision to re-award the TRICARE North contract to Health Net "consistent with" the GAO's decision. Among the reasons that the GAO sustained Health Net's protest was that Aetna gave an appearance of impropriety and unfair competitive advantage by hiring a former TMA official to help prepare its bid, reports the Stars and Stripes.

Aetna is "extremely disappointed," says Susan Peters, president of Aetna Government Health Plans. "We believe we acted appropriately throughout the procurement process and that no non-public information was ever used in preparing the bid." Aetna is reviewing TMA's decision to decide what options the company has.

The new Health Net contract will include a base period (typically 10 months) with five one-year option periods and have a total estimated value of $17 billion. The North region includes 2.9 million TRICARE-eligible beneficiaries in Connecticut, Delaware, Illinois, Indiana, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia and Wisconsin; the District of Columbia; and parts of Missouri, Kentucky and Iowa.

TMA also has decided to issue an amended request for proposals (RFP) for the TRICARE South contract, giving the original bidders another chance. The revised RFPs must be submitted to TMA within 14 calendar days, according to Humana. "We are eager to move forward with this process and intend to submit our best offer to the government," says Dave Baker, president and CEO of Humana Military.

The TRICARE contract for the West region is still under an agency-level protest filed by UnitedHealth.

To learn more:
- visit the TRICARE MCS webpage
- read this Sacramento Business Journal article
- read the Health Net press release
- read the Aetna statement on TMA's decision
- read the Humana press release
- read this Stars and Stripes article about the accusations against Aetna
- read the GAO decision in support of Health Net
- read the GAO decision in support of Humana