WASHINGTON - UnitedHealth Group Inc. won a reprieve Thursday in its fight for a $17 billion government health insurance contract under which the company would administer health care for 2.7 million military members, veterans and their families in 21 Western states.
Minnetonka-based UnitedHealth fell short in its initial 2009 bid for the Western region contract, which instead stayed with TriWest Healthcare Alliance of Phoenix. But UnitedHealth convinced the Department of Defense that the selection process was flawed.
The Pentagon will update its solicitation and invite updated proposals from TriWest and UnitedHealth.
The military health care program, Tricare, has not informed the companies of the new submission deadline. While most of the money allocated for the contract goes toward care, the contract and its five years of renewal options are potentially worth hundreds of millions of dollars in management and administration fees.
A UnitedHealth spokesman declined to discuss the specifics of UnitedHealth's complaints, saying only that it had to do with the "evaluation process."
A Tricare spokesman said an independent review found that Tricare "did not have 'meaningful discussions' to resolve a weakness" in UnitedHealth's first proposal. Tricare was procedurally bound to have that discussion, and the mistake caused Tricare to reopen the contracting process.
UnitedHealth created its UnitedHealthcare Military & Veterans subsidiary specifically to attract Tricare contracts. The chief executive of that unit, Lori McDougal, welcomed the news, but warned that new considerations could lead to government demands for cuts in provider reimbursements.
"Such a course would invite a race to the bottom, compromising access to quality, affordable care for members of the military and their families," McDougal said in a company-issued statement.
The Western region Tricare contract is one of two that are up in the air for UnitedHealth. The company had secured the Tricare Southern region contract in 2009, only to see the $21.8 billion contract taken away after a protest by Humana, the insurance company that had held it since 1996.
UnitedHealth fired back in March with a formal counter protest, arguing that Humana would restrict payments to doctors to such a degree that physicians would withdraw from the care network.
The Southern region case remains in limbo with a government decision due by June 15.
Jim Spencer • 202-408-2752