UnitedHealthcare is losing a large federal contract to provide health care to military members, veterans and their families.
The U.S. Department of Defense announced this week that a division of St. Louis-based Centene Corp. has been selected to provide managed care support to the Department of Defense Tricare program across 21 western states starting in 2017.
UnitedHeathcare currently has the contract for the west region. The new contract for Centene has a value of up to $17.7 billion over five years.
The Minnetonka-based health insurer said it is evaluating next steps and will be “participating in the government’s debrief process.”
“We remain committed to serving the health care needs of our country’s military service members, retirees and their families,” UnitedHealthcare said in a statement.
Past contract awards in the Tricare program have drawn protests from losing insurers that sometimes have resulted in changes.
A Pentagon spokesman did not return a call seeking comment.
In a note to investors Friday, analyst Sheryl Skolnick with Mizuho Securities USA said she wondered if UnitedHealthcare’s poor execution at the contract’s outset was a factor in the decision. Care providers and patients complained in 2013 about delays in getting referrals reviewed and authorized.
Unless UnitedHealthcare successfully protests the award, the insurer stands to lose a contract where it provides administrative services for about 3 million people, Skolnick wrote. But she added her belief that the contract features “significantly lower margins” than similar arrangements where UnitedHealthcare provides only administrative services.
On Thursday, the Defense Department announced the award for Centene, and another award for Kentucky-based Humana with a value of up to $40.5 billion.
Military.com reported that the contracts are part of a plan to reduce the number of Tricare regions from three to two starting as early as mid-2017.
Under the new plan, the east region will be managed by Humana, which currently manages the south region, according to Military.com. The west will be managed by Health Net that currently manages the north region. That would leave UnitedHealthcare with no contract.
The website quoted Vice Adm. Raquel Bono, a director of the Defense Health Agency, as saying: “We’ve been doing this now for almost 20 years, and in each generation of our contract we’ve learned something new. … We really wanted to make sure that our beneficiaries have the benefit of a more simplified, straightforward process.”