Second TRICARE Protest Sustained For Health Net Raises Issues With Whole Process

(MoneyWatch)  Just a few days ago Humana (HMN) announced that its protest of the award of one of the TRICARE regional contracts was upheld by the Government Accountability Office (GAO). Yesterday it came out that Heath Net's (HNT) protest of an award to Aetna (AET) was also upheld.

The two contracts were to manage regions of the U.S. Department of Defense's TRICARE medical insurance programs. Health Net and Humana were the incumbents and lost the contracts earlier this year. They protested the two awards based on how the different bids were evaluated by the Department's source selection board. There is still one more protest by a loser out standing for these contracts.

They are large ones averaging over $2 billion a year for the companies. In Humana and Aetna's cases they do not make up a large portion of their business but certainly do add to it. Health Net relied primarily on its previous insurance management contract with the Department of Defense for its revenue. Losing the contract would have serious effects on the company overall.

The fact that two protests have been upheld so far indicate that somehow there were serious problems with the whole evaluation and award process. If it had only been one there might have been issues with just how that company bid and was evaluated compared to the winner. The third protest will probably be sustained as well if it was on the same grounds as the first two.

If all of the protests are sustained it may require a whole new Request for Proposal (RFP) and source selection process. It appears that the underlying issues involved are such a magnitude that that should be the best way to fix this. The new RFP will have more clear evaluation criteria and the board will have to do a better job of documenting their decisions.

TRICARE is a very important program that continues to grow as the military add members, dependents and retirees. The cost of health care has become a major issue for the Pentagon and in the future when their may be constraints on defense spending efforts will have to be made to limit the growth of this budget item. Having every contract award protested with then those protests upheld only add to the cost and issues with the program. Each protest delays the transition to the new supplier and may add cost. This is money that the military may need for other priorities.

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