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Humana Benefits From TRICARE Protests

Protests by the losing parties in recent government contract awards may change the bottom line of Humana, United Health Group, and Aetna. Two of the four contracts awarded earlier this year to manage TRICARE, the U.S. military's health insurance program were protested. Humana (HUM) protested the award of the contract to United Health Group (UNH) to manage the Southern Region. Aetna's(AET) win of the Western Region was protested by Health Net (HNT). Both Health Net and Humana had their protests upheld which has thrown the whole source selection process and awards into question.
Humana has now reported their financial results for the most recent quarter and stated that the delay in turning over the contract to Health Net has helped the company's bottom line. The company stated that profits were up sixty-five percent compared to last year's numbers for the same period. The TRICARE contract is worth several billion dollars over its life and last year provided $3.3 billion in revenue to Humana. Clearly, this is a contract worth fighting over.

Humana's protest has been upheld but that does not necessarily mean they will win it. In the case of Aetna's win the reasons were so egregious that the Government Accountability Office (GAO) basically directed the Defense Department to give it to Health Net. Aetna had hired a former TRICARE employee who had a role in helping Aetna writing its proposal. The former TRICARE employee may have provided confidential information about the contract.

Some analysts believe that Humana can continue to flourish sans-TRICARE due to its growing Medicare Advantage products. That said, the basic rule in defense contracting is keep the work you have and grow through new contract acquisitions. Keeping the TRICARE contract certainly will help Humana's revenue and earnings which is why they protested the award in the first place.