UnitedHealth to Fight Loss of $23.5B Gov’t Contract

The company said that it disagrees with a government decision to terminate a contract that it was previously awarded and that it will "aggressively pursue" all available options.

The U.S. Department of Defense recently terminated a $23.5 billion contract previously awarded to UnitedHealth Group, Inc.-a contract that the company said would have added “hundreds” of jobs within the state.

In July 2009, Tricare Management Activity-the military's health-care program-awarded to the company a contract under which it would have provided health-care benefits to soldiers and family members in 11 southern states. The contract's total value over five years was estimated at $23.5 billion.

But Tricare said last week that it terminated the contract with UnitedHealth “for convenience of the government” and planned to instead award it to Humana Military Healthcare Services.

Louisville, Kentucky-based Humana protested the government's decision to award the contract to UnitedHealth, claiming that the process used to select a contractor was different than what was outlined in its request for proposals.

The U.S. Government Accountability Office explored Humana's assertion-and it agreed with Humana, which prompted Tricare to review contract proposals and “resulted in a different 'best value' selection,” according to Tricare.

But UnitedHealth Group doesn't plan to let the contract slip away without a fight.

“The Department of Defense had it right nearly two years ago when they awarded this contract to our company,” the company said in an e-mailed statement. “We disagree with this change in course, which resulted from a flawed, uneven, and extensive appeals process. We will aggressively pursue all options available to us.”

Spokesman Matt Burns, reached by phone mid-day Thursday, declined to outline those options but said to “stay tuned.”

In conjunction with an announcement about securing the contract, Humana raised its earnings guidance for 2011 by 25 cents per share.

Health-care delivery under Humana's contract is set to begin April 1, 2012.

UnitedHealth is Minnesota's largest public company based on its revenue, which totaled $94.2 billion in 2010. With 11,500 Minnesota employees, it's also among Minnesota's 15 largest employers.

Tricare administers health plans for 9.6 million members of the armed services and their families, including about 3 million in the southern region that's covered by the contract in question.