The US Department of Defense (DoD) has created a major upset in
the US health insurance industry with its decision to change
suppliers of benefits to nearly six million active and retired
service men and women and their families.
Major losers in the change are Humana and Health Net while big
winners are Aetna and UnitedHealth.
The DoD’s decision forms part of its revision of contracts awarded
under the TRICARE programme covering the DoD’s Military Health
System’s (MHS) south and north regions in the US.
In essence, TRICARE is the civilian care component of the MHS and
has been in existence in various forms since 1956 to cover services
supplied by non-military medical health care professionals and
For Humana, the DoD’s decision will mean the loss of the TRICARE
South Region to rival health insurer UnitedHealth. This development
is due to be implemented on 1 April 2010 and will see some 3
million members shift from Humana to UnitedHealth.
Indicative of the blow to Humana, the five-year contract awarded
UnitedHealth has a gross value of $21.8 billion comprising $20.3
billion in government-forecasted health care costs and $1.5 billion
for management support and services.
Including TRICARE, Humana currently has 10.4 million medical
members while UnitedHealth has some 70 million.
Humana noted that it cannot yet determine a reasonable estimate of
the financial impact of the DoD’s decision.
From a membership perspective the blow to Health Net is even more
severe. Also effective 1 April 2010, Health Net will see 2.8
million of its current 6.6 million members transferred to Aetna, a
far larger insurer currently boasting membership of some 37
Humana is not taking the DoD’s decision lying down and has reacted
by filing a protest with the Government Accountability
In its protest, Humana cited discrepancies between the award
criteria and procedures prescribed in the request for proposals
issued by the DoD and those that appear to have been used by the
DoD in making its contractor selection.
Health Net noted that it will require several weeks to assess the
DoD’s decision before accepting or challenging it.
The DoD’s third HHS region, TRICARE West, is served by TriWest
Healthcare Alliance (THA) which provides health insurance to 2.7
million service men and women and their families.
More fortunate than Humana and Health Net, THA has been awarded its
third five-year contract by the DoD. The contract worth $16 billion
commences on 1 April 2010.
THA is owned by 15 not-for-profit health care organisations and two
university hospital systems in the TRICARE West Region.